Mauris: New broker regulation disaster in the making

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FICOM’s proposed disclosure rules changes for British Columbia brokers could have a disastrous impact on the industry across the country, according to one major 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, told a packed room at this year’s CAAMP national conference in Toronto.
 
Mauris said 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% overnight. He argues bank specialists -- who still won't be required to disclose their commissions -- will use it as a way to sway clients.
 
“FICOM isn’t trying to hurt the economy … they’re not trying to hurt us. I truly believe they don’t understand the consequences,” Mauris said, noting that DLC has a very good relationship with FICOM. “What FICOM hasn’t realized is the minute our market share dramatically (falls) … it affects everyone in this room (including lenders).”
 
FICOM is putting forth a new interpretation of a regulation that requires mortgage brokers to detail for clients how much they earn from lenders on the deal.
 
“We are actively consulting with MBABC, CAAMP and directly with leaders in the BC mortgage broker community on implementation,” Chris Carter, Deputy Registrar of Mortgage Brokers at FICOM, recently wrote in an email to MortgageBrokerNews.ca. “We are mindful that industry members may need to make adjustments to respond to the new requirements.”
 
Mauris called on brokers to get involved, arguing that its impact will reach much further than British Columbia.
 
A number of industry professionals, including brokers and lenders, are set to meet Tuesday morning in Toronto to discuss the pending change.
 
“We know that FICOM doesn’t want to destroy the industry, but I don’t think they understand,” Mauris said. “Most importantly it affects the Canadian public.”
 
The MBABC has launched a petition against the proposed disclosure requirement.
  • Brandon on 2015-11-17 9:35:19 AM

    I think this is a huger over exaggeration. No statistics to back it up. If someone chooses to go with the bank over a broker because of what the broker is paid then you're focusing on the wrong selling techniques. Banks shows profits of 2 Billion a quarter and still control the majority of the market. Where does he get 15% to 30% change? Those are huge numbers.

  • Nick Bachusky on 2015-11-17 9:42:32 AM

    I wish all the brokers in BC all the best and hope there can be a reversal of this unneeded regulation. It brings an unnecessary barrier between us and our client. I also think this is blatantly unfair if the banks do not have to disclose how much they pay. I really hope to not see ties between FICOM and the big banks in the future. It does smell of collusion because of how unnecessary and pointless this is.

  • Kent on 2015-11-17 9:53:38 AM

    Seriously Brandon? Why the hell should brokers be made to disclose their commissions? Is there any other industry that the sales people are forced to tell their clients what they earn? I'm pretty sure that there is not. It is the most absurd thing that I have ever heard of. Can you imagine going to buy a car and the sales person or finance manager says oh by the way Mr. Customer I just made $ xxx.xx off.of you. And thank you for your business. Lol give me a break!

  • Tony Piattelli on 2015-11-17 10:05:25 AM

    I'm all for change when there's value added especially for the borrower, can anyone tell me what the value added is with this rule change? What purpose does this rule serve? The borrow isn't the one paying us so I'm at a loss as to the actual purpose of this rule change and the ultimate objective? Why does someone have to know what we are earning when they aren't paying for it?

  • Bart Durrant on 2015-11-17 10:06:28 AM

    Right on Gary. We need only to disclose how we are paid. What we are paid is the individual broker's business and his or hers alone. Personal privacy is the individual's domain and no one should be forced to disclose with the exception of reporting to Can Rev Agency and to your lender. Do FICOM employees have to tell the broker community what they are paid and more importantly would they like it if they were forced to. I'm all for protecting the general public, but I fail to see how them knowing what I make on a deal does that. Brokers should feel like a baby harp seal about to be clubbed.

  • KBowles on 2015-11-17 10:11:31 AM

    If this legislation is imposed is it the start to every single business in the country having to disclose their profit/markup at the time of sale. I do not see this legislation in any other commission based business. If a bank road rep is paid commission then they should have to disclose as well maybe the commission disclosure needs to state that since we are dealing with no branch banks the lenders do not have to pay for hundreds of building, utilities, bonus, dividends million dollar salaries . That if it wasnt for monoline lenders dealing with brokers and offering lower rates the banks would be lending mortgages out at 4.64% . Brokers save the consumers from the greed of banks.

  • Ross Kay on 2015-11-17 10:19:45 AM

    Embrace the power this new disclosure requires and flip it back around on the banks where disclosure will not take place.

    In 2015 anyone can create a mortgage advice site that can quickly gain top SEO where consumers would see "hidden" commissions not being discussed by the industry. So why would any professional want to hide how much you are making from product delivery.

