Brokers can brag no longer

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Brokers, it may be time for some soul-searching.

Gone are the days when brokers could truthfully brag about having access to 40 or more lenders, argue some industry vets, suggesting lender losses have whittled down that number considerably – along with the diversity of the product, itself.

“I remember saying I had access to 40 lenders -- we would take that client and fit them into the proper box, every lender had a niche,” Cameron Mackie of Dominion Lending Centres Your Mortgage Partner commented on MortgageBrokerNews.ca. “Now when lender(s) merge they (seem to) remove the niche, providing the end result of the ‘same box.’”

That new reality suggests that brokers may have to reconsider their strategy for selling themselves to clients in an environment where the number of lenders with which they deal has shrunken and minimum volume requirements further challenge the ability to shop around.

And with fewer places to turn, come fewer options.

“With the new regulations there's very little that sets them apart,” Mackie said. “This has left us with only about 10 different lenders now; the rest are underwritten through the same third- party underwriting company and their funds are registered with the same trust company.”

And brokers have felt the impact.

“Day by day, the pool of lenders is shrinking; if you look at ING, they stopped dealing in the broker channel and losses like that have an impact on our business because it makes us less competitive,” Bilal Hussain of Mortgage Architects told MortgageBrokerNews.ca. “The more lenders we use, the more competitive we are.”

The industry, like any other, ebbs and flows and some brokers are optimistic that as it improves, the number of lenders will one day grow again.

“There are still a lot of lenders in the market, but I think the time will come when there will be more lenders,” Hussain said. “At this time, lenders may not be getting enough business to survive on their own and that’s why they merge. I’m confident the market will improve and attract more lenders.”

  • Ontario Broker on 2013-09-03 12:36:36 PM

    If you look at the total number of lenders, including B and private, there are as many lenders today as there used to be – in fact there are MORE today than there was 20 years ago. ING was not in the broker channel for decades upon decades, and there was a time when Scotia did not deal with brokers. TD has been fairly consistent, but then they really came into their own when the Bank of Montreal exited. FirstLine was a definite loss to the industry, but brokers have not truly suffered since they left – most of that volume shifted to Scotia, Street and others. Street launched in 2007, Merix in 2005 to name just two relatively new players in the market. Both of whom have done a very good job of picking up market share and providing options for mortgage brokers.

    In my 26 years I have never met a single broker that actively used "over 40 lenders", nor have I met a broker that was signed up to that many lenders. Sure, in theory they may have had access, but the fact of the matter is that it was only ever a marketing ploy used by brokers to convince the consumer to do business with them. Any successful broker will tell you that they have a core number of lenders that you deal with and you send 80-90% of your business to those lenders. The other business goes to the odd smaller lender that might do a trickier or “outside the box” deal.

  • Lior, Mortgage Edge on 2013-09-03 4:56:24 PM

    "“The more lenders we use, the more competitive we are.”"

    I disagree with that statement. I work with about 5 lenders on a regular basis and they are able to get the job done 99% of the time. If I need private money, there is a lot of it going around right now that it's not even an issue.

  • @kiltedbroker on 2013-09-03 10:23:20 PM

    When I was brokering full time, I would actually tell my clients that the phrase "access to over 40 lenders" was a marketing gimmick used by bad brokerages and desperate brokers who where trying to look bigger than they were.

    I would go on to explain that this business is all about trust, and that an effective broker would use 3-4 lenders where they did significant volume and had developed a great relationship. From there, I would frame volume and trust as what secures discounts and top level service... I don't know a client alive who doesn't like feeling special.

    People don't come to a broker to be pimped out to a possible 40 lenders...

    When was the last time you were compelled to choose a vendor based on how many suppliers they had?

    To that end, do you know why people insist the lowest rate is the most important part of a mortgage? Because that is what we continue to tell them.

    The mortgage broker channel has a serious marketing problem.

    If you are still framing your marketing message with how many lenders you have access to... seriously, for the love of everyone else in the industry, please stop now.

  • Ron Butler on 2013-09-04 8:55:56 AM

    Jackson, how does that speak to the concept that one of a brokers best offerings is "choice".

    While I would agree that 40 lenders is just silly: choice and alternatives are key elements are what we offer.

  • @kiltedbroker on 2013-09-04 12:51:06 PM

    Hey Ron, I agree with you. However my point is more how many lenders do you need to substantiate choice? 40? 15? 5? 2?

    We all use a variation of the following pitch to the client. Here is mine...

    "Simply put, a banker works for the bank and is paid by the bank to make money for the bank. The banker has the banks best interest in mind, not yours."

    "As a broker, I represent you to various lending institutions. I get paid a standardized finders fee from the lending institution you decide can provide you with the best product."

    My issue isn't with the statement that we provide choice, it is with how we parade the extent of that choice (and interest rate for that matter) as our only value propositions.

    Choice & alternative may be the cornerstone of our industry, but that isn't what sells mortgages. It is the value proposition that is created as a result of that choice, it is all about the lining up of incentives...

    Either that or the lowest rate.

  • Ron Butler on 2013-09-04 12:56:18 PM

    I agree and you know how fond I am of low mortgage rates.

  • Paul Therien - CENTUM on 2013-09-05 9:52:11 AM

    Ron, Kilted Broker - I think that you both have it bang on.

    I think that we, as an industry, need to market ourselves as professionals who are consumer advocates when they seek home financing. In the end what the consumer cares most about is how much money is coming out of their pocket, and for how long. It is why rate is so important to them, because it dramatically impacts the amount they have to fork over each month.

    Homeowners want to build equity in their homes, and they want to know that they have options. Most will not exercise the options that they have, but knowing they are there is important to Canadian consumers. Dealing with a broker presents them with more options, and a more tailored experience – theoretically that means better service and better products with a good rate. Telling them that you have access to over 40 lenders means nothing unless the care they receive in your hands gives them a sense of ease and confidence as they make the largest financial transaction of their lives, build a safe home for their family, and create a secure future.

Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.

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