Fee models and broker responsibility

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The head of one leading lender believes trailer fees are here to stay – and that it is the brokers’ responsibility to ensure the endurance of the model.

“Unless brokers make this a need and a want, the lending community itself will never change; it’s their business, their future and their value,” Boris Bozic, president and CEO of Merix Financial told MortgageBrokerNews.ca. “Our mindset in the industry is an eat what we kill mentality and then we move on to the next kill, versus looking at this application and this kill and wondering how much more we can earn off this one particular application in the future.

“If you do that enough times up front it means you have to kill less going forward.”

The recent conversation around trailer fee models was sparked when one lender decided to nix its own program, citing its negligible impact on client retention.

And opinion is divided about the advantages of the model, with some preferring to earn up-front with the opportunity to move the client to a new lender at renewal.

“I would rather get my money up front and invest it myself rather than rely on … any other lender offering trailers,” one broker recently commented on MortgageBrokerNews.ca

Still, there are many who believe trailer fees are a good way to continue to earn revenue while also having to rely less on earning new clients.

Bozic believes those who consider their business in the longer term are the ones attracted to trailers.

“Trailer fees are not for everybody; the trailer fee model will attract those individuals that are looking to create book value for their business,” he said. “For example we have 36 mortgage brokers now who woke up on January 1, 2015 knowing that they were going to earn in excess of $100,000 in trailer fees.”

Merix, of course, operates two models. 65 per cent of its business falls under the Merix (trailer) banner, with the other 35 per cent going to Lendwise, its more traditional, upfront revenue model.

But what about the charge that trailer fees may be a thing of the past? Bozic disagrees.

“I believe trailer fees are here to stay,” he said. “It continues to be a viable compensation form – here is how I know it’s viable. Merix Financial in 2015 will pay out $8 million in trailer fees.”

  • Ron Butler on 2015-06-18 12:14:23 PM

    Some lenders simply have completely different goals. The banks in our space use brokers as new client acquisition vehicles so they will never pay a trailer fee.

  • marvis olson on 2015-06-18 12:37:38 PM

    Merix offers deep discounts on renewals--great for clients---I get paid they don't have the friction of moving to a new lender.
    They calculate a skinny IRD so if you need to refinance mid term--when rates were falling it was cheaper for client to pay penalty & get a whole new mortgage rather than top-up like you are forced to do when dealing with a bank---& I get paid for my work as a new deal.
    Win win for everyone.
    I was an early adopter & spread 75% of my business between Firstline & Merix--guess who I like to deal with on renewals-----FL has a good retention team that start 6 mths prior to maturity & are very creative.

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