    Mortgage brokers assume an increasingly high risk of government oversight and like REALTORS the first opportunity a lawyer sees in creating a class action lawsuit that could end in a win, will drive this reality home to both licensed professions.

    Now maybe 50% or more of your members may not be qualified to deliver services at a competent enough level to allow commissions to be openly disclosed and signed off on. Too BAD!! Get rid of those folks through your embracing change.

    There are over 70,000 too many REALTORS in Canada resulting in the 30,000 that are needed operating in an infrastructure that is preventing logical informed and vetted decision making processes on home ownership and trading homes from being possible.

    Today around 3.5 million home owners in Canada should be sitting down with a independent mortgage broker ( not a bank rep) and structuring their debt to equity ratio in their home to reduce the risk they are now exposed to. This is not some crazy the sky is falling discussion but rather the new reality in a world where the next decade or more will see interest rise slowly while home prices stagnate or deflate to a level where the housing market can still grow and Canadian's can be housed without further government subsidy.

    Mortgage Brokers ( independent professionals) are one of the major tools Consumers NEED NOW. Running from disclosure is like REALTORS running from discussion $30,000 commissions. Running means fear.

    Professional, competent and ethical business people embrace change that exposes the other side of the business to consumers.

    What informed consumer would ever allow any Bank REP to handle their mortgage debt??
    If they are in fact informed.....NONE!!!!

  • Walid Hammami on 2015-11-17 10:21:10 AM

    No matter what, we will adapt.

    If you don't want to disclose the fees then you will look like you try to hide something.

    Did Gary Mauris say what he is afraid of?

    Does he think clients might want to go behind the broker channel to cut the broker fees (if we disclose how much we get paid)? Is it true that the banks will lower the rate if you bypass the broker?

    If it is not the case, then this is a no issue at all.

  • Dave on 2015-11-17 11:17:32 AM

    Another rule added that the banks don't have to follow? More proof that the banks run this country.

  • TimH on 2015-11-17 11:37:02 AM

    Gary nailed it where he noted that Banks are not required to make similar disclosures - why doesn't OSFI force Banks to reveal their cost of funds on every mortgage?

    It would seem the point of it is to reduce competitive pressure on the Banks.

  • Luke Wile on 2015-11-17 11:42:57 AM

    We believe it's good business practice to disclose what we earn to the client up front anyways. I feel this is a drastic overstatement, "it could ruin the industry". We endeavour to explain why it's worthwhile to the lender to pay us the finder's fee; we bring them the client, minimize the lender overhead costs by spending all of the time with the client, and the lender earns the interest. Moreover, the lender must be competitive to earn our business compared to the rest of the others in the marketplace. Once again, I feel it's good business practice to be more transparent than less.

  • Veej on 2015-11-17 11:44:31 AM

    In my opinion, I believe that disclosing the percentage of commission a broker is paid should is okay only if the borrower know exactly what is the percentage cut the Mortgage Agent is receiving from the broker because The Mortgage Consultant in many cases do not receive the full 100% Commission. The public should be made aware that agents only receive a portion of what is being paid by the lender (their split less admin fees and other expenses).
    Just as in the Real Estate, the public believes that the Real Estate Agent gets the full commission that is being charged to the Vendor but what they do not know is that the Agent just receive a portion of the amount charge less expenses that the brokerage charge them. As long as the public is given full disclosure of what the Mortgage Consultant who provided them with the service is actually paid and what the brokerage actually receives on the transaction, then I do not mind. Many brokerage takes a percentage of the Finders Fees in addition to a Volume Bonus which the y do not share with the agent. i do not think that is fair. If the Agent did not originate that Mortgage, the broker would not receive Volume Bonus. They deserve just a percentage split on this. Who actually does all the work in Mortgage Origination? Who faces the consequences when documents are bad? Who brings the volume of business to the Broker? "The Mortgage originator", that's who. So why is it that some brokers does not want to pay the volume bonuses the them. All this should be disclosed also. The Banks should disclose how much they are paying their agents also and include all the incentives and benefits that they give their agents. I know this before because I was offered a position with one of the Bank as a Mortgage Agent and I do know how much is paid and all the benefits that they give. Full disclosure should be given by all involved in this type of business not only Mortgage Brokers. At FICOM, people are sitting down and making rules but they are not the one out there actively bringing business to lenders and bringing happiness to Borrowers. They make rules and get FAT PAYCHECKS. that is what I have to say. All the Financial Regulators should go out there and try to do what we do then they will know what is actually going on.

