Brokers react to National Bank compensation changes

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National Bank announced changes to the compensation structure of its broker services this week and broker opinions diverge among those who say they won’t be affected and those who feel it will impact their decision to use the bank’s services.

“I think the changes are not a good thing because they are reducing the volume bonus, which was already reduced last year,” Colleen Austin of True North Mortgage told MortgageBrokerNews.ca. “To reduce it again so quickly is going to be a detriment. We do send a fair amount of business there so it will impact where we’re going to send things.”

Austin hopes changes like these won’t become a trend throughout the industry.

This week the bank announced a slew of changes to its compensation model, with a shift to greater rewards for efficiency but a de-emphasis on volume. More specifically…

“They changed the volume bonus from 20 to 10 and that’s the lowest of anybody we send business to. Just commissions in general are going down on their one-year, 10-year and all-in-one product,” she said. “Everything that came out is basically a reduction of money they’re going to pay brokers. Hopefully we don’t see any other lenders following suit.”

However, not all brokers are lamenting the changes  – especially considering the bank still offers proprietary offerings largely unique in the channel.

“I don’t think the changes that National Bank are bringing in are that intrusive; as long as you are achieving the volume levels needed, I’m not seeing an intrusive change,” Ross Thorstad, co-owner of Verico Mortgage Depot, told MortgageBrokerNews.ca. “They’ve got the ‘All in One’ for refinancing clients that allows you to pay down the mortgage and, as long as you are within the cap of 65 per cent, it allows you to still access the line of credit borrowing limit.

“Other lenders offer a similar product but every dollar you pay on the mortgage, you don’t retain the borrowing limit.”

  • Filomena on 2013-10-04 7:24:03 AM

    National Bank is so difficult to deal with, their underwriters live in a box, their BDM is not very responsive, their policies are too tight, that this won't impact me at all because I find it very difficult to deal with them.

  • Jim T Advent Mortgage on 2013-10-04 7:38:57 AM

    I do like the move towards efficiencies and away from volume bonus. This sends the right message to the market – be efficient and we all do better. One can now earn upto 50bps in vb/efficiency bonus. This is almost double the current market.

  • David Larock on 2013-10-04 7:49:02 AM

    I applaud National Bank’s compensation change and hope that more lenders will follow suit. It is certainly in their best interest to do so.

    Most lenders draw almost no distinction between brokers who fund 25% of what they submit versus those who fund 80%+, beyond a little lip service and the odd cull of the worst of the worst. Today’s lender compensation models basically ignore the fact that low funding ratios cost them money.

    NB is shifting its broker compensation focus away from sheer quantity (volume) and toward quality (higher funding ratios) instead. If lenders believe that their volumes will slow in future, evolving their reward systems to tilt the playing field in favour of the most efficient brokers is a no brainer.

    Today’s volume-first compensation models created low funding-ratio broker monsters that sap lender profitability. Tomorrow’s compensation models can vanquish them just as easily.

  • Ron Price - DLC on 2013-10-04 8:17:28 AM

    @Filomena

    Ditto, back at cha, but we are experiencing declines of deals from many lenders that they have even told us would have been approved a year ago, and yes service levels have gone into the toilet etc

  • Paolo Di Petta | dipettamortgage.com on 2013-10-07 6:15:49 AM

    This is not surprising - as inefficient volume costs them money, whereas efficient volume saves them money. It's a simple value equation.

    This is only the beginning. Closing ratios aren't the only ratios that banks track - expect to see more data-driven changes in incentive/penalty structures with the big lenders in the future.

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