Brokers react to direct-to-consumer campaign

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Brokers may not be happy about the strategy, and one veteran argues it could lead to more pressure to buydown rates.

“Street's initiative should be of no surprise to the industry, since brokers are engaging in the online deep discounting buydown game by willfully eroding their margins, which ultimately affects the quality of service, and the professional sound advice brokers are typically known to provide,” John Bargis, principal of Mortgage Edge, told MortgageBrokerNews.ca. “If this works for Street, expect others to follow. Brokers once used to see banks as their biggest competitor.

“They are slowly graduating to cannibalizing one another, which can only lead to a significantly diminished customer service experience and value for borrowers.”

Street Capital is the latest broker channel lender to offer direct-to-consumer mortgage campaigns. In onesuch initiative, the lender is offering rates as low as 2.25% and up to $1500 cash for users of the ForeSaleByOnwer.ca website. And a similar offering was first reported by Canadian Mortgage Trends.

Other such campaigns by big bank partners and credit unions have drawn broker criticism in the past. Street is certainly not the first channel lender to pursue various distribution channels and the lender says it is “channel neutral.”

“This is very important because there are very different value propositions out there … some of them are more rate-focused, others are more service and advice-focused … what we want to do is (be) channel neutral,” Ed Gettings, chief executive officer at Street Capital, told MortgageBrokerNews.ca. “We give the same pricing and the same pricing tools, flexibility, to all of our channels that we deal with.”

Brokers have access to similar rates “should they buy down,” Chris Reid, senior vice president of business development at Street Capital, told MortgageBrokerNews.ca. 

For its part, Street Capital has already received broker feedback about the programs.

“Some have concerns. Others say it’s an open competition and we have to adapt. You have to adapt to the competition in your marketplace,” Gettings said. “We’re giving (brokers) the tools to support the value proposition you want to go to market with.”

Whether or not the marketing initiative will deter brokers from sending business to Street Capital remains to be seen. However, broker Dustan Woodhouse thinks it might.

“I am pretty sure that most brokers could go through their career never really needing to send Street a single file, and I am equally sure that with this announcement many brokers will choose to do just that,” he said.
  • Julie Stamp on 2016-03-24 8:45:32 AM

    We are used to the big banks not giving a thought to all the hard work it takes to build your client base and maintain those relationships, we saw it happen with First Line through CIBC, it is very disappointing to see a Broker Channel lender choosing to do the same, even with a bought down lowest rate they are offering rates we cannot match unless a cash rebate is offered on top of the buy-down, similar to Mr. Butler's operation. I think it's disrespectful of the relationships built over the last years and the loyalty shown by Brokers to their brand which helped put them where they are now, it's mowing our grass so to speak. Not only are they offering direct better rates to new business, they are sending out pamphlets to your existing clients at the 3 year mark trying to get their refinance or sale/upgrade business as well, this is not renewal fishing this is directly trying to take our meat and potatoes from our existing clients. It's something Brokers and Agents that have like me sent a lot of my business to Street Capital need to address with their clients, you need to aggressively be in contact with your database to make sure you are not losing that refinance or sale and up purchase opportunity, directly contacting my clients for additional direct business is not Channel Neutral in my opinion.
    It's an unfortunate part of this business, loyalty in this industry is like trying to find that elusive Unicorn or needle in the haystack.

  • nick on 2016-03-24 10:25:02 AM

    the so called broker advocate is prostituting itself to now compete with the brokers. This is a strong message to the broker community and i hope that brokers take note. Street relied totally on the broker community to get the company off the ground. Now they slap the same brokers in the face by competing with them. Those who still send broker business to street are actually helping with the demise of their industry. We provide the cashflow for them and then they use that to backdoor the broker community. .

  • Ron Butler on 2016-03-24 10:28:01 AM

    If mortgage brokers want to cut off every lender who ever offers mortgages direct to the public, I guess we will all be out of lenders very soon.

    Mortgage Brokers: just compete for the client's business. Just do the very best you can: best rate, best advice, best service, pay for the appraisal, assist with any legal fees. Just be as competitive as you can possibly be and quit complaining about what others offer, quit defending max commission, max profit.

    If your advise is so good, and some brokers do actually do bring brilliant advice and planning to the table: charge more! But mainly compete, compete and then compete some more.

  • Richard on 2016-03-24 10:28:33 AM

    Its funny how their marketing slogan towards brokers/agents says "Broker focused. Broker loyal".

    What a load of BS!!! I am not sure if I will ever send another deal there.

  • George Christopoulos on 2016-03-24 10:31:15 AM

    This policy differs from how banks manage it.
    Banks strive to offer one rate be it from a broker or other channel. It may not be perfect but they have matched offers from branches in the past.
    Banks also have other channels to fill their bucket should they piss off brokers.
    Street does not , it is very easy to turn the tap off to Street.
    I'm sure Street has seen a decline in origination's and I doubt they have been able to replace the volumes through this initiative.

  • Dustan Woodhouse on 2016-03-24 10:52:07 AM

    Here is a more complete comment on this:

    It is my thought that Street may have a more difficult time weathering negative Broker sentiment for this move that is directed at the Credit Unions or Banks for multi-channel approach.

