Brokers: CIBC isn't playing fair

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CIBC’s move to continue offering stated-income programs through its branches and road reps -- at the same time it kills them at FirstLine -- has added insult to injury, charge brokers, concerned about a loss of competitiveness.

“As far as I am concerned as a broker who has used FirstLine for 14 years, I am simply sad,” Ron Butler, with VERICO Butler Mortgage Inc., told “Although top CIBC executives feel they have done the right thing for their shareholders and they think their future strategy is sound, I believe that what is clearly a move away from support of the broker channel is a mistake.”

He’s not alone with brokers from across the country expressing the same concerns following FirstLine’s announcement it would kill a slew of loan programs associated with stated-income lending and new immigrants hampered by credit history requirements associated with traditional A deals.

“Hello everyone, FirstLine will no longer accept new applications for stated income programs effective end of today also max loan amount is $1 million,” reads an email penned by one of the lender’s BDMs and sent to brokers Tuesday afternoon. “if you have any deals you need to send please do so by the end of today.”

The same does not apply to the CIBC Self-Employed Recognition Program, which the bank continues to hawk on its website. It also remains on the menu for BFS clients seeking as much as 90 per cent loan to value for an insured new home purchase, a CIBC mortgage specialist told Wednesday.

Brokers outside the MCC family will now have their access denied to that CIBC product, with mortgage professionals worried other lenders – some of whom have already tightened their BFS lending requirements – will effectively close the channel’s door on stated-income product, altogether.

The FirstLine step, in particular, comes on the heels of the release of documents suggesting the Office of the Superintendent of Financial Institutions is increasingly worried about BFS underwriting practices at the country's big banks.

Mortgages often granted to the self-employed and recent immigrants "have some similarities to non-prime loans in the U.S. retail lending market," and banks and other lenders are becoming "increasingly liberal" with mortgages and home-equity credit lines that don't require individuals to prove income, according to a 152-page OSFI document obtained by Bloomberg News.

Still, lenders may want to rethink any plans to just shut off the BFS tap for their broker partners, said Butler.

“I am not angry at the people inside of FirstLine, who are hardworking professionals who really want to support brokers,” he told “I understand completely that all of the changes at Firstline in the last year have come right from the top (but) if CIBC management decides that (it) wants to grow the broker channel business again they will find it very difficult and very expensive. Bottom line: they have made a mistake.”

  • Veteran Broker on 2012-02-03 2:47:52 AM

    It's too late Ron. The broker channel is in a serious decline. With recent events playing out (i.e. CMHC hits porfolio ins. funding limits & banks becoming super competitive), I predict that the broker channel as we've known it for the past 15 years will be resigned to originating only real equity deals. The smart ones that are in the broker channel including brokers should start looking for other career options including working for the bank directly. And if you don't, you're in denial. That's the truth!

  • Chad on 2012-02-03 4:56:45 AM

    Veteran Broker, I could not disagree more. The art of lender is needed more now then ever. More and more of the retail channel is moving to automated adjudication and have become nothing more than glorified car sales people.

    If you are "Smart Broker" I would look at becoming a TRUE expert in your field and stop trying to compete on rate. Build you personal and corporate value and brand

  • Paul Therien on 2012-02-03 5:03:48 AM

    Veteran Broker - It was not all that long ago that stated income programs from major banks simply did not exist, and risk pricing on lending was king - you only have to look back over the last decade to see the truth in that.

    The broker channel will survive - there are many who still believe in the value of the broker, that includes the consumer. I've been in the industry now for 21 years, and I have seen a lot of change, but change is the nature of the financial world. Being a broker is not just about a transaction anymore, it is about value.

    You only have to look at the insurance industry and the "doom and gloom" predictions that were made for brokers in that industry 10 years ago. They revamped their value proposition to the consumer and today are stronger than they have ever been.

    True there will be challenges, but there are too many of us that still believe in this industry to simply roll over.

