Brokers lose 'easy money' with TD commission change

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It may be the end of a very lucrative era for brokers using TD. But for one high-volume broker, in particular, it’s the loss of a $400,000 shot in the arm, with the bank finally moving to bring its generous mortgage replacement policy in line with other lenders.

“It’s a sign of the times and I understand why they’ve done it,” said Gord Pipkey, owner of Verico Real Mortgage Services and No. 1 on this year’s CMP Top 50. “Still, the change is going to affect us more than it will most brokers because we do 40 per cent of our deals with TD and we’re one of their biggest brokers.”

Indeed.

Pipkey is bracing for revenue loss of $400K annually stemming from TD’s move last month to alter its commission on “replacement” mortgages. It means brokers arranging refinances with a minimum $20,000 increase for existing TD clients will no longer earn full commission on the entire replacement mortgage, but just the bump-up.

TD’s decision to close that loophole brings it in line with the overwhelming majority of broker channel lenders. It also represents the loss of what Pipkey terms “easy money” for brokers, already grappling with a slower real estate market. Refinances have helped to fill the gap, although for brokers sending a significant percentage of their deals to TD, the bank’s decision may further compromise their bottom lines.

Still, Pipkey, who did $263 million in funded volume last year, isn’t dwelling on the loss.

“I’m a mature broker, who understands economics and the current environment,” he said. “TD’s decision reflects a tightening market. It’s only equitable.”

It’s unclear what if any affect the move will have on the big bank’s appeal with mortgage professionals, although at least one agent is suggesting the bank has now increased the willingness of brokers to move clients for refinances that would otherwise have stayed at TD.

  • JS on 2011-10-14 4:05:50 AM

    About time, this gets rid of the churning that goes on in the industry that has forced the lenders into near 0 profitability

  • George on 2011-10-14 4:14:27 AM

    This lines up with TD's move to pay realtors 50bps as a referral fee. We have not used TD in years and these are 2 good reasons for you brokers to think twice.

  • Reality Check on 2011-10-14 4:14:45 AM

    The sense of entitlement that Mortgage Brokers seem to be unashamed of, is completely disgusting. We get paid to provide New business, not churning around existing clients. Experienced brokers like this should be doing what's best for their client instead of complaining about the loss of "easy money". We earn our livelihood, not complain it.

  • Dustan Woodhouse on 2011-10-14 4:28:42 AM

    I see this as a potential negative for the clients more than anybody else.

    Although I personally tend to focus on the pending referral from giving a client good service, as opposed to the commission on the file I am working; there is little doubt that most of us are still motivated by the dollars per file. To that end how many clients would still be sitting in Prime + products from 2009, rather than having been shown the savings of a refinance to P- the following year were brokers not being paid to redo those files.

    How many banks sales force reps went back through their book and re-did dozens of mortgages for zero commission when the discounts came back in 2010?

    I like to think that most brokers will take care of their clients interests first, but TD’s move dampens the motivation for some I suspect. With variable discounts all but gone, and the potential for a second wave of variable refi’s ahead should discounts come back will test us all for sure.

    Hopefully brokers will see that even doing the odd pro-bono work tends to lead to more referrals; files that you do in fact get paid on.

    At the end of the day though, yes – the easy money is gone.

  • Blair Anderson on 2011-10-14 5:40:33 AM

    Well said RC. Brokers need to worry less about reaching status levels with any one lender, and keep the lender community competitive. And only pick lenders who focus strictly on conversion ratios, nothing else.

  • Long over due! on 2011-10-14 6:14:32 AM

    Paying brokers to recycle the same clients over and over has proven not to be a financially sustainable model for this lender. Surprise surprise.

  • Angela Wong-Liao, Invis Inc on 2011-10-14 11:37:32 AM

    It make sense that TD stop double dipping paying the brokers for their refinancing deals as most other lenders do not compensate for the full mortgage amount for refinancing, only compensate on the top up amount. I agree with this policy because I do not want my clients to pay penalties on refinancing with their own banks.

  • Alberta on 2011-10-18 12:45:29 PM

    Well that is news to me, I never received a full commission on a td deal unless the client paid the full pre-penalty and only than if it made sense. I guess I missed the memo

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