Brokers react to latest mortgage industry research

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The latest research on the broker industry from Maritz Canada for CAAMP, revealed some interesting facts about brokers and their relationships with consumers and lenders.
 
The study entitled “Canadian Mortgage Broker Channel: Consumer and Industry Perceptions” noted among other things that only 35 per cent of consumers have a full or good understanding of the services provided by mortgages brokers, 17 per cent are aware of the AMP designation and that while two-thirds of those looking for a mortgage consult with a mortgage broker on first mortgages, that falls to 27 and 21 per cent respectively on early-term renegotiation and scheduled renewals.
 
In the broker/lender relationship there is still clearly work to be done. While the vast majority of mortgage lenders (97 per cent) see the value of being involved in the broker channel for such reasons as access to wide range of customers, less costly to operate and putting different lenders on a level playing field, nearly two-thirds of banks (32 per cent) don’t believe their institution benefits from involvement in the broker channel. Lenders and banks cite four primary concerns when dealing with brokers: fraud, inconsistent or inexperienced brokers, lack of client ownership and the difficulty of cross selling. Surprisingly, when asked what influences brokers when choosing a lender, lowest rate was just the fifth-most influential consideration. Number one was speediness of approval, followed by underwriter support and service provided.
 
In terms of keeping clients, the study indicated the key is in the relationship between the broker and the client after the first mortgage has been completed. While low interest rates are one of the key drivers in attracting clients, what drives satisfaction and loyalty are things like, being proactive, suggesting strategies to improve terms and being helpful.
 
“While these results may be eye-opening, they should not be surprising,” stated the study. “The fact is that brokers have already passed the rate test among their customers; that is why customers chose their broker in the first place. What drives true loyalty is development of meaningful relationships with customers, ones that ensure that when it comes time to deal with their mortgage, customers immediately think of their original broker.”
 
MortgageBrokerNews.ca solicited reaction on the report from a number of industry professionals:
 
Vince Gaetano, VP, principal broker, MonsterMortgage.ca
First, the Mortgage Broker channel has dropped to 25 per cent and the survey described this as delicately as possible. At the end of the day, we are moving backwards.

Second, the broker/lender relationship needs work. It speaks volumes when among Bankers, one third do not believe their company benefits from the involvement of the mortgage broker channel. It is apparent that "trust" needs to be established to grow market share. Without it, brokers and lenders cannot increase market share moving forward.

And lastly, the AMP designation needs to improve its value. I agree with the survey that AMP’s themselves need to communicate with end consumers the value and importance of the designation. The problem that I see is, how can one be proud to discuss their status as an AMP with a client when all they had to do is attend free industry luncheons and stay awake for CE credits. The concept is a good one but the designation credits need to be earned with effort.

Overall, the survey is not surprising. The industry has to come to the realization that the only way we can grow is to draw back the lenders (BMO and HSBC) that left and convince new ones to enter – you need more participation in the channel (simple math). The only way this can happen is if brokers give up something to entice them to come back or enter the market. Brokers need to start understanding the term “cross-selling” and how it will start effecting lenders decisions to stay in the space as we know them now. Brokers need to begin the digestion of the term clawbacks and understand how this mechanism can help the industry’s sustainabilty when coupled with trailers, accountability, representations and warranties to the lending partners. Trust is built when two parties are working together and being fully transparent of their respective painpoints. There is no more pie to split up.

At this point in time most lenders and brokers seem paralyzed to speak about the painpoints that need to be discussed. As we commence a new decade, we need an industry summit now more than ever to help shape our industry into one that we can all be proud of.
 
I believe that success leaves clues and this report provides a blueprint for moving our business forward. The first thing that jumped out at me was what mortgage broker clients find most valuable, being pro-active, suggesting strategies along with friendly after sale contact. Consumers are looking for expertise and leadership when it comes to financing their biggest investment. Most consumers don’t even know what they don’t even know so the entire mortgage discussion is centered around rate as a consequence. By suggesting clear strategies, and dollarizing long term savings, educating the customer on how the different products affect them and confidently recommending the best solution rather than asking the customer what they think they want is a way to become their trusted advisor, minimize rate sensitivity and close more transactions.
 