  • Broker on 2015-11-17 11:46:04 AM

    This is a horrible policy. I cannot think of ANY industry that advises me of how much they are making. Picture hiring a painter, framer, home builder, or buying a car... and knowing exactly what the employee is earning off of you. This instantly shifts the focus of finding the right person for the job, to finding a way to reduce that persons profit. If my home builder is making 50K off of me, it may be more than fair but I instantly want this cut back to 30K because that is human nature.

  • Westerner on 2015-11-17 12:08:42 PM

    Brandon: Statistics and studies are always helpful in supporting or opposing a policy change. The regulator needs to produce the statistics it is relying one to change a long-standing policy. The statistics need to show that there is a problem and that this is the right solution. In fact, the regulator admits there is not a problem. FICOM is instead relying on its own new and out of the blue very strained interpretation of the law which it has applied properly for over 40 years. The quote in the article indicates that FICOM recognizes consultation is needed and claims it has been done. Yet both MBABC and CAAMP have indicated they have not been properly consulted. This is a matter of FICOM making unnecessary bad rules based on their power rather than making good rules. I appreciate your knee-jerk comment but it is way off base.

  • broker on 2015-11-17 12:38:12 PM

    FICOM hasn't publicly stated April 1 2016 as the implementation date. Gary is privy to
    the real story and it has concerned him enough to make this public statement.
    We should all support MBABC's stand on this.
    Get involved.

  • BCer on 2015-11-17 1:31:02 PM

    MBABC position to FICOM is very detailed and makes sense. This is a BC issue but effects all of Canada and MBABC obviously understands and is not afraid to say what is right. It gets it. Support 'em.

  • George on 2015-11-17 1:39:04 PM

    I have no problem with telling the client that we're paid by the lender, nor if push come to shove, the commission percentage, but we certainly don't know if or how much Volume Bonuses will be. And seeing as how they want the broker to disclose income from all sources, then we have trailer fees on renewal and so on. Come on, get real. The borrowers today are educated enough to know that we're paid by the lender, but in reality even we don't know how much we'll make for sure on most deals!

  • Ron Butler on 2015-11-17 1:48:47 PM

    Couple of facts and observations on this:

    Gary is dead right there is a profound competitive advantage to Bank Reps not having to disclose commissions over mortgage brokers having to disclose commissions. However this argument about federal versus provincial regulation has been going on about 50 years with no end in sight. Not much we can do on that front.

    FICOM did not just dream up this change, this concept of transparency is entrenched in the Basel Accords and it is fact that most regulated industries are moving to reveal all advisor income.

    Painters, plumbers and carpenters do not have to disclose income but we function in regulated industries and we all knew they were regulated when we all joined. The simple truth is that by the end of the decade every provincially regulated industry will disclose dollars and cents income, the life insurance folks, the P&C insurance people, the financial advisors will all have to reveal what they earn from every transaction.

    FICOM and FSCO and RECA all have one prime mandate: consumer protection and consumer benefit. Ask 100 consumers if they would like to know how much money an advisor makes from their transaction and 90 of them will yes I do.

    The provincial regulators should consult with us over the precise wording of the regulations because most brokers do not know exactly how much they earn on a file until the end of their fiscal year, we cannot be held to a standard of absolute precision of our earnings because we just don't know. The wording of the regs have to accommodate that fact.

    So we have a right to be mad based on the disadvantage versus the bank reps but if I respond exclusively like a consumer for a moment I personally would like to know what all the "advisors" I use make on a given transaction right from the insurance guy to the car salesman.

    Some good points have been made in these posts. Those who oppose the new regs simply based on "none of your business" make the error of looking like they have something to hide. Let's us instead rationalize our businesses, offer great value to the consumer and be proud to point to the true advantages we brought to the mortgage transaction and that the earnings we received from the lender were actually a massive bargain for the consumer.

  • MP on 2015-11-17 2:05:22 PM

    Realtors are required to disclose their commissions to buyers in BC but in their case the seller is paying the commission. There is a huge difference here. In our case the borrower is not paying the commission. In the financial services business the broker/planner must disclose the commission but it is paid from the client's portfolio and is a fee. Our remuneration is much different....

  • Victor Simone on 2015-11-17 2:56:29 PM

    FICOM should concentrate on things that protect the consumer, like Errors and Commissions insurance. Why 'O why would they not make liability insurance mandatory ? FICOM has lost it's compass, and prior to making any big moves like fee disclosure, need to get opinions from stakeholders.

  • John Sayer on 2015-11-17 3:09:32 PM

    Until there is a level playing field for all BC residential mortgages FICOM should not adjust the reporting.

