CIBC offers settlement to brokers

by |

CIBC is now putting a formal settlement before FirstLine Brokers to compensate them for outstanding BasisPOINTS.

Under the terms of the offer presented Friday, brokers will be paid “$0.05” for every BasisPOINT OR see each one converted to two Aeroplan Mile points.

A broker agreeing to the offer also “RELEASES AND FOREVER DISCHARGES Canadian Imperial Bank of Commerce, CIBC Mortgages Inc., FirstLine Mortgages, each of its and their subsidiaries… from any and all claims, demands and causes of action.”

The offer was also presented Friday with a long-awaited thank you from FirstLine for broker who made it the biggest mono-line in Canada.

“Thank you for your support of FirstLine Mortgages,” reads the  Termination of FirstLine® Mortgages Broker Agreement and Related Matters, dated Friday. “As we recently announced, FirstLine Mortgages, a division of CIBC Mortgages Inc. (“FLM”), will no longer accept any new mortgage applications as of the close of business on July 31, 2012. As we work towards this date, there are a number of actions you may need to take, which are detailed in this letter.”

Those details outline what exactly happens to FirstLine clients in terms of payment agreements and maturity dates and the fact that brokers will continue to have “access to FirstLine BasisPoints®, POINTS and document tracking information on www.firstline.com until December 1, 2012.”

The FLM POINTS program will in fact be extended to December 1, 2012, with redemption available until that time.

“Any POINTS held by you at the close of business on December 1, 2012 will be cancelled and you will not be able redeem these POINTS in accordance with the terms of the Agreement,” reads the correspondence.

Still brokers have now come up with more creative ways to claim their BasisPOINTs.

It’s a fairly complex system, said one broker, but one that appears to be on the right side of regulations. It also relies on the assistance of friendly clients looking for refinances.

Under FirstLine’s basisPOINTS rules,a broker can cash in those points to facilitate a buydowns for a client's refi and also secure a cashback fo rhe client.

Under the proposed gameplan, a broker would arrange a refi for a client facing renewal. He would use his BasisPOINTS to buy down FirstLine’s rate, bringing it in line with the rest of the market. At the same time, the client would apply for a cashback, agreeing to pass on most if not all of those funds – conceivably in the thousands of dollars -- to the broker.

Potentially, it’s a win-win situation for both broker and client, with the mortgage professional able to access BasisPOINTS likely built up over years of doing business with FirstLine. The client, as long as fees to break an existing mortgage are covered by the broker, also wins a much needed refi at competitive rates and not the premium ones now being offered by FirstLine as it prepares for a July 31 shutdown.

The “hypothetical” manoeuvre has, in fact, been put to the test, said one broker, with FirstLine having signed off on such a transaction.

Still, it can only be used in a very limited number of cases, said another broker, it being dependent on clients looking for refis and, preferably, approaching renewal. The latter is to minimize any penalty exposure.


 

  • Kevin J. Power, President Power Mortgages Inc. on 2012-07-21 4:00:24 AM

    CIBC has not been overly generous with their offer to payout the Basis Points. They would have held them on their balance sheet at 8 cent value and indeed that is the value for Basis Points. If you do a mortgage for yourself, you can without tax consequences, get the full value of basis points up to 7% of the mortgage amount. Their policy allows this.

    My gut tells me that part of the reason for Firstline being so out of the market on rates for the past number of months was to create the necessity to bleed down the number of Basis Points outstanding. The less that is there, the less that they have to settle.

    They are paying out 62.5% of the real value established at 8 cents, there is a full and final release requirement and there is no mention of any tax considerations.

    I am not signing anything until I get an answer to my concerns.

  • Ron Beyer on 2012-07-21 4:17:54 AM

    I find it interesting that CIBC is offering a "settlement" as opposed to proper payment in full for these earned Basis Points. If a client of CIBC were to offer the Bank a "settlement" it would haunt the client on their credit file for years. Don't you just love double standards?

  • Ron Butler on 2012-07-21 4:18:24 AM

    I am just happy to see an offer made, on the BasisPoints side of things CIBC did not have a legal requirement to pay us a penny.

  • Former CIBC Mortgages Employee on 2012-07-21 4:39:10 AM

    CIBC has done a terrible job of the entire situation surrounding FirstLine. The poor communication and treatment of brokers shows a blatent disregard for a group that ardently supported the brand for years. It also shows great disregard for the consumer who was placed with FirstLine. In the past decade, under the new CIBC management, the bank has been steadily declining in consumer opinion polls. They have taken what was once a great bank, number two in the country, and ruined what took almost 200 years to build. It is amazing to me how the shortsighted need of an executive to "make their mark" can so quickly damage an organization. With CIBC mortgages in particular, the new team at the top has shown absolutely no regard for the needs of their partners, the consumer, or the people who work in the bank. I feel sorry for the brokers who own an MCC franchise, because they will be next on the chopping block... guaranteed.

  • R Smith on 2012-07-21 4:53:26 AM

    my calculations also. 67% of what they are worth. I also think it is no coincidence that they are not worth a lot at the moment to buy down a mortgage at the current offering rates of 3.74 for a 5 year .

  • Jerry on 2012-07-21 5:14:04 AM

    What amazes me is the CIBC branch by my office is offering 2.99 for a 5 year closed and FLM is at 3.49 for a 5 year closed. Forcing brokers to use their FLM points.

  • truth on 2012-07-21 5:15:22 AM

    I find it interesting that we would ask our Clients to grant us a cash-back. I just read the article on how the Banks satisfaction metrics have deteriorated. What do we think the consequences of this type of behaviour would be?
    Incredible!

Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Name (required)
Comment (required)
By submitting, I agree to the Terms & Conditions