Impact on clients

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A pending rule implementation that will require all broker compensation to be explicitly stated to clients could actually harm homebuyers and result in fewer lending options for purchasers, according to one industry player.

“If you’re going to introduce legislation, it should truly benefit clients,” Dustan Woodhouse, a broker with Dominion Lending Centres Canadian Mortgage Experts, told MortgageBrokerNews.ca. “But this proposed change could force thousands of brokers out of the channel, which would result in the elimination of some lenders, and lead to fewer options for clients.”

It’s an interesting angle, and one that could very well play out if the requirement has the kind of impact on the industry many are predicting.

FICOM is putting forth a new interpretation of a regulation that would require mortgage documents to explicitly state how much brokers are compensated.

And the effects could force some brokers out of the space, according to one leading network head.

“What happens on April 1, 2016  (when the proposed change goes into place) – on that day, instantly, it could be almost the beginning of the end for our industry,” Gary Mauris, president of Dominion Lending Centres, recently told a packed room at this year’s CAAMP national conference in Toronto.

Mauris argued the rule change – which would require brokers in B.C. to disclose all income made on transactions – could erode broker market share from 30% to 15%. He argues bank specialists, who still won't be required to disclose their commissions, will use it as a way to sway clients.

Brokers across the country have also expressed concerns that once the precedent is set in British Columbia, it could spread to other provinces as well.
 
  • Jim T, Advent Mortgage on 2015-11-20 11:05:45 AM

    I think we are blowing this way out of proportion. At best, this will have a small impact. Aside from the rate shoppers that nickel and dime, I do not see clients demanding some money back when they see how much we make. I don't think that 80% of the population will care when they see how much we make. As a matter of fact, having this small segment of clients (rate shoppers) asking for cashback is really no different than doing a buy down. At the end of the day, this will all be factored in just like a cashback and we end up at the same spot. Lets face it though, this business is getting tighter and our margins will start to feel pressure (just like any business). Those of us who are great business people will continue to do well.

  • Marc Marchese on 2015-11-20 11:09:49 AM

    Is this going to be the case for all industries? Insurance, cars sales, financial planners, landscapers, cable companies and cellular companies. Where do you stop?

  • Steve on 2015-11-20 11:49:03 AM

    Its a stupid rule. It could lead to big divides between client and broker, but I still know why people come to me... and it is never about rate. Every broker I know is adaptable and far from powerless. The sky will not fall.
    The real issue is that the disclosure provides no value to the client, it wastes time and it could lead the client to see wealth where there isnt any meaning they will want brokers to cough up cash for appraisals etc. The more curious clients may want to see what 3 different brokers will write on the commission line.

  • James on 2015-11-20 12:14:24 PM

    The conspiracy theorists would believe that the banks had something to do with lobbying FICOM to make this change so that (a) they can use it to make themselves look better and (b) pull an Australia at some point in the future.

  • Kevin on 2015-11-20 5:31:54 PM

    Why is a national brand leader using alarmist rhetoric here? And since when did Mr. Woodhouse become an all powerful guru for our industry?

    This type of fear mongering doesn't make the issue do away, or make our position stronger. Better to use the time and the media to have a balanced discussion about these things, and to work with the regulators to find solutions.

    I did not realize that DLC purchased KMI

  • Victor Simone on 2015-11-21 3:43:53 PM

    FICOM wants to protect borrowers ?

    Then FICOM will need to tell us why E & O insurance isn't mandatory. Surely FICOM has to get stakeholders involved or they will kill the golden goose.

    So many better options to protect consumers, and FICOM is being a bit heavy handed in my opinion.

  • Rhéau Séguin on 2015-11-24 3:46:05 AM

    in Québec it is already a compensation rule by OACIQ witch is our licence authority, we have to disclose all commission to the borrowers. thats the law.how the clients are gone react to that we don't know yet because the new regulation is very recent.

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