Brokers: Cut pooling? Cut volume requirements

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Fair is fair, says one seasoned mortgage professional: If lenders are bent on scrapping volume pooling, then, they must consider lowering their minimum volume requirements.

“Taking away pooling is a sign that First National is cutting back because they realized they went too far with incentives,” said Len Lane, owner/broker of Verico Broker for Life in Edmonton. “But if lenders will take away volume pooling, then they need to lower their limits for status.”

The controversial issue of pooled volumes and minimum volume requirements resurfaced this week on the heels of an email sent by First National to its broker partners outlining the decision to cut  compensation on all its products by 5 bps. It has also pulled its Wizard Spending Account incentive program.

First Nat is blaming, in part, volume pooling, suggesting it has led to a loss of efficiency in terms of having to deal with agents submitting under one broker and not just that mortgage professional.

All brokers are well aware of the pros and cons associated with volume pooling. However, channel lenders may ultimately be weakening their broker ties at a time when the funded volumes are expected to fall.

“There are lots of comments about pooled volumes being the reason behind poor performers getting the same bonuses as top performing brokers,” Lane told “But for small brokerages and independent brokers, pulling their volumes together is the only way to submit enough transactions to these lenders and get preferred rates.”

To replace this lost incentive, he said, lenders could lower their minimum volume requirements.

“Many lenders, like First National, require brokers to submit to them anywhere between $10 million a year to $20 million a year in order for brokers to qualify for higher level of discounts and bonus payments,” Lane said. “A lot of brokers can’t generate that much volume without pooling, so it would be a great help if the bar were lowered.”

The slowing market has already prompted similar calls from other brokers.

“If the lenders gave brokerages a little more slack in terms of meeting minimum volume requirements to maintain status, it would really help those in small markets,” according to Kent Brewer, broker with Mortgage Alliance Front Gate Mortgages in Fredericton, NB. “The way things are some brokers bring their deals to a smaller number of lenders just to maintain minimum volumes.”

  • Moira on 2012-08-23 2:37:58 AM

    I agree. Perhaps volume bonus should be replaced in part by an "efficiency bonus" that way, smaller firms or independans can compete on issues such as funding ratio's or conversion of pre-approvals to live deals. It seems to me that lenders have been paying VB for business they would probably have received anyway, but without the "quality control" that would ultmately have resulted in a cost efficiency. Just my thoughts.

  • Liz on 2012-08-23 4:17:56 AM

    ING has been doing just that for a couple years now.

  • Julia Krause on 2012-08-23 4:38:13 AM

    Yup... it's been quantity over quality for so long, it was only a matter of time before lenders started to see that this wasn't the way to go. But I've been saying this for YEARS. Try rewarding the brokers who send good quality applications and make the underwriter's job easy with complete applications, the correct documentation, and no arguing. What a concept!! But no, instead they reward brokers who send them a hundred crappy deals and make underwriters' lives miserable... typical of the direction this industry has taken in the last ten or so years. And sad, too :(

  • Lender on 2012-08-23 5:27:37 AM

    If the volume thresholds are lowered then so would the compensation associated with those volumes. If for example 25 million funded make it possible for the top tier to get the best rate and commission then a 5 million level would mean that those incentives also need to decrease. Would it not? Or does the broker expect the full compensation of a 25 million producer at 5 million? The volume thresholds are set expecting certain effort and volume allows for x discount and x total compensation and that a certain return for a lender remains. Pooling has messed up the effort part of the equation.

  • larry gwynne on 2012-08-23 12:16:22 PM

    Never mind the brokers/agents, it is a complete diservice to the borrower who cant get the best rate because his broker/agent doesnt meet the volume requirement. Doesnt the wheel turn here because of the borrower, of course it does. Lets level the playing field for the borrower so that they can benefit from the best rates that can be obtained at any given time. For the broker/agent maybe the lender should also level the playing field by making it the number of deals and not the volume. We all know that house prices differ dramatically in different parts of the country but the effort to put the deal together does not

  • Paul Therien, CENTUM on 2012-08-25 8:20:56 AM

    I think that all parties in this need to be careful when making sweeping statements. Volume is important, however, efficiency is fundamentally the most effective way for both the broker and the lender to increase profitability. It costs a broker a lot in "brown" dollars to farm a deal to multiple lenders, just as it costs the lender significantly to underwrite deals that do not fund. I think it is very important to remember that brokers played as much a role in the current compensation model as did the lenders. We (brokers) demanded greater and greater compensation, and when the industry was flying high, the lenders were happy to give this too us. Since those hey days however, we have seen the average funding ratio in our industry slip from 70% to around 50%. This happened for a number of reasons: tougher guidelines, more agents, greater farming of deals, rate wars, lack of broker experience, etc. The reality is however that for a lender to fund one deal they have to underwrite two deals.

    Brokers want faster turn-around times, more compensation, better rates, and easier lending guidelines. Lenders want higher efficiencies and cleaner applications. The situation is complicated, and we need to take careful consideration of the solution to ensure that the results are mutually beneficial to the lenders and the brokers. In the end we are all here to benefit the consumer, and we have to make sure that if we as an industry want to continue to be a viable alternative to the consumer, we work together and do our part to create a sustainable industry.

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