Our own rate site needed now: broker

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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.
 
  • Promethus on 2013-06-06 8:16:01 AM

    Whats to say that once a non-profit site is up and running, another "new" site opens up, and offers rates 0.05 below the Non-Profit site. Competition is not something to be regulated. Look at cell phone providers, who stays with the same cell service provider after 3 years, unless a really good offer is provided?

  • Agent and Advisor on 2013-06-06 8:24:13 AM

    Completely agree. I find that mortgage agents don't seem to mind being bullied or pushed around, whether it be from banks, rate sites, underwriters, or realtors. I am also a financial advisor and notice a totally different attitude when it comes to respect for the profession.

    On the advisor side, financial institutions treat me with courtesy knowing that I bring them business. However, that same institution's mortgage division will treat me as if I owe them. It's almost as if mortgage agents feel they should be thankful that banks and monolines give them a chance or that rate sites allow them to gain exposure. I think this is a weak and self-defeating attitude and agree with Larock that we need to take a stand and start gaining more control over our own business. If we don't, we will continue to be bullied and squeezed in a race to the bottom. Let's realize our worth and make some moves before we get left behind.

    Let's shift our mindset, stop battling each other on these rate sites, which only benefits lenders and the site itself. A broker-run site is a great alternative.

  • Jake on 2013-06-06 8:24:45 AM

    Ha Ha! Ron Butler, one of the biggest users of the current rate sites to start his own for the better of the industry? Come on, david. you and I both know that "for the better of the industry" will never ever happen in these ultra competitive times.

  • Ron Price/DLC on 2013-06-06 8:26:35 AM

    Great insight Dave.
    I agree wholeheartedly w you except for one thing. I do not believe that anyone entity should do it. I believe it needs the involvement and participation of all the national brokerages. The advertising revenues generated can then be used to promote our industry as a whole.
    Let's hope you have started to ball rolling, as it becomes clearer every day that the internet, where the majority of folks go first for mortgage rates etc., realty etc., will and is already causing a profound shift in how originations occur.
    The future is all about getting your message, your venu and your value proposition in front of the online consumer first and best.

  • Cory on 2013-06-06 8:37:49 AM

    The pricing of the product on rate sites is based on the Broker's ability and willingness to provide that price. If another site opens and offers lower rates I would suggest it has nothing to do with the site and everything to do with the Broker paying to advertise that rate. Simple solution is to find a new provider willing to be at the same rate. The cell phone comparison has no merit in my opinion. I like many Canadians have been with my provider for 15+ years, and I don't like them at all (and their offer is the same as the guy down the west mall wing). The word on the street is that "all cell phone providers are the same, they all suck, so I will just stay with who i am with". It kind of reminds me of the comments I hear about banks. 3 rate sites today, 4 tomorrow, 10 in a year, does the number really matter? I agree with Dave Larock and Agent Advisor that it is time we work together to take control of our industry. Not sure that non-for-profit has any place in business, however a broker run rate site is needed.

  • Jake on 2013-06-06 8:39:35 AM

    Best idea?

    Lenders need to disallow buydowns below x%.

    Example one monline allows 15 beeps and that's it.

  • Mario on 2013-06-06 8:43:11 AM

    I understand and strongly believe in competition and free enterprise, however, this rate buy down activity is becoming a form of cannibalism where we are eating away at our income for the sake of volume instead of profitability.
    I question how well a broker buying down rates making very little income will be able to fully service the long term needs of their clients. I also question how this activity of continuous rate buy-down is helping elevate our industry to a higher level of professionalism and long term growth?
    I guess it's an environment of adapt to survive.

  • Paolo Di Petta | dipettamortgage.com on 2013-06-06 8:52:02 AM

    The more we play the rate game, the more everyone loses.

    We are not the rates we offer, we are the service and expertise we offer.

    Perhaps an industry-wide campaign on why we can save the client money in other ways than just offering the "best rate" is a better move.

    Additionally, all these sites do is artificially set unreal expectations in clients who don't qualify. I've had clients leave because another broker was advertising a "better rate", only to have them come back because the deal couldn't get done. In the mean time, their situation got even worse, making it harder to get the original deal though.

    Our efforts would be better focused on pointing out the dangers of rate sites instead of commoditizing our industry.

  • Jake on 2013-06-06 8:56:47 AM

    When that happens @Paolo and the client comes back you know what you do then? Smack them with a nice fee. An even bigger one than before.

    That's what I would do.

  • Jake on 2013-06-06 8:58:37 AM

    Guys - a lot of the comments here are what I hear on the street when I'm chatting with broker friends. Guess what -

    1. Rate sites are not "dangerous".
    2. Rate sites are here to stay.
    3. What are you going to do about it because the industry as a whole won't do anything?

    The third part-

    The industry (us, together), can't even decide whether CAAMP or IMBA is "our" industry. The industry is made up of individuals and the best part is we're all the captains of our own ship - therefore what works for Ted won't work for Tom etc and vice versa.

  • Paolo Di Petta | dipettamortgage.com on 2013-06-06 9:00:31 AM

    @Jake, that's not my style.

    And to be honest, it's not their fault. The more we play the rate game, the more we validate it.

    Customers only know what we tell them about the industry. And if we sit here and parrot rates (that we can't really even control), then it's not surprise that they see us as walking rate machines.

  • Julie Stewart-Boyle on 2013-06-06 9:06:46 AM

    Our efforts would be better spent on educating the public about what we actually do as brokers. There are a lot of people who still don't know what we do - structuring their deals & mediating with the banks on their behalf can be invaluable to clients. The focus should be on ongoing public education and awareness by CAAMP and provincial associations - take the emphasis off the rates.

