Brokers lambast IG offering

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News broke Tuesday that Investors Group had launched an unprecedented mortgage product but brokers have already poked holes in the offering.

“Please note: not so ‘minor’ stipulations: fully closed, arm’s length sale. No transfer, no port, no nothing,” Ron Butler of Verico Butler Mortgage said in the comments section of MortgageBrokerNews.ca. “Need to refinance in year three, job transfer in year two, need to do anything with the mortgage? No matter what your equity is in the house always the same answer: sell your house.”

The product in questions is a 36 month closed variable-rate mortgage rate at 1.99 per cent (Prime minus 1.01 per cent).

Investors Group’s website lists a number of stipulations but, as Butler pointed out, there are many others that also need to be taken into consideration by clients.

“If applicable, you may be responsible for legal and administrative fees or prepayment charges. Not available for renewals or internal refinances,” the fine print for the product reads. “These promotions are closed terms that are not eligible to be paid out, refinanced, early renewed or extended prior to maturity of the term (except upon the bonafide sale of the subject property).”

Other brokers drew attention the product as a mere means to drawing clients in for cross-selling opportunities.

“I know how Investors Group works, and this product will be tied to cross selling of other IG products that most people don't want,” Daniel McKay wrote in the comments section. “Brokers won't lose out on much business over this teaser loss leader offering.”
 
  • Victor Simone on 2014-05-14 11:27:26 AM

    Yum, lambasting is so very good. I wouldn't say that us brokers are afraid of this type of thing, because some have been in business so long now that this is just a recent challenge that we spin into an opportunity for ourselves. "We got this."

    Am I worried ? No, but when the dust settles over the next few weeks we will have found a way to deal with this new rate of 3 yr 1.99%, and you can take that to the bank....or perhaps not a bank ?

    Although I truly respect Power Financial and it's ability to serve the market with it's various products and channels of distribution, I have my doubts as to whether IG can actually carry this football without dropping the ball. IG has mortgage underwriters ? Sure, but can they really perform at the type of level required for this type of promotion, is my question. Time will tell.

  • Zhanna Krupnikov on 2014-05-14 11:38:01 AM

    4 The 36 month Variable Rate mortgage has a guaranteed rate of Prime – 1.01% for the 36 month term of the mortgage. The interest payable is calculated based on Our Prime mortgage rate and is subject to change at any time. Payments are based on the 3 year fixed posted rate at the time of funding. The Annual Percentage Rate (APR) for the Variable Rate Mortgage term listed above is 1.997%. The APR was calculated based on the Mortgage Prime Rate of 3.00% set on September 9, 2010, which is subject to change.

  • George Christopoulos on 2014-05-14 11:44:14 AM

    Good comment Victor. Underwrinting is more complicated than ever.
    From what I have seen of IG advisors, good luck getting anything completed.
    This will come and go but it just shows little regard financial instituitions have for mortgage people, they still think all you need to do is offer the lowest rate to attract clients.

  • Dave, Broker on 2014-05-14 1:26:52 PM

    Good luck getting a deal approved at IG....

  • Jake Abramowicz on 2014-05-14 1:42:08 PM

    "Criticism isn't a strategy" said Jeff Bezos. A very true comment in our industry which is full of whiners and misers.

    On another unrelated level, funny reading Ron Butler's comments. Someone plays his game of bottom bottom rate dwelling and he whines and cries about the terms and conditions. Funny what happens when you lose at your own game.

  • Ron Butler on 2014-05-14 2:27:15 PM

    @ Jake, We have never sold a fully closed "A" mortgage in the history of our company, even years ago when MCAP went fully closed for a while. So I guess while I am "bottom, bottom rate dwelling" I am still marketing exactly the same products that you are; just at a better deal for the consumer.

  • Jake Abramowicz on 2014-05-14 2:50:17 PM

    @Ron Butler - the fact is this. You are probably going to lose a little bit of business to your "A" clients who you have said all have best incomes, best credit, and care about rate rate rate (per your CMHTV interview) - so now you're looking down the barrel of the same gun you point at the broker industry by offering the lowest rate at .38% or so commission.

    #amIwrong?

  • Ron Butler on 2014-05-14 3:19:28 PM

    @ Jake #YouAmWrong

    We will lose some business absolutely. We already lost a mortgage. The maximum this IG promotion will last is three weeks and then they will go back to non-competitive rates they offer currently (check out the fixed rates 3.35% 5 - year fixed, ouch). We offer great rates 24 / 7 / 365.

    As for the gun barrel, my apologies if that is how we make you feel. We do not intend to make other mortgage brokers uncomfortable, regrettably it may be a by product of offering lower rates to the public.

  • Jake Abramowicz on 2014-05-14 3:33:43 PM

    You don't make me feel anything, Ron. The comment wasn't one of fear, rather an objective criticism of you as a broker. When you sell nothing but rate, and another company who you can't sell lowballs the industry, and then criticize it, it's completely hypocritical.

    The fixed-rate they offer is irrelevant in this case. Why? Simply because people will be too drunk on 1.99 to notice any of the fine print.

    Oh and stop with the hyperbole statements of you being such a saint in the industry for the betterment of the consumer: call it what it is - your business strategy - and not some altruistic crap that you keep pushing. You're not in here to feel warm and fuzzy that you just lent money to a client - you're in here to make MONEY first.

