First Nat’s move to cut brokers compensation and end its Wizard Spending Account program has exposed a divide in the channel on the issue of volume pooling, with some suggesting the practice is now drawing to a rightful end.
“Cease the pooling…If any of you knows anything about our biz – it is the pooling that hurts!” a commenter wrote in response to the MortgageBrokerNews.ca story announcing the First National move. “Why should one dude giving one deal a year get the same as the dude with 100!”
The comment was echoed by several other mortgage brokers, joining First National in blaming pooling – at least in part – for cancellation of the Wizard program.
Last Friday, First National sent a broadcast email to brokers saying that effective August 17 finders’ fees for all its products will be reduced by 5 bps. The lender also announced its Wizard Spending Account program, a popular incentive program, would also be discontinued.
First National has billed the move as a cost-cutting measure largely prompted by two factors:
• The reduction in allocation for CMHC bulk insurance, which forced lender to use more expensive sources to fund mortgages
• The practice of volume pooling, which caused First National to pay out more money through the Wizard Spending Account
But many brokers say volume pooling has been largely sanctioned and, indeed, encouraged by broker lenders.
“Some lender representatives encourage volume pooling because they benefit from it,” Kevin Power, president of Power Mortgage, told MortgagebrokerNews.ca. “That’s because their own compensation is based on getting large volumes “
In industry move away from pooling would likely hurt small brokerages and those working independently, he said.
“For some brokers who work independently or those who are with a small organization, volume pooling with colleagues is the only way for everyone to get a bonus,” he said. “The lenders pay the bonus based on the volume of business submitted not the number of brokers who submit it.”