  • Jake on 2013-06-06 9:11:14 AM

    Julie

    This will never happen: - take the emphasis off the rates

    Why? Because for the bread-and-butter easy deal it really is not that difficult any more to get approved for a mortgage.

    once you fall out of that box then yes, we add value.

    But for the cookie-cutter borrower I am finding the great majority care ONLY about rate.

    Wishful thinking. I HOPE it happens, but I don't THNK it will. What should happen is this: Monolines get together, form a group, and advertise TOGETHER as to their advantages. They certainly have the budgets!

  • Cory on 2013-06-06 9:13:59 AM

    Can't disagree with comments around selling value and educating clients. The point to consider is that these sites are going no where, they are gaining traction and the end user has clearly indicated their perceived value to be price (rate), servicing is not something they care about, they are past bank clients where servicing is minimal. Most things in our society are price driven. Sure Jaguar still sells cars, but they sell a tiny amount compared to Ford Focuses. There is a place for both models, but to think the rate model is bad and will or should disappear is pretty short sighted, wishful thinking. I don't think everyone needs to partake but I do see a need for Brokers to take more control of the rate model. Dave's point of these sites becoming our competitor is very, very real, look what many lenders have done (used to use us, now they compete with us). Sitting around waiting for it to happen is not good business.

    P.S. I own www.ratesale.ca and I would be happy to have a conversation with others on how to collaborate and make a site for Brokers. I originally had no intention of using it, I bought it to keep others from launching what I thought was a perfect rate site name. But maybe there is a place for it. Feel free to reach out to me if you have any ideas around it. 403.381.3790 ext #1 Before you call, let it be known I am not a rate guy, never have been, so please don't call to chew me a new one. Thx.

  • Paolo Di Petta | dipettamortgage.com on 2013-06-06 9:15:21 AM

    @Julie - I absolutely agree.

    Though I don't think CAAMP does anywhere near enough of that for us. You's think that in almost 20 years, they might be able to do it...

  • Omer Quenneville on 2013-06-06 9:21:46 AM

    We should care less about the rates and trying to compete with discounts and we should focus on service and best advice. I truly believe if we focused more on the client’s needs, give best service and advice, clients would be lining up at our door. We as mortgage brokers have the potential to give the banks a run for their money. I'm tired of seeing clients sell their soul for one or two tenths of one percent only to pay later down the road with a bad mortgage. Clients ask for what they have been programmed to ask for. We need to open their eyes, help them see 3-5 years down the road. I can assure you, if we start taking the banks business based on service and advice, you will see change in the industry.

  • Paolo Di Petta | dipettamortgage.com on 2013-06-06 9:27:46 AM

    @Cory - there's always going to be different levels of service for different types of clients.

    BMW and Ford are two very different companies, but you wouldn't call either unsuccessful.

    And BMW doesn't even acknowledge Ford as competition. They know people will buy Ford, but they know that those buyers are not their ideal client.

    It's all about business model. Buydowns and volume is one way to tackle the industry, providing quality service and expertise for a fair wage is the other.

  • Cory on 2013-06-06 9:41:17 AM

    @Paolo, agreed 100%. On an individual basis the Mortgage Broker running a BMW dealership carves out their niche and does a great job at it, makes a good living and provides a quality, comfortable ride. It is the model I have chosen and it works. My clients like it and we do a great job competing in a crowded market. My thoughts on the Ford dealership is that they have a much larger audience so there is a bigger opportunity and as a result what we see are more Ford dealerships for more people. There will always be a place for both, but what I keep hearing is comments from BMW Brokers who simply want the Ford dealer to disappear. It is never going to happen. Your points are very valid, but so are those of the Ford dealership owners... the paying customer has determined that. Each their own, they will both survive, I just see an opportunity for Brokers to work together to gain more control of the rate site environment.

  • Paolo Di Petta | dipettamortgage.com on 2013-06-06 9:46:40 AM

    @ Cory

    That's exactly my point - You can't do Ford volume on BMW margins.

  • Ron Butler on 2013-06-06 11:01:37 AM

    I want to thank David for his intelligent comments, he sees there will be new ways of doing business in the future and he is thinking about how brokers will deal with that fact.

    I have said a thousand times the full service, full commission mortgage broker will always have a place. Brokers who do brilliant work and whose clients love them will likely to continue exactly as before.

    There may be a network sponsored rate sites soon, I know several of them are in the initial planning stages.

    If the networks / Super Brokers do proceed to ramp up rate sites my bet would be they would do one tenth to one twentieth the business of the established sites on their best day.

    I don't believe that a group of independent mortgage brokers will ever come together to put a site up.

    To create a successful site to compete with Rate Hub and Rate Supermarket would burn through about $3 Million to even try to get to a point they would be close to competing so I don't expect we will see that anytime soon.

    Good non-discount mortgage brokers should just keep doing what they are doing only more so.

    The discounting of rates is here to stay and the proliferation of rate information is also here to stay. Pick your camp and do your best at whichever you decide to pursue.

  • MortgageMan on 2013-06-06 1:08:38 PM

    I think a lot of mortgage brokers would be shocked if they knew which owner of a well known mortgage brokerage has a large ownership stake in one of these rate sites...

  • Ron Butler on 2013-06-06 1:15:19 PM

    Just for the record: because this came up immediately after my post; it is not me and actually most of us would not be shocked, we already knew.

  • Scott Dawson on 2013-06-06 1:34:33 PM

    This whole rate site discussion is getting a bit boring.

    It's not just rate sites brokers need to worry about. The internet has fundamentally changed how consumers are researching, learning about and obtaining mortgages. Individuals need to make sure they're positioning their business to best take advantage of this shift.

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

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