Brokers help lift Scotia’s falling market share

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Brokers – specifically, a bigger piece of their action – helped cushion the blow for Scotiabank in its third quarter even as its overall market share fell – a validation, say brokers, of their value proposition.

“If they (Scotia) were smart, they would look at expanding their efforts to grow business through the broker channel as a more cost-effective way of originating mortgages,” Della Dwyer, an Invis mortgage professional in Barrie, told “I don’t know that they’ll do it, though.”

The comments follow release of Scotia’s financials for the three months ended June 30. While the mega bank reported an impressive $2.5 billion growth in funding volume of residential mortgages, relative to the year-ago period, its overall market share fell from 20.40 per cent in Q2 2010 to this year’s 20.30 per cent.

It suffered an even bigger slide in the last six months, having reached a 20.54 high in the first quarter of this year. Percentage gains and losses of even one basis point represent hundreds of millions of dollars for lenders prepared to undercut each other’s discounted rates in order to meet year-end targets, says analysts. That may help to put erosion of Scotia’s residential mortgage portfolio in perspective. The slip would, in fact, have been steeper were it not for brokers.

Scotia was the broker channel’s No. 1 lender by volume for the quarter ended June 30, moving up from second position, according, citing a quarterly report from D+H. While a slowing real estate market clipped away at its originations even through mortgage professionals, the decline was less than those sustained by most other lenders using brokers to bring in business.

Those results reinforce the idea that brokers continue to represent the industry’s best source of originations for both big and small lenders, said Dwyer. The analysis also counters the arguments of lenders such as Macquarie and Concentra – both quitting the channel earlier this year.

Scotia’s success aside, brokers are increasingly facing the pressures of disintermediation, said industry trainer Greg Williamson.

“Lenders will always be looking for a shorter route to the client,” said the broker, as part of his webinar “180 DEGREES ACADEMY - Winning the Rate War.” “That means cutting out the intermediary. There is only one way to stop, or slow down, the process of disintermediation, and that’s through innovation.”

  • Kevin Power, President Power Mortgages Inc on 2011-09-01 4:46:44 AM

    It is great to hear that we are contributing to our lenders successes. All lenders have their short comings. The biggest concern that I have with Scotia is their STEP Product, far too many customers and mortgage agents do not understand the impact that that product has on their own book of business and the "Customer Retention Stronghold" that this product gives the bank on the equity in the home and borrowers not easily being able to move away on maturity. Collateral Charge Term mortgage documents are registered for 100% of the value of the property, which ties o]up all of the equity and these documents are not acceptable for switch transfer on maturity. We today's 85% max LTV on refinances makes it almost impossible for clients to leave.

  • Max J. Cafissi on 2011-09-01 4:46:51 AM

    I am surprised by Scotia Bank's success through the Broker channel. Personally, neither myself nor any of my Agents have sent a deal to Scotia for over 2 years. Scotia was the first Lender to introduce the Collateral Mortgage and Split Level Mortgage, both products that are designed to limit the clients' ability to "switch" their Mortgage at maturity. They were also the first Lender to require the clients to attend at the Branch for signing of documents which I feel is another ploy used by Branch Staff to discredit the Broker. we in the Broker Community are now complaining about how Lenders are thrying to cut us out of the equation. well, I say that we are to blame for this because we have been guided by greed, not by doing what is best for the client. My suggestion would be to deal only with Lenders that allow the Broker to complete and submit all documentation, and that don't require the security to be registered as a Collateral Mortgage.

  • @kiltedbroker on 2011-09-01 7:10:07 AM

    I agree with you Max. I think that it is a failure of the broker channel to use Scotia. I had a Scotia rep in my office tell me that the initial mortgage origination alone is not worth Scotia being involved within the broker channel and that the only reason they lend is because they have the opportunity to cross-sell the client and retain them long term. With branch signings, this is pretty much common knowledge.

    The bank is our direct competition, I don't understand sending clients there at all. How much stronger could our mono-line lenders be if we redirected all the broker business currently heading to Scotia (and TD for that matter) to them?

    When was the last time Scotiabank sent you a referral? Complete failure if you ask me.

  • Ontario Broker on 2011-09-01 7:42:00 AM

    You both are concerned about the STEP or Split level mortgage but neither of you mention TD Canada Trust's wholesale effort to cut out the Mortgage Broker's retention efforts all together with the across the board 125% of value collateral mortgage. I have always found that the Step mortgage is usually the best product for the type of client that needs it and isn't that our mandate get the client what they want.

  • Matt on 2011-09-01 4:58:07 PM

    It's ironic. If Scotia weren't so draconian and impossible to underwrite with they could blow their quota's out of the water. I've tried and tried to work with them but even A business is tough if it doesn't fit their rules. And believe me they have a lot of them. I'm all for backing the mono lines. Scotia haven't done me a single favour ever.

  • DanP on 2011-09-01 10:11:05 PM

    Knowing what we know about the Banks' position regarding Brokers, why then do Brokers continue to send clients their way? Whatever their motive, could it be the Banks have made it easier to deal with them in Brokers' efforts to get their deals approved? If so, what does that tell you about the mono-lenders approval process? Is there a message the mono-lenders, who are supposed to be Brokers' right-hand, should take away from this whole situation? Food for thought!

  • Kevin Power, President Power Mortgages Inc on 2011-09-02 6:01:50 AM

    Further to my original message, I did not want to get into too much detail and sound like I was beating up on Scotiabank, but I have never done a STEP Product with them and haven't sent a client in five years. I stopped doing sending deals to TD a few years ago when they presented their new contract for signing. It was an extremely one sided agreement in favour of TD and not in our best interest to sign. Their utilization of Collateral Charge documents almost a year ago was just a further reiteration that I had made a good decision to not sign their broker agreement.

  • Ron Butler on 2011-09-02 8:25:08 AM

    WE do alot of business wiht Scotia and the branches have sent us 14 turndown referrals this year with 3 deals done.

    They are very stong marketers to the clients we bring them and they try very hard to retain their business.

    It's a battle but monolines want to retain business as well.

    Collateral Charges are here to stay, unless the government puts an end to it. Eventually monolines will do the same.

    Everything you ever needed to know in life you can learn from the Godfather movies: keep your friends close and your enemies closer.

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