Brokers blame buydowns for Scotia chop

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Buying down rates not only cheapens the value of a broker’s work, but could be directly responsible for any slash to broker compensation, according to one mortgage broker.

“When we buy down rates, we are sending banks the signal that we are willing to give up our commissions as long as banks give us the mortgage,” said Wyatt Tunnicliffe, of Dominion Lending Centres in Chilliwack, B.C. “Brokers, across the board, should get together and agree to move away from this practice.”

At least one Scotia official was quoted by an online industry publication saying the bank moved to reduce broker compensation in order to shrink margins and better navigate a low-rate environment.

However, Tunnicliffe said, it is also very likely the widespread use of buying down rates may have played a part in Scotia’s announcement Wednesday it will chop 5bps off the finder’s fee it pays out to mortgage brokers on five-year terms.

Banks felt confident brokers can swallow the compensation cut because they were willing to compete on rate and sacrifice their fees anyway, argue an increasing number of brokers.

“Unfortunately, with the compensation cut that takes effect (Thursday), many brokers are getting hit twice,” Tunnicliffe said. “They slash their own income by buying down rates and then Scotia pays them lower fees.”

It’s patently clear, he argues, brokers should not compete on rates, but focus on getting clients the best deals and products suited for their needs.

“A lender’s commission structure is not at the top of my list,” he said. “First I make sure that the product I am getting for my client is the best for his or her needs.”







  • Joe the broker on 2012-10-20 5:24:31 AM

    "Buying down rates not only cheapen the value of a broker’s work, but could be directly responsible for any slash to broker compensation, according to one mortgage broker."

    Total nonsense. It has nothing to do with rates being bought down. It has to do with bank and lender GREED. Buydowns happen more often now with all these garbage rates sites like ratesupermarket and ratehub, etc. popping up everywhere and flooding the internet with cheap rates. Its a sign of the times and people will jump for 10 or 15 basis points especially if they are internet shoppers.

  • Broker Excellence on 2012-10-20 5:43:57 AM

    OK Joe the Broker, let m eask you one question; where do these rate sites like reatesupermarket and ratehub get their discounted rates from?....simple, from brokers and agents like you and me who are willing to discount. In a way you have just proven that what Wyatt Tunnicliffe said is absolutely correct. Instead of laying the blame of everybody else, let's man up and take the hot squarely on the chin. Agents and brokers who discount directly harm themselves and the industry including all the rest of us who sell on value not just rate.

  • Andyman on 2012-10-20 6:38:03 AM

    I feel Scotia or any other lender would think twice about cutting commissions if we used this or any forum to agree to move away from the commission cutters!! I believe Scotia would re-think their move if they didn't get any deals for the next week or two, it might take a little longer but the other lenders could see their volume's increase as Scotia's dropped and this would send the right signals to both. As long as we keep sending them deals they win, we loose because the other lenders are bound to follow and who could blame them. If Scotia got zero apps for a few weeks and reconsidered.... the other lenders would know what the results of cutting commissions would be and never even attempt it.

  • Jason on 2012-10-20 7:22:52 AM

    really- move away from Scotia? and then have them pull out of the broker market- that sounds brilliant. Let me know when your boycott starts so that I can cross the picket line. Yes it sucks but these low rates are clearly compressing margins... You think that a broker friendly bank like First National wanted the fall out of lowering commission? they did so because they too need to remain profitable and able to offer rates that compete with the banks....

  • Fred on 2012-10-20 10:22:53 AM

    The biggest issue with our industry right now is losing lenders and not having nearly as many options for the consumer as we did a few years ago. A big part of the reason we have fewer lenders is because margins are very thin and our industry really isn't as profitable as many might think. Best to take a minor commission adjustment versus having the same thing happen as did down under. There the four major banks bacially elimiated the mono lines, reduced commission by 50% and made brokers pay for and pass a course if they wanted to use them. A 5bp reduction in commission probably doesn't seem as bad considering what has happened in other jurisdictions.

  • JM on 2012-10-20 1:18:30 PM

    Wyatt is one hundred and ten percent more to be said on this issue.He has said it all...

  • truth on 2012-10-21 3:29:33 AM

    This is just the beginning. Compensation will continue to adjust downwards. The days of writing 10-15 million and making a living are going away.
    Time to go to work on a full time basis folks!
    You will actually need to be producing some volume to make money. Tiering of compensation based on volume is next.

  • Kevin J Power on 2012-10-21 3:46:22 AM

    People who buy down rates using their commission hurts all of us. They people who do this are willing to work for little and do not offer anything other than rate to their clients. Very short term thinking, but that is why they do it, they are not professional and are not in it for the long term.

  • John Dearin RPA,. AMP. on 2012-10-22 9:58:13 PM

    Why are they cutting commissions? Simple in my opinion, they know there are enough brokerages that will continue to give them business, less work, and at least the same income. We use the banks infrequently and still see our income rising. We have been pushing the mono's and getting the business

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