First Nat sparks debate on volume pooling

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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 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 “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.”

  • Jim T.. Advent Mortgage on 2012-08-22 3:19:40 AM

    Get rid of the Volume bonuses and pooling altogether. Then stand back and watch the consolidators crumble.

  • Len Lane on 2012-08-22 3:29:04 AM

    First Nat is another example of you cant give everything away. If they stop pooling then they need to lower the limits or it won't matter where we send our business as long as it gets done.

  • Terry on 2012-08-22 4:28:04 AM

    Pooling is all just Brokers who care about the more they make, the less they care about placement for their clients. This business shouldn't be about greed. If this is what it is all about, than I am ashamed to be a part of this organization. Should be thankful to have a job, period!

  • Terry on 2012-08-22 4:38:13 AM

    Bunch of greedy Brokers anyway. I could care less about volume pay. Really. You should all be caring about the client, not lining your pockets. Imagine, if your clients knew you were throwing them all into the same pile simply to make more money. It's attitudes like this that make me feel embarrased to be a part of this organization. The clients should all go to the local banks, and leave us with the sub prime clients and see how much volume you will have! Next to none. Let's be thankful we have any business at all. People like you should go work at Walmart or McDonalds and than see how you feel. Oh, at least you will have those shares in the companay.

  • Jim @ DLC on 2012-08-22 5:00:28 AM

    Pooling isn't just all about volume bonus. Pooling is about small brokerages and independant brokers working together to be able to submit enough business to these lenders to stay competitive. Being able to get the preferred rates or submitting enough business to keep the lender satisfied.

  • Jeremy Nagel on 2012-08-22 6:03:28 AM

    Pooling is not the issue. The issue is brokerages allowing the low producing associates to be part of that pool, speak with underwriters and clog up the system.

    Personally, I would like to see lenders mandate an 80% funding ratio on committed deal and a 70% funding ratio on pre-approved deals. If you are good at what you do, this won't be an issue. Now watch the transactional brokers crumble.

    Suddenly you have to know your business, is that a bad thing?

  • Ron Butler on 2012-08-23 3:10:58 AM

    Jeremy is on to something in his first point, there is a difference between an operation designed to maximize commissions while clogging up the lenders underwriting desks with each individual agent calling underwriters and wasting the underwriter's time because the one deal wonder does not understand the products and a central underwriting brokerage who has an expert vetting all agents deals and working with the lenders underwriters smoothly and efficiently.

    Lenders hate pooling but often love central underwriting.

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