  • Ron Butler on 2014-05-14 3:38:52 PM

    I think you may feel something Jake because you are sounding angry and upset.

  • Jake Abramowicz on 2014-05-14 8:06:46 PM

    How can one sound angry and upset on the internet? I call this two things: 1. Schadenfreude and 2. Just Desserts. No anger here, man. This business is too good to the both of us to feel that way.

  • race to the bottom on 2014-05-15 5:34:23 PM

    The only card being played in this business is price, free appraisals,free legal or something Free or cheaper than the other guy. If customers valued strategy an planning then none of this would be happening.

  • Jake Abramowicz on 2014-05-15 5:46:15 PM

    put yourself in the customer's shoe. how many times have you gone for the better offer in any business over something that has a higher price? this is how people are built, it's no surprise. why didn't IG offer 2% but instead 1.99% Because people believe 0.01 is a better deal.

  • Ron Butler on 2014-05-15 5:55:41 PM

    @ race I am not certain what was meant by the post.

    What is it you will "plan" about a mortgage; will you call the client once a year and remind them to increase their payments? Or have them take out a SLOC so they can invest in mutual funds and the broker can make some extra comp on the investment side?. I always find this planning story so self serving.

    Many consumers are great planners on their own, they do not need anyone's "plan" or fridge magnet, they want REAL value like those free appraisals, free legal fees and low rates.

  • Jake Abramowicz on 2014-05-15 6:06:49 PM

    I CAN'T BELIEVE I JUST READ THAT - I am going to do a screenshot in case you ask CMP to get rid of that comment.

    So what you're saying is that you have the faith of your 800-credit-full-time-super-A clients to plan their own lending?

    How in the hell does FSCO let you operate with comments like that? Do you blatantly tell FSCO "I don't care about what the client thinks they need, they need best rates, and that's what I give them?"

    This is crazy! I am literally speechless.

    NO, a mortgage isn't brain surgery - you're right. NO it does not require a PHD to "plan" effectively. But if your clients saw the countless emails I exchange with my clients with respect to planning borrowing they would quickly realize the real value isn't in the free appraisals (that of course I provide, too), or the cash-backs I give from commission to help pay for penalty, but in the long-term relationships I have developed (and friendships to some degree) with these buyers.

    I still can't believe I just saw this admission from Mr Ron Butler himself that mortgages are easy, there's nothing to plan, and all that people SHOULD care about is rate rate rate.

    On the same page that he's slamming another lender who he can't access for giving a better rate rate rate!

    Conditions and terms be damned!

    :)

    (I wish we were at a bar this would make for an entertaining debate)

  • Ron Butler on 2014-05-15 6:11:35 PM

    Jake, based on this post I think your bar wish came true at noon today.

  • Jake Abramowicz on 2014-05-15 6:12:53 PM

    Why?

    I was at the bar actually but at 2pm not 12.

  • Ron Butler on 2014-05-15 6:13:47 PM

    I rest my case.

  • Paul Therien - CENTUM on 2014-05-15 6:33:28 PM

    Lenders have been offering no frills products to consumers as a tool to lure them for decades. The commentary is not really any different that when BMO came out with their discounted rate.

    The restrictions are not really a surprise considering that the average mortgage in Canada does not reach the 5 year maturity point.

    If I remember correctly the average branch originate mortgage lasts just over 3 years at 3.3, while a broker originated is under 3 years at 2.8. (It's been a while since I have been at a bank and seen the numbers, so not sure if they still apply, but those were the numbers from about 6 years ago.)

    It's not the greatest product out there, BUT this is a tool for all brokers to use... to show them that rate is not always king. Consumers need to know that it is important to seek advice before putting pen to paper.

  • race to the bottom on 2014-05-15 10:20:49 PM

    actually most people are terrible at it, thats why Canadians have more debt than ever, many won't be able to retire because they spend more than they make and have zero savings. Many people are 30-90 days away from disaster, if they lost their jobs. Then people wonder why the rich are getting rich and poor are getting poorer...

  • mortgageman on 2015-10-01 3:50:55 AM

    Actually the primary reason IG offered the mortgage was for DEFENSE. Their goals is not to make money from mortgages, but to build a fence around their clients.

    Their research shows that when a client has 3 or more products with a company they are less likely to move/leave.

    When a bank funds a new mortgage with an IG client they have a 65% likelihood of transferring their investments assets to the bank.

    When BMO offered 2.99% their statistics showed that 2 or more additional products were sold to mortgage clients. Once your info is with BMO they will send your investment statements to the financial advisors to offer you a second opinion. BMO Nesbitt burns will call and solicit you to purchase stocks or bonds. Then BMO Mastercard department will call and offer you credit.

    IG was not able to handle the volume of calls and applications. The Vancouver mortgage specialist in the first week of the rate announcement had 100 applications. He was processing 5 a day. Most applicants were given rate holds and most mortgages were approved in 3 weeks. Many applicants who needed funding in 30 days ended up getting a mortgage at the bank.

    As for the consumer, if this product fits your criteria then apply.

    As for mortgage brokers there is no need to bash IG or discredit the product. Be the better man and inform applicants of the pros and cons of all products relative to their lending needs.

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

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