Brokers: Good riddance to "unethical' points

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While FirstLiine’s BasisPOINTS settlement is a hot topic, some brokers are saying the actual demise of the program is good for the industry’s integrity.

“I thought they were very unethical,”  Paul Mangion, with The Mortgage Centre in Mississauga, told MortgageBrokerNews.ca. “I am happy to see them go.”
Mangion is, in fact, voicing the concerns of many brokers, who objected to the FirstLine program, and to a less extent, others like it.

The beef centres of the idea that the program encouraged brokers to give higher rates to some clients in order to secure points for themselves or better deals for subsequent clients. Points were also once  awarded for BFS deals, outside of that controversial rate incentive.

“Brokers should be working to get all their clients the best deal or best rates,” said Mangion. “This system tended to subvert that.”

While other lenders offered reward points as well, they were structured differently from FirstLine’s, said the broker.

“Other lenders offer reward programs as well,” Mangion said. “But they are just points generally offered as an option and not offered the way CIBC does.”

In an earlier interview with MortgageBrokerNews.ca, he also said that clients need to be told when their broker is providing them a ceiling rate rather than a floor rate.

“When we, as brokers, receive an extra benefit in the form of points from a lender for offering the high end of our rate range to an unsuspecting client, that has to be disclosed,” he said.

This week other brokers expressed disappointment with CIBC for discounting the value of the BasisPOINTS they have accumulated in its settlement offer. Kevin Power, president of Power Mortgages Inc., complained that the bank is offering 5 cent per point as opposed to the original price of 8 cents per point.
 

  • J. Darren Ings on 2012-07-27 4:10:49 AM

    The demise of FL is likely going to be my own as well. I lost the best brokerage product company available. If all you ever sold was rate, than you didn't need FL. But if you wanted to sell the best Home Owner Advantage Program, best pre-payment options, and what was once the best self-employed product, no-one touched Firstline. Always remember, if they come to you for rate, they'll leave you for rate. Firstline gave us an advantage over bankers and brokers that simply sell rate.

  • Frank Petrin on 2012-07-27 4:14:22 AM

    Unethical points program? Dont blame the program for a Broker's unethical use of it.

  • Len Lane on 2012-07-27 4:24:15 AM

    Good call Frank...it does seem to be leveling the playing field. Now its best rate or buy it down out of your end. I think it also shows that lenders can't give everything away any more.

  • James on 2012-07-27 4:45:51 AM

    With Firstline you could offer very competitive rates and some extra value by offering the floor rates and banking the bonus points on promotions that were run or cover cost of appraisals. How about the realtor rewards offered by TD & HLC (CIBC). I am sure they are not being disclosed by the banks or their reps.to clients. A lot of other companies offer the same type of program but if you are putting the customer first you will always provide good choices for them and put your self interest last.

  • Julia Krause on 2012-07-27 4:49:42 AM

    Interesting... I was giving a training session for new brokers in Edmonton a few years back, and one of the attendees asked me to explain a FirstLine rate sheet. I explained it, and also how the points system worked. That new broker said, in front of the entire class, "that is unethical!". I let new brokers make up their own minds about it. Of course, another attendee told their FirstLine BDM that he heard in MY class that FirstLine was unethical. UGH! I see FirstLine as the original mortgage broker's lender! The pioneer in the mortgage broker industry. I started my career at a 'Mortgage Centre - FirstLine' franchise office. At that time there were very few lenders who would pay a broker a commission. I'm sad to see FirstLine go... it's the end of an era :( (It goes without saying, though, that I could not care LESS about CIBC...)

  • James in Whitby on 2012-07-27 5:51:22 AM

    As someone who worked for FirstLine Trust (yes, TRUST as in before CIBC came in a ruined the company) I'm sad to see it go. I did not agree with the way some brokers used the points however have to hand it to FLT for being a ground breaker and championing the broker channel for so many years. Look around the lending and brokerage community and you're hard pressed to find someone (over 30) who has not worked there.