  • Ad Lakhanpal, Mortgage Broker, Mortgage Alliance on 2012-02-03 5:05:42 AM

    There is not much to be gained by criticizing the lending strategy of CIBC or any other lender. There are other lenders who will fill the demand for stated income products.In these changing times,the prudent thing for brokers is to maintain relationships with several lenders so that if one implements a drastic change, the business can be diverted to someone else. As long as there is a profit potential in a product,someone will rise up and fill the gap, so let's not get too pessimistic!

  • Jim on 2012-02-03 5:16:30 AM

    It is too bad but this will be the reality with even more lenders going forward. If there is any positive around this it is the fact that this change will shake out the marginal players in our industry. This is a good thing. With respect to Firstline, we stopped using them and their arrogant attitude.

  • Paul in Ottawa on 2012-02-03 5:26:25 AM

    level the playing field. Don't use FirstLine at all.

  • Kevin on 2012-02-03 5:30:20 AM

    Just one more reason to focus on dealing with non deposit taking institutions.

  • Paul in Toronto on 2012-02-03 5:38:51 AM

    I have to admit, I laughed when I read the article. The problem is so easy to solve that I can't even figure out why there is any debate at all. As Paul in Ottawa said, just don't use Firstline. It is really that simple.

  • James on 2012-02-03 5:42:23 AM

    Send no business to them and based on friends I have that work there I think Firstline will be swallowed by CIBC. Comments made at a meeting they attended were we are paying brokers too much

  • David Larock on 2012-02-03 5:48:26 AM

    I think it's actually good news that CIBC is still offering these stated-income products because that means the decision was based on channel strategy, not based on a belief that the products came with undue credit risk (other lenders take note!)

    Frankly, I really wasn’t surprised by this announcement – CIBC has been on the back foot in the broker channel for some time now and I expect similar announcements from them in the future.

    Veteran broker (if you even are a broker)- the future of the broker channel was never going to be with major banks who hire direct sales forces to compete with us. It lies with lenders like MCAP, First National, Merix, Home Trust etc. all of whom are thriving.

    Keep that in mind before you turn to the Dark Side!

  • ike on 2012-02-03 5:59:05 AM

    I love how ppl have their panties in a knot over hoopla. claim your income, pay taxes like the rest of us folk, and this is not an issue... Too many brokers are shady and inflate income greatly (to the point where it is stupid and FLM is now saying screw this crap it only leads to larger problems for us - not worth it. Personally i think lenders should reduce the commission to brokers to offset flipping business and acting with such carelessness.

  • John on 2012-02-03 7:05:27 AM

    Paul and Kevin have it right. Stop supplying CIBC and their family tree with business they don't deserve.

  • Elfie Hayes on 2012-02-03 7:54:10 AM

    this announcement is just one more reason why we are called Brokers. We don't put all our eggs in one basket if we truly want to do the right thing for our clients. There is plenty of opportunity to help BFS clients and I'm ready willing and able. When they do go to the Bank and get turned down, and they will through their thousands of inexperienced road reps, I'll be here to do the deal. The tide is turning, swim the other way and stay alive.

  • Ron Butler on 2012-02-03 9:14:41 AM

    I think Veteran Broker is having some fun with us and quite a few rose to the bait.

    I think we do have a right to be critical of lenders who work in the broker channel when they withdraw products in our channel but keep them in others and raise rates to the point where they are permanently non-competitive. Why stay in the channel; just leave.

    Many of us supported Firstline for years and for many of those years we had good reasons to keep the clients with FLM as we saw new homes bought or homes refinanced or just adding a LOC. Firstline was a good lender for a long time and their are wonderful people there who do a great job for the clients and for us and for CIBC.

    I believe there may have been a direction top management at CIBC could have taken to stay in our channel and maintain good broker relationships and still acheived the ROI they needed.

    In the end I think the decline of a lender that lead our space for years is sad and I wish there could have been another way.

