​Brokers weigh in on market share drop

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Broker market share has dropped year-over-year and some industry professionals believe regulations are to blame.

“There is a simple reason that broker market share has dropped,” Ron Butler of Verico Butler Mortgage wrote on MortgagegBrokerNews.ca. “Brokers are forced to obey B-20 rules, banks branches circumvent them.”

CAAMP’s annual fall report, released earlier this week, points to a significant drop in mortgage broker market share, a large portion of which was picked up by the big banks.

“For all current mortgages on homes that were purchased during 2014 up to the time of the survey, 61 per cent were obtained from a bank,” the official report states. “Mortgage brokers had a 31 per cent share. Credit unions were the source for six per cent of these mortgages, followed by two per cent from life insurance or trust companies.”

These numbers represent a significant change from the mortgage origination breakdown of just a year ago. In 2013, up until the date of last year’s publication, banks accounted for 42 per cent of mortgage market share, while brokers accounted for 40 per cent.

The tightened mortgage rules, which have sometimes stymied brokers’ ability to place clients in mortgages, have been a constant struggle for industry players. And this, coupled, with the big bank influence has not boded well for the industry, according to the CAAMP stats.

“Mortgage brokering is a relationship business and you can only expand your business by expanding your expanding your sphere of influence,” Clayton Carby of Total Mortgage Management wrote. “The Banks have a greater ability to do this because of all the services they offer. We need to offer education as well as best interest.”
  • Ramesh Amin on 2014-11-21 12:45:31 PM

    I guess it has also got to do with us home buyers being taken for a ride by some not so honest brokers and thanks to that handful the whole community of mortgage brokers gets a bad name.

  • Daryl French on 2014-11-21 12:54:08 PM

    Banks spend billions on marketing and it is tough to get agents to spend $100 a month on marketing programs. I hear constantly that mortgage brokers hate working with Realtor's, yet Realtor's are involved in a lot more real estate transactions than we are!

    I think we as an industry have to own the drop in market share and change our roll from best rate to best financial solution. We have to start investing in our business and ourselves, instead of just viewing ourselves as sales reps.

    Business people look at ROI from relationships and marketing and invest in what gives them a good return. Sales reps just focus on the next sale.

    I agree that banks are playing on a different field but I also believe we need to up our game as they (the banks) give us more than enough amo to compete very easily with them. We need to consistently get our message out to the public (Don't sign that Mortgage Renewal) and focus on financial strategies with clients, Realtor's, and other industry professionals and then we will see growth, and deserve the growth.

  • Rod on 2014-11-21 12:59:19 PM

    Maybe also to do with brokers sending a large share of their business to the banks ?

  • J G on 2014-11-21 1:38:31 PM

    I'm not sure why a Mortgage Broker wouldn't want to work with a realtor as Daryl mentioned above me here - our office thrives on realtor relationships. Are Realtors tough to deal with? Absolutely, but it's a necessary situation and once you gain their trust, deals roll in.

    I think - this statistic simply shows a disconnect within the broker community about a few things.

    1 - Being able to educate your clients and educate yourself on the changes being made in the industry.

    2 - Not following up on past clients and letting them stray.

    3 - Providing poor service (I've had clients who have used other brokers and they bring in the paper work they were given and it's wrong or not even filled out)

    4 - Not knowing how to differentiate yourself, as a broker, from the banks.

    5 - Not educating the client on the differences in mortgage conditions.

    Our office has steadily increased volume year over year since I have been in the industry (5 years) and the main reason is because we do 1 through 5 (collectively) very well.

  • Ron Butler on 2014-11-21 1:59:31 PM

    J G ........... I support all you are saying but this is a market share issue and it is a very big market. Brilliant individual or team efforts can ALWAYS increase volume year after year. Our own volume is up 18% BUT if I did not have the massive increased compliance issues that the bank branches are eating our lunch on with compliance circumvention we could have been up 40%.

  • J G on 2014-11-21 2:48:48 PM

    I agree Rob. It is a market share issue, no arguments here. The compliance issues are troubling and have certainly stymied growth within our own office as well, so I hear you there.

    As brokers we need to find a way to work together to educate and create awareness, much like Insurance Brokers have done.

