Rate sites may be inevitable, but if third-party sites are left unchecked there is a real danger that they will one day gain irreversible pricing power over brokers, cautions one broker.
“If we keep building these sites up, what’s to stop them from becoming our competitors?” says Dave Larock, a broker with The Mortgage Group. “They gain strength every time we turn one of their referrals into a funded deal. Right now they (rate sites) depend on brokers for momentum – but the day will come when they will begin dictating pricing to us; or just realize they don’t need us anymore.”
The comments come on the heels of Kanetix purchasing RateSupermarket, a major comparison site for people seeking the lowest rate for new purchases and refis.
And although Larock has nothing but “respect and admiration” for the president of Kanetix, Yousry Bissada, he argues some brokers are short-sighted and effectively digging their own graves by relying on rate sites more and more.
“We’re at the point where we don’t have a lot of time left,” warns Larock. “The window of opportunity is closing fast for us to do something. What we need is a rate site by brokers, for brokers.”
Larock goes on to say that the best way to keep the leading rate sites “honest” – meaning not raising referral rates on brokers or withholding leads altogether – is for a non-profit rate referral site to be created.
And although Larock isn’t sure who should lead the charge, he is sure who shouldn’t.
“Definitely not CAAMP
,” he says matter-of-factly. “No way. They would never be able to pull it off. We need a well-established broker, like a Ron Butler
– he would be a good choice with his record of credibility and expertise. And it would definitely have to be not-for-profit, with all the fees being put right into advertising.”
Larock likens such a site to the monolines, and how they keep the big banks in line and maintaining links to the broker channel.
“Do you think the banks would give us brokers the time of day if the monolines weren’t around?” he asks. “The monolines keep the banks interested in broker business. It would work the same with a broker-run rate site. It would create permanent leverage and keep the other rate sites honest.”
Although Larock admits he is doing a lot of armchair quarterbacking on the issue, “having never used nor ever intending to use” a rate referral site, he feels confident that brokers can still survive if they continue to operate with a strong business model and a solid reputation.
“Look at real estate. You have the no frills, no commission shops who are operating at a fraction of real estate commissions,” he says. “Top agents who are well-established with sterling reputations barely notice this type of market disruption.”
The same likely applies to mortgage brokers, although not all.
“Those brokers who don’t have anything unique to offer will starve – and frankly, that is healthy for our industry over the long run,” says Larock.