    If the lender wants to totally change the way they work with us or how much they pay us that's perfectly fair

  • Concerned broker on 2012-02-03 3:12:01 PM

    What I dont understand how every brokerage website states that they deal with 75 Lenders! isnt really only less then 20? First National,MCAP, Scotia, TD, Merix,Street, Radius, Icici,ING,Moncana,

    The industry has lost BMO,HSBC,Resmor(2 more months), Concentra, Wells Fargo,.....

  • C.M. on 2012-02-03 5:28:00 PM

    I have used FirstLine a lot in the past. They were a great Broker Lender and offered some fabulous products for clients and Brokers. But it seems they got too big and successful and started with very aggressive client retention strategies; internal reps were offering rates and discounts that Brokers couldn't offer - this was against their original policy of being a Broker-friendly lender. I don't know if it's greed that has created this downfall, but the path that they have decided to take will certainly be their demise. FirstLine has been slipping for a few years and I think that this last decision is their way of easing out of the Broker channel. With the percentage of self employed and business owners in Canada, we need the stated income products to keep the real estate market a float. Are there stats that confirm that BFS default on their mortgages more so that those who have income-qualified? I think that this decision is cloaked under the disguise of something else... Are they in trouble given the class-action lawsuit in front of them? CIBC won't get nearly the amount of business they receive without having FirstLine as their wholesale channel; clients are becoming smarter and if they do their research and work with Brokers, they will realize that there are better options available.

  • Firstline Supporter AND Long Time Broker on 2012-02-04 1:58:06 AM

    First off, MCAP discontinued their "stated income programs" and there was no announcement on that, Street Capital just changed all of their programs and again no announcement...but boy when CIBC/Firstline makes a change it's published and everyone has something to say about "Big Bad CIBC"...if you are a good broker and know your products and are aware of what Firstline continues to offer, you can see that they still have some products and stratagies that blow many other lenders out of the water. CIBC has commonly been the first to pull the trigger on many things and not long after the other lenders to follow suit (I.E. the ARM)...mark my words on this, the BIG guys will follow suit AND in doing so, the monoline lenders will have no choice but to do the same as most of the are backed by "the big guys".

    Know your stuff, sell your VALUE and service your clients (rate is not everything, I rarley lose a client to rate AND I rarley price a deal). Back to basics people, we were all able to make a living before extended amortization and stated income even exsisted...the good brokers that know their worth and become planners instead of order takers will be just fine when the dust settles.

  • Rick on 2012-02-04 5:59:57 AM

    Back to basics I cant wait , Brokering since 1989 I too have seen many changes . Lets now separate the real brokers out there from the ones that look like brokers. Get rid of the order takers and start to bring value to what you do for a living. In my mind this will increase my buisness. If and when cmhc stops the self employment programs across the board realtors and bankers will want to know me . Behind every closed door is an opportunity so embrace it dont fight it , look for the angles that sets you apart.

  • Bruce on 2012-02-04 6:59:51 AM

    At Rick. Amen brother. When the market is hot anyone can make money. During times of adversity only best survive or better yet prosper.

  • Andy on 2012-02-04 9:22:41 AM

    Why not just boycott FirstLine for one full month? In March just stop using them - everyone - completely. We all have many other lenders to choose from. You want to send a message to a bank? Hit them where they'll feel it: in their bottom line. How do you think the shareholders they're trying to protect will feel then?

  • Paul Therien on 2012-02-04 9:29:37 AM

    The business is changing, it is a simple fact that we all in this industry need to deal with. Stated income programs have not been historically available - there was a time when it was VERY difficult for a self employed person to get a mortgage, and that was not in the distant past. I can remember providing a bank with three years of financials for every BFS deal. It seems to me that in the 80's a BFS person was really put through the ropes to even get a credit card, never mind a mortgage.
    We've heard for three years from brokers, lenders, government and the media that change was in the wind and that credit was going to get tighter.
    What we see today... This is the direction that the lenders are moving, and truth be told, it's their right to decide their risk tolerance and from who or where they will accept business. We may not like it, we may not think it is fair, but it is reality.
    I agree with everyone on here that speaks to creating value for the consumer. Brokers have to stop selling rate and start selling real solutions, service, advice and value to the consumer. Innovation and finding consumer driven solutions are going to be the keys to success.
    FYI Resmor is not leaving, they are re-branding. HUGE difference.