    In terms of Banks not following the rules, I have seen this first hand a few times with lenders who offer a collateral charge, that will register 125% of the value of the home, then do a deal without having to abide by the Insurer Guidelines.

    For instance recently I couldn't refinance a deal for a friend of mine, who needed more than 80% LTV (he couldn't do a B deal or private deal because 1 - He wouldn't 2 - To do all debt put him over 100%LTV). His bank collateralized his charge to 125% of the value and did the deal taking him above 100%LTV.

    I am not sure how we can get around that - I hope my friend doesn't have to end up selling his house any time in the near future.

  • kevin irvine on 2014-11-21 3:59:12 PM

    I've had a certain Toronto bank do that 3 times to my clients by defrauding their system internally so I don't send them any business as none of the clients are happy now and nor am I with them.....people just need to explain how the bank's calculate their IRD penalties and then no one will want to use them for their mortgages. That said there are a lot of poor brokers out there that just don't bother to work it or do follow up with clients and that is a big part of the problem

  • Ron Butler on 2014-11-21 4:15:55 PM

    I want to make it clear, I am not happy that this uneven playing field exists but its there and we just have to suck it up. Brokers have bee crying about branches one upping them for many decades; the difference is today we have had B-20 crammed down our throats and it burns us to see clients that would have been a slam dunk deals 18 months ago turn into problem files. I am not even suggesting that we should be ticked with our bank lenders because this is going on. The people at the broker divisions of our bank lenders have zero impact on the branch operations. All we can do is fight the good fight. I will make a bet this this branch advantage will get bigger before it gets smaller.

  • Jason on 2014-11-21 4:18:07 PM

    Once again a commentary about market share turns into a CAAMP complaint session. Typical blame game! Actually brokers expend so much energy complaining about banks and CAAMP, it is any wonder that this industry even got to be 1/3 of the size it is!

    Do the banks have an advantage? Sure they do - simply put... it's their money they are lending out! As for the "skipping of the rules" - did it ever occur to people that a branch has an advantage if the client currently does business with that bank? They already have access to the information - whereas a broker lender does NOT have that same access nor do they have the client relationship history.

    You also forget… brokers are THIRD party, self-employed, 100% commission sub contracted whole sellers of multiple products. The lenders do not know the customer, nor do they have the opportunity to. There was a lender once that insisted on meeting or interviewing each and every customer before the mortgage funded… brokers pitched such a big fit about it that the lender eventually exited the broker community altogether. Anytime a lender tries to know the customer more, or even mildly attempts to get more involved with the clients brokers throw temper tantrums. Geez, brokers just want it all don’t they?

    As for CAAMP… IT IS AN ASSOCIATION, plain and simple. You want them to advertise on the same scale as the banks? Guess what? It will NEVER happen.. here is why: TD spend roughly 150 million dollars PER YEAR on marketing (TV, Radio, Internet, Sponsorships, etc). That is ONE bank, ONE. Let's do some math...

    TD spends the equivalent of $1041.00 per MONTH (or $12500.00 per year) per licensed independent mortgage broker. Throw in the spend of the other big 5 banks, and well... it is more like $5000 per month ($60,000 per year)... PER LICENSED BROKER that is a member of CAAMP.

    So who is going to cough up $1000 a month, never mind $5000!?!? Anyone? You want CAAMP to be able to even come close to being able to compete with the over 200 year old marketing machine that is the big banks? Who’s paying for it?

    Also, why would a DLC broker, Verico broker, Centum, etc. give that kind of money to CAAMP to grow all brokers? Sorry, I would rather spend that money building my own brand instead of also building the business of broker who do not even participate in CAAMP.

    Stop and think before you start publicly ranting. Any sane person looks at any situation from both sides before publicly commenting in a forum like this.

    As for what brokers can do? You have the ability to build a strong referral business that is based on providing sound fiscal advise on home ownership. Are you ever going to do as much as the bank? No you are not. That is simply reality, so stop looking at the pie in the sky and finding reasons why you can NOT succeed and build your business for what it is. A niche service that some consumers will like, others will not.