  • Kevin on 2012-07-27 6:10:33 AM

    When the points came out it was a tool to allow a Broker to properly price a deal. Lenders like Bridgewater and Resmor had & do price their mortgages based on credit, is that unethical to do as well? Their rates were higher than the ceiling rates we would sell at Firstline. A client with a previous Bankruptcy or OPD never felt they were being taken advantage of. In fact, it was the opposite, the rate was way better than what other brokers were offering the borrower. Used properly, it was a huge tool to build your AAA busines. We lost a huge partner. I dont see how these points are any different than MCAP, or lenders that sell tiered pricing tied to finder fees like Scotia,Bridgewater, Resmor. Whats next, is it unethical for brokers to not use a portion of their finder fees to buy down rates? The power of branding a ceiling rate with cashback to pay penalties & closing costs for clients was huge. Firstline will be missed but like all things, life goes on.

  • MP on 2012-07-27 6:48:40 AM

    I agree with Kevin on this one. If used properly it was a huge tool for brokers. Maybe a new lender will open up and use this basis points system. hint hint..

  • Tom on 2012-07-27 7:11:50 AM

    As long as you told your client that you were charging them a higher rate then it wouldn't be unethical.

  • Ron Butler on 2012-07-27 7:19:52 AM

    A wholesale attack on the Points program is just silly and misdirected. If you knew the history of the company and the program and how some of the very biggest volume and most professional brokers this country has ever seen used it to capture "A" business and really build up our whole profession you would not being attacking the program now.

    We should all remember Firstline for the powerhouse and true Broker advocate it was under Gettings and Grewal and forget about the sorry ending we would all be better off.

  • Chris on 2012-07-27 8:24:04 AM

    I certainly wouldn't call the program unethical...as stated if you giving your client a higher rate to get more points or pay THAT is wrong on the brokers part...and you have to disclose on the Form 10 anyways....I simply found the whole thing confusing, 1stline once told me my points had expired before I used them...(fought that and won) so just give me plain simple pay with with excellent service and I will be happy! I don't need this other useless fluff.

  • Terry on 2012-07-28 1:41:23 AM

    Funny, I think I used the 1/2 a dozen times, 5 years ago. I never used a lender for volume points. They may have had a few good products, but, you know that usually all good things eventually come to an end. That't why I am more apt to using a lender that has local services, and for the ones that don't than I use another. Rates are not everything, and I have done a huge volume of business without Firstline. Here we go again, another lender bites the dust. CIBC, well that's another story. Most likely end up like HLC in the end. Stay with what you know and the sureness of your lender to be here in the next 25 years and stop playing around with the best pay, the best rates and the unsureness of the lender in the future. So, all you Broker Houses that only used Firstline for higher pay, really never though of the client, only of themselves.

  • Bill Nugent on 2012-07-28 3:03:30 AM

    i have sat here and read the comments by people for the last 3 or 4 days that do not have enough ethics to even use there last name when they make comments. I believe this foroum should not be open to comment if you are not prepared to state who you are.
    For the people out there that do not understand Firstline they have been the most inovative lender to enter our marketplace since i have been brokering.
    They created the partner mortgage where a client could use his rrsp as part of the mortgage and reduce his debt to Firstline while paying down his mortgage and increase his or her security by doing so.
    They created the access side where you could take credit challenged clients and if they paid there mortgage for 12 months as per the agreement they automatically would be offered a renewal on the A side at the floor rates.
    They had the best equity program in the market place for many years that rivaled Home Trust but at A pricing( i still do not understand why they did not price this product a little higher)
    As for the points the price that most ethical brokers that have a name that dealt with Firstline would usually offer the client the floor rate that was equal to other lenders in the marketplace. Where the borkers actually made points for the most part was by putting there money where there mouth was and floated the deal thus collecting a extra 10 basics points which they earned once the deal closed not before. If you happen to understand the Firstline system that was not extremely complicated you would earn a extra 10 basics points due to your efficiencies and volume the rate the client received was still equal to what was being offered in the marketplace. Again these points were earned after the deal closed. This gave brokers that understood the system the advantage to buy down rates, pay penalties, lsawyers to generate new business.
    It is a sad day for our industry to lose a quality lender and a sadder day for brokers that do not understand or use the lender to be slamming the lender after the fact.

  • Roberta Hardern on 2012-07-28 3:39:42 AM

    I would just like to note that the points program was not unethical, it may have encouraged unethical behavior in people who already had no ethics

  • Sara on 2012-08-14 2:15:29 AM

    I have to add that the majority of these comments being made stating the program was unethical are obviously being made by brokers who don't understand the flm points program in its entirety. That's clear to see. Could it be complicated? Sure, if you didn't have a flm bdm explain it to you. Did it take time to learn? Sure. Was it worth it? Absolutely.

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