  • Explain Value on 2012-02-06 7:36:34 AM

    Everyone keeps talking about "value" as if its worth something that the banks can not provide. The banking industry has been around over 125+ years. The mortgage broker industry around about 30 years. Broker industry grew mainly by beating bank rates. Now the banks are willing to play the rate game just the same way brokers have been doing it.
    With rate no longer the advantage, brokers are now throwing around "value" like it didn't exist before. Probably didn't when rate was an absolute advantage over banks; didn't need to provide a whole lot to close the deal. In general, what value would that be if it is not paired with rates. Value can not be substitute for rate. Value is the minimum prerequisite brokers need to come to the table and rate closes the deal or vice versa. On an A client/deal what is there to talk about other than picking the right term with good rates. The blessing here is that an A client does not know they are an A client. The broker/bank have kept clients in the dark about this because if clients knew, they would/should demand the best rate period.
    The advice brokers give is already expected from an independent service provider. Banks have more tangible "value" to shake a stick at: branch location across cda, walk in service, trusted brand, institutionalized client service, plus many other ancillary services. Anyway way to look at it, bank brand will trump broker brand any day.
    Therefore, broker needs to lead with rate to win business because there is nothing else tangible to offer.

  • Veteran Broker on 2012-02-06 10:36:59 PM

    "Explain Value" is bang on. Value can mean whatever you want it to mean but the main pull factor that will land the client in most cases, is RATE!

  • Paul Therien on 2012-02-08 6:49:57 AM

    That there is nothing more tangible to offer the consumer than rate is simply incorrect.

    Those brokers who have figured out that there is a way to focus on more than rate are the ones that are experiencing growth, and do not kid yourself, there are MANY brokers who are growing. Ask them what they have been doing differently and the majority of them will tell you that they are not competing on rate. What they are competing on is personalized service, providing valuable long term mortgage planning, providing options outside of just the mortgage transaction, and much more. ALL of this adds up to "Value".

    The broker industry as we know it is only 30 years old, compared too much in the financial world, it is still a toddler. Yes, that means that we have challenges, but it also means that we have the opportunity to define our own future, define ourselves to the consumer, and create a sustainable industry. We just have to look at all of the many polls that tell us the vast majority of consumers do not know who we are, or what we do. That alone tells us that we have opportunity; it is up to us to recognize that opportunity and find a way to capitalize on it. NO ONE will do it for us.

    I believe in this industry and the vast opportunity that it still holds, I believe that our future is our own and that we should be defining it, not having it defined by others.

  • Chad on 2012-02-09 8:03:00 AM

    Explain Value, hmmm is a 2.99 no frills a good idea? Is registering for 120% of the value a good idea? Regular or Collateral charge? Ask 10 branch people that question and they will have no clue. Most branch people at not lenders anymore they are sales people. They push the bank sales goals of that month. The broker of today that talks of "Value" has become that trusted banker of years past. Lenders come and go, products come and go. Advice is key. Know your customer, know your products. Why is BMO giving 2.99 on a 5 year locked in rate, because in 2.5 years when they go an renew they blend them at posted rates. If you have enough skill to explain that you would lose 1 client. If a customer really wants a No Frills many lenders out than provide that with the same or even better rate.

  • eterledsinutt on 2012-02-09 8:23:45 AM

  • Kathryn on 2012-02-04 6:55:26 AM

    "The only constant in life is change", these brokers that take the changes too dramatically, maybe it is about the time to think about a different career. This year some products are in, some are out, next year some products are in, some are out...

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