    Reasons being:

    Banks and CU’s always had their own sales force, from the start.
    Banks and CU’s never marketed themselves as all about Brokers.
    Banks and CU’s provide solutions for Brokers that no monoline can touch. (39.07% GDS…etc)

    In the case of these other two channels we are also restricted from products, programs, promotions, etc.

    However Brokers tolerate this from these two channels because both provide solutions Brokers simply cannot get anywhere else.

    Brokers need balance sheet lenders, a.k.a banks and credit union.

    The first challenge I foresee with Street is that this is optically not a pleasing move for their current client base – Brokers.

    The second challenge is for Street to ask themselves if they fracture the relationship with that client base (Brokers) what unique value proposition do they provide Brokers that no other monoline can provide?

    I am not too clear on that answer, differentiation is something all monoline’s struggle with and often it comes down to a subtle policy nuance that is meaningful to one Broker over another.

    Or it comes down to the underwriters and BDM’s, if you have great people working for you they can be the glue that holds things together. On this front Street has some truly great people.

    As for the one sentence that did make the story, hopefully the above provides the context for it.

    I am pretty sure that most Brokers could go through their career never really needing to send Street a single file, and I am equally sure that with this announcement many Brokers will choose to do just that.

    What will I personally choose to do? That will take a bit more thought, as I never like to react too quickly one way to another.

  • Rick B. on 2016-03-24 10:57:16 AM

    Ron is right, this is nothing different than what we are used to but Street should change their slogan to "broker neutral" to be inline with their values.... truth in advertising

  • nick on 2016-03-24 11:05:25 AM

    ron butler it has nothing to do with max commission or max profit and heaven forbid we are in business to make money. It is your model and street's practice that is demising this business period. Working more for less. I would have no problem with street offering the public the same product they offer the brokers but it is not the same. It forces brokers to give up their money to match the rate. With your logic why not offer the client the lowest rate we can and make no money. Instead of 2.25% 5 year fixed lets throw every penny we make into the deal . That is what the lenders want and that is what you preach. You are not a broker and never will be. And this is coming from someone who has been in the broker business for over 30 years.

  • Victor Simone on 2016-03-24 11:12:22 AM

    Street is paying rebates directly to the clients, and what they need to think through is the overhead required to provide direct to client services.

    Paying brokers a commission seems to be a waste of money for some lenders, or so they seem to think.

    Fact is mortgages don't sell themselves, but some lenders keep hoping they do.

  • mat fugere on 2016-03-24 11:16:21 AM

    Hi think Dustin's comment is spot on!

  • mortgage geek on 2016-03-24 11:40:05 AM

    This is probably a sign of the times. As a publicly traded company they have to continue increase shareholder value diversifying their origination channels, revenue channels and being cost efficient are just a few ways to this. I wouldn't be surprised if other lenders are thinking of dipping their toes in the direct to consumer approach.

  • Layth Matthews on 2016-03-24 11:59:23 AM

    Don't be hard on Street Capital! Maybe they just don't know who they are yet. I've been struggling with that for years. Maybe they're just going through an existential crisis like me!

  • James Robinson on 2016-03-24 12:08:51 PM

    If every broker decided to take the "buy down to the lowest rate" approach advocated by some brokers, there would be a swift and severe reaction by the big banks. The banks can compete when their rates are within about 20bps of the non banks, but if it were 50bps and started to impact the ROI to shareholders, they would very quickly introduce rules with the monolines they provide capital to and ensure that the competition wasn't cutting their grass. Let's remember that the banks could shut down virtually every monoline if they choose. This is very much a "careful what you wish for". The banks have a constant mission in the boardroom to increase margins and profits and only when forced will they drop rates and margins to compete.

  • Kris Grasty on 2016-03-24 12:10:26 PM

    We shall have to wait and see how this all n shakes out.

    I do not think that discouraging a lender from accessing clients through other means channels will change things. It has always been a free market for clients and vendors alike.

    If Street Cap is adjusting their model from Broker Focused, they surely will see a lack of focus from Brokers.

    They can offer a cut rate price without our fees, but they offer us nothing different lately ccompared to other monolines and fewer effective/applicable specials; this may equate to more files going to other lenders.

    Street Capital will have to evaluate which channel is going to profit for them the most. Would the larger influx come from Brokers or from online clients who have no idea who SC is?

    Not the norm but a few files (only a couple) nearly went unfunded with over the years with SC for no good reason, unnoticed until my scheduled week prior to funding confirmation. How would an unsuspecting client handle no funds on closing? We have issues/snags like this that we look after "behind the curtain" on occasion with lenders/files which IS a part of our Broker proposition!

    Sit back and watch. For me, if the same rate/product/discount etc is available with an alternate lender then I will be more likely to consider the other options. If SC offers something better for a given file on a given week, they would still be in the mix.

    Client's best option available will trump any opinion I have on this move!