The biggest hurdle this industry is going to have to overcome in the future is a lack of  consumer  awareness. The report raises this concern again this year and unless the associations, lenders, brokerages, and agents get organized and deliver a clear consistent message to the consumer of exactly what we do, then this will be an ongoing challenge. I believe strongly in and support the AMP, but feel any monies spent by the association should articulate what an Accredited Mortgage Professional does. The ads should read something along these lines: Use an Accredited Mortgage Professional  as your trusted advisor. An AMP will provide expert, unbiased advice, choice and value by negotiating the best mortgage on your behalf from Canada’s largest financial institutions and lenders.
 
The other item that stood out was our continued poor showing when it comes to early renegotiations and renewals. We have to get better as an industry at pro-active communication. Many agents simply lack the systems, resources or organization to contact their customers on a regular basis and keep them apprised of changes in the industry, rate trends, refinance, debt consolidation opportunities or advanced renewal discussions and then wonder why their clients renew at the originating lender? A steady informative campaign with options and suggestions, via regular emails and quarterly telephone calls will increase these numbers significantly for any agent. Many companies large and small lack the resources, scripts and systems to put an effective program in place.
 
In a nutshell, our entire Industry has to be alarmed at the flat line or even negative growth the mortgage broker space has been experiencing at a time when the rates are near their lowest point in history. Although I willingly participate in spirited competition, it is time that the super brokers, independents, associations and lenders check their guns at the door and start cooperating and spreading a consistent message to the consumer of the value we bring to the market. I have watched the financial institutions massively increase their mobile mortgage sales forces, continue to restrict product offering to the broker community, cut commissions and restrict access based around our lack of organization and fragmentation as a whole.
 
 I think there should be uniformed licensing, a one fee association membership which gives you the opportunity to participate in up to three regional Associations. (Right now many agents are being asked to be MBABC, AMBA and CAAMP members.) This is expensive, time consuming and waters down the effectiveness of the numerous yearly events offered. I also think the provincial yearly licensing fees should be increased to discourage part time agents so that we can begin growth with committed fulltime professionals and focus on best practices.
 

Dave Larock, mortgage planner with TMG The Mortgage Group (Thompson/LaRue)

Broker market share has also been affected by the drop-off in sub-prime mortgage loans. We had a disproportionate share of this market so that fact that overall broker market share is holding steady means we have pretty much replaced that lost volume with more prime business (which is no small feat).

It’s true that a few bad apples can spoil the barrel but I find it interesting that lenders are so concerned about broker fraud, especially when the largest mortgage fraud in Canadian history was recently perpetrated at RBC and BMO – two banks who don’t accept business from mortgage brokers.

Where brokers compete, customers get a better deal – plain and simple. If the average decrease for a renewal client using a broker is 1.4 per cent and the overall average rate decrease for renewal is one per cent then the average decrease for renewals who sign-back their lender offer without contacting a broker is even worse than one per cent.

I’m really surprised that more brokers don’t manage their database better. It’s hard to get customers through the door and once you’ve built that trust it seems like such a waste to throw these relationships away.

 
  • Jeremy From Calgary on 2011-01-12 8:29:02 AM

    It's about time the industry clamps down and gets rid of those bad apples. A slap on the wrist just doesn't cut it! Furthermore, those who want to hold a real estate license as well as a mortgage associates license, etc...what are you? The is a definite conflict of interest here.

    Personally, I think the brokerages, if they are serious, need to do some thinning of the herd. That's where it needs to start! Shouldn't it be about professionalism and the integrity of our industry, not a numbers game?

    Cheers to a successful 2011!

  • Elaine on 2011-01-12 8:44:00 AM

    That's what happens when anyone can apply and be handed a Broker license. I don't blame the lenders that feel Brokers are not necessary. It's easier to buy a Broker license than a dog license. All those guys that came into the industry figuring they could make a quick buck, a few hundred thousand a year or more in their minds, were dreamers that came from selling things like beer or cars, or driving a courier in their past life. It should have been made mandatory for a person to come with no less that 5 years of direct lending experience. This would have cut out all those want to be's! I say no more.

  • Julia Krause on 2011-01-12 8:59:29 AM

    Lots of new brokers have come into the mortgage industry over the last 10 years, and I've been saying that new mortgage brokers don't get the training and help they need. Lenders get frustrated and clients get frustrated, and it hurts ALL mortgage brokers. I don't understand why certain people feel that I'm saying something out-of-line or 'taboo' when I say that practical, real-life training on a national level is missing in our industry. I believe our industry should be growing and moving forward. This is a great opportunity for CAAMP to step up and create some standardized training and help for the less-than-2-years-in-the-business brokers. And YES, I would LOVE to get involved and help make that happen!