    Currently, bank employees are a potential hidden menace in the residential mortgage business as they see 65% of the market without any FICOM oversight. Many of these employees reap easy bonuses and employment advancements without any reporting... except to their manager who is also taking a slice of the bounty.

    FICOM are barking up the wrong tree. Banking billions control Canadian residential mortgages, they also invest in the non-banking mortgage lending and for this single reason should be over seen by one authority.

    Canadian banks have too many avenues to reap. Mortgage brokers have published schedules with Form 9/10/11 reporting.

    FICOM must arrange for parity in Federal & Provincial reporting before advancing on this unbalanced action.




  • John Van Driel on 2015-11-17 3:55:07 PM

    What will our industry associations be doing, in response to this??

  • Jesse on 2015-11-17 4:27:54 PM

    Anybody that agrees or thinks that this new regulation is even 1% acceptable needs to have his head examined!! How the hell can a business employer or employee be force to show his income to his clients!! Billions of different industries and jobs in the world and NOT one of them has any such retarded regulation. And the lenders really need to get involved and push against this as well!!!

  • Jesse on 2015-11-17 4:31:28 PM

    What the hell does a persons income/commission have anything to do with the level of service or product the client/buyer is getting!!?? UNBELIEVABLE, bunch of goons working for the big banks!!

  • BC on 2015-11-17 4:50:29 PM

    FICOM's position is based on its current (after 40 years of interpreting it differently) interpretation of the BC Mortgage Brokers Act. No one has said anything about the Basel Accord requiring the change and there is no requirement. Ron Butler's general reference to the Accord doesn't help. No specific section, page or resolution is referred to and hopefully it is not a very specific comment made on a general impression of what the accord might say? Ron, are you in BC? Do you know the section of the Act being interpreted and the past and current interpretations. Are your comments as to the BC situation also general impressions or have you followed and understand the specifics.

  • Eve on 2015-11-17 7:42:41 PM

    John van Driel asks the same question all members should their associations. Non-members should join associations or not have expectations.

  • Brokers United on 2015-11-17 10:49:01 PM

    I propose that each broker put up $100 and we stand united together and MBABC hire the best law firm to do whatever's necesary to fight FICOM on this. They're clearly reaching here...

  • John Van Driel on 2015-11-18 10:29:58 AM

    Each Broker should put up $500 and each agent $100. All of this, of course, IF we can't rely on our Associations!!

  • Broker 2 - not from BC on 2015-11-19 8:14:55 AM

    Relevant disclosure is a must for consumer protection and transparency. However, commissions paid by a lender to broker are not at a cost to the borrower and hence not relevant.

    As I see it, this will lead to requests for rate buy downs (not always possible); consumers focusing on interest rates (which is important but not the most important part of mortgage financing), increased documentation which is already massive and probable loss of professionals with reduce services to mortgage consumers.

    There is also the added possibility of broker error and ignorance given many brokers are unaware of, or not eligible for, additional compensation such as volume bonus; lender points, travel dollars, campaign bps ... What would the ramifications be for the broker who incorrectly quotes this on page 157 of the documents reviewed and signed by consumers?

    This is currently a serious matter in BC at this time, but if implemented I am confident would be for all provinces.

    For information on MBABC's position and to sign the petition (you don't have to be in BC to show your support and give comment) go to:

    https://www.change.org/search?q=mbabc

  • Steph on 2015-11-20 7:26:44 AM

    I see this as primarily a PRIVACY ISSUE. I encourage our BC colleagues to challenge the proposed reg on this point.

  • Debra on 2015-11-22 3:28:33 PM

    This cost is unrelated to the clients mortgage approval and these costs are not passed on to the client. In fact, many times we are able to negotiate a better rate using commissions. This will hurt consumers and kill the mortgage broker industry for sure. The banks will be affected by this as well.

  • Kevin R on 2015-11-22 6:11:22 PM

    What if mortgage agents get paid salary instead of Commission. Does that change this? Does the mortgage salesperson have to declare they are paid $80000.00 a year salary? Does FICOM supersede the Privacy of a privately owned Corporations, forcing the Corporation to disclose corporate revenues?

    I dont even see Financial Planners disclosing what they earn on investing consumer money & they complain about being over regulated. When I see consumers getting a free service & have the freedom to shop their mortgage where ever they feel they can get the best deal, where does this regulation benefit anyone? Make no mistake, our commissions will become part of the negotiation for mortgage agents/brokers to win the mortgage transaction. Maybe all the associations across the Country need to join forces & legally challenge this regulation in Supreme Court of Canada. When consumers are not paying for the service they get, this is a violation of our privacy. Either that or I guess the Banks sales forces are going to get a big boost.

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