  • J G on 2014-11-21 4:24:59 PM

    Jason - comments appreciated, but I looked at the other comments and I don't see anyone bashing CAAMP?

    I agree Rob - their advantage will grow. All we can do as Brokers is the best we can for our clients.

    Some clients learn the hard way and get burned by their banks.

    That being said, we still send deals to our bank partners, when necessary and sometimes at a clients request. So they are a necessary evil in the marketplace.

  • Bob on 2014-11-21 4:47:09 PM

    Always amazes me when Brokers slam Banks and then two of the top 5 broker lenders are TD & Scotia. Banks look at the broker channel as a relatively cheap source for finding new clients to cross sell more profitable products. Even if all brokers collectively tried to compete wih the marketing machines of even one Big Bank it would be a colossal waste of time & money. Maybe eliminating some of the part time "amateur" brokers may improve market share. Couldnt imagine trusting a mortgage brokers opinion who only funds a few deals a year & has another full time job

  • Ron Butler on 2014-11-21 4:50:20 PM

    Jason, you are right: brokers like to complain, I am up for it myself. Self employed people feel the heat of adverse conditions more than salaried employees.

    We will NEVER compete with the banks on advertising. We have to work smarter and stay ahead of the curve, deliver real value to consumers and become more efficient to survive on slimmer income per mortgage.

    Lets be clear: 35% of a multi-billion dollar marketplace is not a niche. Their are several very nearly Billion dollar brokerages in this country. Mortgage Brokers are for real.

    The truth is that while we are third parties some of us have delivered billions of mortgage volume to some of the big 6 banks in this country and with one bank brokers represent 50% of the bank's total Canadian origination.

    So I don't think mortgage brokers are the red headed step children of the mortgage space.

    Finally, the client belongs to the client, they don't "belong" to the broker or the lender. The consumer acts in their own self interest and so they should. As long as mortgage brokers deliver great value to the consumer we will be here for a very long time.

  • Gord F on 2014-11-22 11:40:29 AM

    How about addressing the one issue that no broker or governing body has even come close to addressing since I've been an agent...amending the bank act prohibiting branches from selling mortgages. The insurance industry lobbied many many years ago under the premise that licensed insurance brokers have gone through the academic and practical process of selling home, auto and life insurance whereas those working in a branch had not. As a result the bank act was amended prohibiting branches from selling insurance. The same exact thing is happening with our industry. It bothers me when I see high level brokers and those working in "our associations" such as IMBA and CAAMP pushing there own agendas instead of fighting for what is right and fair for our industry.

  • Kuldip S Panesar Homeland Mortgage Corporation on 2014-11-22 2:45:59 PM

    Banks have different rules for the mortgage broker channel and for in house mortgage approval. For example , they are offering lower rate of interest than available to the broker.In case of down payment they need three months account history , with explanation of large deposits of $ 5000.00 where as they ignore this in house applications . They are also having quick response which is not available in Broker channels. Similarly there are number of other issues which can be explained here .
    Mortgage Broker Association are to take up the matter with the banks which they are not doing..................

  • Walid Hammami on 2014-12-15 11:04:13 PM

    Banks make certain products available to their reps and not brokers (example TD HomeLine of Credit)
    Some Banks have stopped offering mortgages for commercial entities but keep doing it with their clients, it happened to me once with a client with national bank, they made an exception for him, they sent it to their legal department and drafted a special agreement. They will never do something like that with us.

    With National again the reps can lower the rate to compete but a broker can't what is worse is that here in Quebec banks pay the real estate agent and the agency about 75 basis points (including taxes) for referring the client, they don't work the file, advise the client or collect his documents. All they o is refer and they get paid. The mobile representative gets paid 45-20 bps depending on how much he cut the rate (it's even unfair for the mobile rep). so total cost is about 120bps Isn't it better to pay the Broker 100bps.

    Now we see HELOCs at prime, we can only offer prime + 0.5%

    It's uneven playing ground in many ways. Not to blame CAAMP but... what are they doing about it? I think if you are intellectually honest you will see that this is a legitimate question and concern.

    I don't think CAAMP will be able to keep the status quo forever. The situation is evolving and once the critical mass is reached then there will be actions taken.

    I wish we can write an Article about this issue.

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