Lenders using specials to win business from each other

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Lenders are duking it out over business and offering special promotional rates to their rival’s clients – much to the chagrin of one leading broker.
 
“The big issue I have right now is the live-deal specials that lenders offer; a lender will publish a new special rate that is only for new business if that client has an existing deal in progress with another lender,” Tim Hill of Dominion Lending Centres Primex Mortgages told MortgageBrokerNews.ca. “It’s a bid to get clients away from other lenders and they all do it but they also hate losing clients.”
 
The biggest frustration comes when two lenders offer the same live-deal special, but the existing lender won’t match the competitor’s promotion for that particular client, according to Hill.
 
The scenario creates a conflict of interest for the broker because he wants to get his client the best rate, but he has to cancel the deal with the existing lender.
 
“Say I have a client with lender A at 2.69% and lender B announces a 2.59% live-deal special,” Hill said. “Lender A comes out with its own 2.59% special but that client won’t qualify because he is already considered an existing client.”
 
MortgageBrokerNews.ca obtained an email sent by one leading lender to brokers announcing this type of deal. The conditions for the 2.59% five-year fixed rate were as follows:
 
  • New business and live deals only
  • Maximum buy down to P-0.85% | 2.49% | 2.14% allowed
  • You must indicate in notes - 5 Year Fixed Promo or
  • 3 Year Fixed Promo or 5 Year ARM P-0.65%
  • 120 Day Rate Hold
 
And while Hill, who is based in Vancouver, has been struggling with an increase in these types of promotions, it appears the trend may be specific to hotter housing markets.
 
“I have not head of this sort of deal; the only thing I’ve had trouble with are quick-close deals,” Steven Klassen of Verico One Link told MortgageBrokerNews.ca. “In Manitoba I haven’t seen lenders do anything like this.”
  • These lenders are the problem on 2015-09-03 3:36:29 PM

    This is one thing I hate about monoline lenders. We all understand why lenders do this but that doesn't make it right.

    When a lender bars a broker from doing the right thing for the client, the lender should expect cancellations.

    Eventually consumers will wise up to this practice and start asking brokers if the rate allows for float downs.

  • The lender on 2015-09-03 5:26:31 PM

    You brokershould are the problem! 98% of you are greedy selfish, uneducated lazy bums who believe that you are entitled to everything and everyone owes you everything!

    If you were smart enough you would know the lender who issued a commitment to you 30 days ago already has sold that mortgage commitment to an aggregator or they already spend money hedging that rate!

    Stop complaining and do something positive for this industry!

  • Tim on 2015-09-10 9:53:28 AM

    Most of us are well aware of how the system works, but the customer doesn't really care about the lender's profitability (or their cost of hedging). Simply put, Lenders lock themselves into a rate and expect to pass that risk on to the customer.

    Customers can (and should) switch, and as Brokers we have a fiduciary responsibility to tell them to do so. Unsure how this is greedy or selfish.

    Lenders are effectively punishing customers and brokers for being loyal to them - a rather questionable business model.

    @The Lender: not sure if your comment is meant to be sarcastic, but instead of shooting the messenger, why don't you look at ways improve the broker relationship and retain business?

Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.

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