  • Full Time Broker on 2011-01-12 9:01:49 AM

    I agree with Gary that our own industry's separate associations and regulatory bodies is part of the problem. The major banks look at that and use that against us. How many times have we heard clients say the bank says there is a fee to deal with a broker or create doubt and uncertainty by saying do you know who your mortgage will be booked with. Our lack of a consistent message as an industry and what we do is not helping. The other point is the saturation of brokers. We have people who wrote the test and pass the exam and became a broker. They know nothing about giving proper financial advise and all they do is beat down each other on rate because that's all they can do to get business. We need to bring in more proper and experienced mortgage professionals and discourage those with no prior experience.

  • M on 2011-01-12 9:05:49 AM

    Regarding your comment Mr. Mauris:

    In a nutshell, our entire Industry has to be alarmed at the flat line or even negative growth the mortgage broker space has been experiencing at a time when the rates are near their lowest point in history. Although I willingly participate in spirited competition, it is time that the super brokers, independents, associations and lenders check their guns at the door and start cooperating and spreading a consistent message to the consumer of the value we bring to the market. I have watched the financial institutions massively increase their mobile mortgage sales forces, continue to restrict product offering to the broker community, cut commissions and restrict access based around our lack of organization and fragmentation as a whole.

    hm hm. Maybe your should practice what you preach here instead of always pilfering other brokers and using tact in your advertising in trade magazines.

  • John on 2011-01-12 9:16:57 AM

    "Furthermore, those who want to hold a real estate license as well as a mortgage associates license, etc...what are you? The is a definite conflict of interest here."

    Jeremy a little bitter? I hold both licences and feel I give my clients superior service and advise because I know both real estate and mortgages. So just for the record I know what I am, professional.

    Have a great year all,

    John

  • jeff on 2011-01-12 10:03:57 AM

    I feel as a 24 year professional in this field that if we as an industry think we can buy our AMP by attending some seminars etc and think that we know how to sell our services is proper conduct, we have to give our head a shake. For that same comment about a courier driver becoming a broker and now gets his AMP are you telling me he knows anything?, You should only be permitted to obtain this AMP by being one. Not by buying one. Tenure is where you get your accredited Mortgage Professionalism from. Learn your job and everyone will be satisfied, from the lenders to the most important, the clients. We shouldn't be having this CASH COW AMP for those who don't know what it means to be one.

  • Jeremy From Calgary on 2011-01-12 10:26:28 AM

    I certainly did mean for my comment to upset you, and can appreciate what you are saying. With all do respect, there is a figure of speech that goes something like this, a jack of all trades, and a master of none. The conflict of interest comes from working both sides of the deal. It's no different than me being the originator and working for TD underwriting my own files. Let's face it, your commission on the purchase is significantly more than the origination side, so which commission are you more willing to protect? It's not rocket science!

    To answer your question, no, I'm not bitter and have no reason to be. The way I see it, a good mortgage associate doesn't need to supplement their income by working in another profession. As an industry, we need good associates who are willing to lend a hand up to those who are willing to lean in.

    In closing, I'd just like to ad that there are many associates who think fast service, the best rates and access to many different products, blah, blah, blah...is great service, but how is that different then what anybody else can offer? Superior service delivered, does not always equal superior service perceived!

  • Jeremy From Calgary on 2011-01-12 10:28:14 AM

    oops, I meant to say I certainly didn't mean for my comment to upset you.

    Sorry for the confusion.

  • Kyra Van Graan on 2011-01-12 11:50:53 AM

    Clearly, if you are a mortgage broker without a CRM than you are costing yourself an enormous amount of business. Nexa is a CRM that is able to mimick your data in Expert and updates every two hours to keep your data in Nexa consistent with your Expert data. I attended a webinar today to learn more about Nexa's capabilities and I was really impressed!

  • BC on 2011-01-12 12:59:12 PM



    Our association (CAAMP) is run and governed by the big 5.

    Many years ago I was excited to go to my first CIMBL conference to learn all about the industry that I had joined. Imagine my shock to learn that one of the panelist and CIMBL board member was employed in an upper management position at the Royal Bank!

    As I dug further into "our" association it shouldn't have surprised my to learn that the puppet masters were none other than a who's who of banks and lenders with a token broker thrown in for good measure.

    Needless to say, I haven't been back since.

    Now let's look at our AMP designation.

    In concept a great idea.

    But wait, what's that, an unlicensed bank employee is eligible for an AMP through CAAMP????