  • Debbie on 2016-03-24 12:55:45 PM

    Why does the media always go to Ron Butler for opinions? Ron do you even work under the same structure as other brokers? Don't you just pay the "sub-brokers" a flat fee for a mortgage and everything goes under you? They have no idea about volume bonus or probably even MPP. you probably buy the rate down against the volume bonus the sub broker should have made and keep the Brokerage volume bonus for yourself. Of course you don't care, you are exactly the same.
    Personally I agree with Nick, Street Capital rose to the top off the backs of hard working brokers and now they flip us the bird and say the same rates are available through the broker channel, but we have to give the shirt off our back to accomplish it! I really liked Street Capital in the beginning because they were open for business, guess they just aren't as hungry anymore. Be careful who's toes you step on as you climb up the ladder, because you never know who's A*s you'll be kissing on the way back down.

  • Dawn on 2016-03-24 1:07:35 PM

    Thanks Dustin for your voice of reason.

  • The Wealthy Homeowner on 2016-03-24 1:19:51 PM

    Homeowners who are ignorant to the rules and regulations that govern the mortgage broker and real estate trading acts are the target audience of the offer listed in this article. The 3 service providers that combined allow the offer to be delivered as of today's date are all in breach of provincial and federal legislation in countless instances as of minutes ago.

    It really is time for CMP to step up and clean up the profession by establishing a Standard of Practice where ongoing breaches of provincial and federal legislation causes immediate removal from that association.

  • Blair Goodman on 2016-03-24 3:35:51 PM

    Ah yes once again a monoline "partner" decides to shift it's model, should we be upset or just move on to our next "flavour of the month" lender who makes the same promises of broker focused and broker committed. Is it disappointing yes, a surprise, NO.

    Every time a lender shifts we need to be prepared to sever a relationship and create another with someone who can do a better job for all parties involved.

    When a renewal letter arrives from a lender 6 months out promising the client it's "best" rate...only to battle us with a rate match after we do the service to the client and find the real best pricing....should we consider working with that lender in the future?

    The race to the bottom is a slippery slope and one that struggles with integrity and professionalism. Maybe buy downs should be eliminated and then we know that clients are truly being best served rather than being positioned with a sub par product in the name of saving the deal and making whats left just to pay the rent. Maybe mortgage sweat shops are the future where the only thing that matters is seeing an "all conditions met" email, regardless of service, education and product. I think not.

    We all work for our clients best interest, no one else, and this should always remain our focus.

    It's our choice and fortunately the lender choices are still great....now go out and make it an awesome day for you and your clients!!

  • Jim T, Advent Mortgage on 2016-03-24 7:16:24 PM

    Street has been going direct to consumers for a while. As a matter if fact, they are currently competing in an rfp for a large consumer oriented program.

  • LanceH on 2016-03-28 11:12:04 AM

    I don't think anybody is seeing this for what it is. They're slowly transferring to becoming a bank, and this is one of various steps to get there. Also, they may be looking to beef up their books before selling the co. It's one or the other, and they want us brokers to keep sending them business in the interim. Well, I've never sent them a deal, and won't be starting in light of this.

  • Franklin DeGroot on 2016-03-28 12:30:22 PM

    Ron Butler had it right – Street needs to appease shareholders and look at continually growing their share and profits – and you can’t blame them for looking for alternatives to the market. Given that broker share is roughly 35% of the market, there’s still a big part of the market that is being controlled by 6 banks. To think that they are competing directly with us is short-sighted.

    Street has a decent value proposition and they’ve always been good to me. I’ll continue to work with them and they’ll continue to pay me for the clients I send them, which is the true nature of our relationship. If they get bad, then I’ll look elsewhere as I always have. But for me to chastise them and organize a rebellion against them because they have a partnership with someone that we deem as ‘competing directly with the hand that feeds’ is small. I’d rather just focus on the business I have coming in, and be happy with that. At the end of the day, lenders are the ones who drive the car in this relationship and we’re simply passengers along for the ride. I continue to tell my agents that if they think that offering ‘best rates’ or ‘best customer service’ is what’s going to get them business, then they should find a new career because it’s not proprietary – we all do the same thing and at the end of the day we are what we are – “Brokers” – not “Lenders” – and our business is based on giving a client to a lender in exchange for compensation – wash, rinse, repeat. If you feel threatened, it’s not a bad time to consider diversifying your offering, or “hedge your bets” on the industry.

    What’s commonly overlooked is that if you phone any monoline customer service asking for a mortgage you would be put through to their customer service team to assist in a mortgage application (First National, Merix, MCAP, etc… try it! I dare you). It costs lenders a lot to work on thin margins dealing with brokers - a spread of 150 bps on the bond rate and 2/3 is paid out to brokers who complain all the time? At the end of the day someone is going to get sick of it and just go direct to the consumer.

  • Shaun Serafini (@mortgagepro10) on 2016-03-28 2:37:46 PM

    In fairness, from somebody who has done a large amount of business with Street Capital until the halt of the trailer model, all one consumer has to do is work with Street one time to realize what a painstaking experience dealing with them on a file can be.

    Perhaps it's a blessing in disguise because I'm sure clients would be thrilled to hire a broker to deal with all the hoops, hurdles and frustration after one go at it on their own with these guys.

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