Collu: Volume minimums ‘taking brokering out of brokering’

Collu: Volume minimums ‘taking brokering out of brokering’

Continued use of volume requirements may undercut efforts to grow efficiency ratios while threatening broker independence, said IMBA’s new president.

“There are lenders that are taking the brokering out of brokering,” Albert Collu told MortgageBrokerNews.ca after touching on the subject at last week’s meeting of the Independent Mortgage Brokers Association of Ontario. “By continuing to use volume requirements, instead of just going with efficiency ratios, lenders are inadvertently reducing the willingness of brokers to hunt around for the best mortgage for clients in order to fulfill minimum volume requirements with a given lender and maintain status.”

He’s voicing the concern as lenders streamline the number of brokers they work with by adopting efficiency ratios – the percentage of applications that convert to a funded mortgage. That metric for evaluating broker performance is a good thing, said Collu, who supports the shift as the best way of encouraging brokers to improve their stewardship and to ensure deals align with lender profiles.

“What used to happen is that brokers would just throw deals at lenders without knowing the lender’s products or the client’s situation,” he said. “When you enforce efficiency ratios, it works for everyone – brokers and lenders.”

Maintaining those ratios at or above 65 per cent not only wins brokers compensation incentives and access to preferred interest rates, but increasingly dictates whether they have access to the lender at all. Collu, president of Argentum Mortgage and Finance, joins the growing number of industry players who want lenders to reduce their emphasis on volume requirements in favour of conversion ratios. Insisting upon both could disqualify productive brokers hamstrung by their market’s size or modest home values.

“If the average broker is doing $4 million in deals annually,” said Collu, “how realistic is it to ask them to send you $10 million?”

A growing number of small brokerages are now channeling deals for a particular lender through one broker in an effort meet minimum volume requirements. It ensures access for all the brokerage’s clients, but means only one member of the team has official status.

Logistics aside, said Collu, smaller players pressured to meet those volume minimums may find themselves tethered to one or two lenders instead of canvassing the entire field of lenders for the best fit on a client-by-client basis. It’s what Collu means by “taking the brokering out of brokering.”

Still, lenders are increasingly sensitive to the challenges facing brokers in smaller markets as they improve their efficiency ratios but struggle to meet volume requirements.

“I have status with more than six lenders,” Abby Colwell, a broker with Mortgage Brokers City in Saint John, told MortgageBrokerNews.ca. “What I have found is that some are willing to consider volume based on the number of deals instead of the dollar amount because of the lower home values in this market. They’re still using efficiency ratios as well, which is very important.”

 

3 Comments
  • Anthony 2011-04-26 10:22:12 AM
    I have always maintained that volume is anti-mortgage industry and finally someone has stopped and take noticed. It's simply the worst tool to have ever hit the industry whereby we as agents have become unpaid employees of the banks with the same control being bestowed upon us.
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  • @kiltedbroker 2011-04-27 12:03:42 AM
    I am the owner of a small brokerage in Regina SK, we have "status" at 3 lenders. If mortgage volume was the only criteria, we would be "status" with only 1 lender. We have found tremendous success in positioning the quality of our business as we maintain an Application to Fund ratio above 85%. We have been able to negotiate for status based on the quality of business rather than quantity.

    I think establishing relationships with lenders is the most important thing we can do in this business. In response to the following statement, "smaller players pressured to meet those volume minimums may find themselves tethered to one or two lenders instead of canvassing the entire field of lenders for the best fit on a client-by-client basis."

    I would rather have a solid relationship with 2 or 3 lenders where my underwriter trusts me & my business and I have the confidence that they will come through in a tight spot to get the deal done, rather than having status with 20 different lenders that all package their AAA desires with different logos who don't know and trust me.

    Regardless of volume, this business is about relationship and quality of business. From my experience if you are doing good enough business, the lenders will remove the quantity "minimums".
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  • Faye Drope 2011-04-27 7:56:38 AM
    I agree with Albert. I think the industry has grown dramatically over the last 10 years and mortgage brokers that are doing very well don't even want to stop and think about this. Its not about doing well. It is larger than that. I think if mortgage brokers entering into the market had more licencing restrictions and more mentoring this wouldnt even be an issue with the lenders but any time you have an industry that is based on commission this will keep us all running in different directions. The broker industry needs to take a breath and say who is driving this bus? Our industry needs a forum that only caters to Mortgage Brokers so we can address issues that effect each and every one of us. Things will not change nor will there be a different bus driver as long as we continue to let our industry be driven by lender invited associations. P.S. I am a supporter of CAAMP
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