    So now the bank run association has issued me a certificate for my education based on me paying to go to a bank run party in Toronto and sending them $200 every year.

    If I stop partying and stop paying them, the bank will take my education away? (ooops, I meant CAAMP not bank, honest!)

    (stick with me here)

    I would gladly pay dues of $100 a month to be a member of an association that didn't just masquerade as a broker's association but really did act and lobby for brokers and their clients.

    Now… If the 12000+ brokers in Canada followed this model, you would have a monthly cash flow of $1,200,000.00 or $14.4 Million per year. I am sure that we could put together something significant with that.

    Gary, I appreciate your chutzpa and would like to nominate you as our CEO, are you in?

  • Gary Mauris on 2011-01-12 1:28:03 PM

    Dear M,
    Nobody owns the agent, the agent owns the agent and we have to continue to earn their business and not hope that they stay with us because one time long ago we were lucky enough to have them believe in what we were doing and join our team. As i said, i believe in spirited competition, it makes us all better and drives all to higher standards. If my agents leave us, i look hard in the mirror to see where i dropped the ball and how i can improve our value and services so that we can limit losing good people who have helped us become who we are, not blame the competition for pilfering.

  • Jon on 2011-01-12 5:36:33 PM

    As someone who has worked on both sides of the mortgage fence, the 1st point that would be worrying to me is that 32% of lenders see no benefit to being involved in the broker channel. If this attitude becomes more widespread then more and more lenders will hire their own road reps and offer products/rates that won't be offered to brokers. The 2nd worrying point is that the ratio of clients who use brokers drops dramitically after they have been placed with their lender. For Brokers to pump up their chest and say how wonderful mortgage brokers are and how bad bank lenders are is foolish as they say "pride comes before a fall" For more Lenders to see added value by using brokers, then there has to be more of a financial benefit than is currently offered, the broker system isnt a unified front with mostly every woman/man for themselves, so collectively they have no bargaining power, with maybe a few super brokers having the ability to negotiate. I also would be looking at the ratios and say why do 67% of people go to brokers for a 1st mortgage but that drops to 21% on renewal, so how come the broker value to the client has dropped by 46%, that's an incredible drop in retention ratios, which would be a MASSIVE issue at most lenders. As mortgage financing is probably going to be more restricted in the future mortgage brokers need to adapt otherwise they risk losing more of their market share.

  • vittorio oliverio on 2011-01-13 5:34:09 AM

    Look, I believe the best way for the lenders to take us seriously is to have a campaign that basically states the following:

    we ask this question
    Why should your next mortgage being from a mortgage broker?
    than we provide a simple answer, it could read as follow
    "to save money"
    " to get a better mortgage than what your local bank is not offering"
    " to give you more than just a mortgage but some great advice on your mortgage options"
    and forth

    Lets be honest, the people that work at the bank are not as educated in the mortgage product as brokers are and we need to put that information accross to the public. So if CAAMP wants to really increase the mortgage broker channel, they should focus on this

  • Joe Pinheiro on 2011-01-13 8:45:46 AM

    Fiction: CAAMP’s board is made of lenders or as someone mention (Big 5)

    Fact: The executive board of CAAMP is comprised of 3 brokers, 1 insurer (CMHC), one lender (Merix)
    The entire board is comprised of 9 brokers/agents, 2 insurers, 4 lenders who are Firstline, Merix, MCAP and Equitable

    Fiction- any road rep from the “big 5” can get their AMP
    Fact- as per the new changes only those who are provincially licenced and carry E&O insurance can make an application to receive an AMP. I don’t know too many Royal Bank road reps that are provincially licenced. Please check out the new AMP requirements at caamp.org.

    Fiction- AMP is a “cash cow”
    Fact- in excess 95% of the revenue generated from membership is spent on advertising and promotion of the designation. All this information is available to all members as per our financial statement. I know some would rather not read the reports. It’s much easier to simply comment.


    The industry is facing a lot of challenges these days. We all have to find a way to work and exist cohesively while functioning in a competitive environment. As Chair of CAAMP I look forward to working with all those that have a stake in our industry but am also focus during my tenure on the mortgage brokerage channel. Steps have been taken to increase professionalism and make the AMP more relevant to you the broker/agent and Canadians. Please take the time to find out what is really happening and how you can help make this a better industry.

    I also think that it’s only fair to put my name on any blogs and I also appreciate those that do. I can be reach at chair@caamp.org.

    Joe Pinheiro
    Chair of CAAMP

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