Talk about one of the channel’s big banks is raising broker eyebrows in B.C., along with concerns the lender has sweetened its referral offer to Realtors with paid appraisals and legal for clients.
“In a presentation to a real estate office this morning, Realtors were offered that if they avoid going through the broker channel and refer directly to the branch, they will offer the clients free legals, free appraisals and pay 50 bps directly to the Realtor,” says one brokerage head in an email to colleagues Monday, and obtained by MortgageBrokerNews.ca. “Does anyone have any thoughts on this as it seems to be a somewhat better offer then what we as experienced status'd brokers have access to.”
Concern about a possible double-standard was first raised last year as news broke the lender was actively growing its use of Realtors as referral partners as well as its use of brokers.
But Realtor compensation of 50 bps, paid to the brokerage, is only one element of the offer now being presented to those real estate agents. Brokers may now have to compete with incentivized Realtors, but also clients rewarded for taking their business directly to the bank and not the broker.
Mortgage professionals will increasingly face the process of “disintermediation,” says industry leaders, as lenders look for ways to cut the cost of originations.
“Theys will always be looking for a shorter route to the client,” said industry trainer and broker Greg Williamson, of “180 DEGREES ACADEMY - Winning the Rate War.” “That means cutting out the intermediary. There is only one way to stop, or slow down, the process of disintermediation, and that’s through innovation.”
Other industry players have now floated the idea of lowering upfront broker commissions as a way of protecting broker lenders largely without the product lineup of the banks, which allows them to cross sell and effectively use mortgages as a loss-leaders.
Earlier this month, National Bank indicated that it would seek to adjust its use of mortgage brokers in favour of growing originations at the bank branch
“In Ontario, we’ve seen good volume growth,” President and CEO Louis Vachon told analysts during a conference call Thursday. “A lot of that is coming – 40, 45 per cent – from brokers.
“Clearly, for the next few quarters we are going to look at net margins in that business … and we’re going to look at hopefully increasing the branch and mobile sales force contribution in Ontario and (although) we’re not pulling out of the mortgage brokers market, on a relative basis we’d like to reduce it a little bit.”
The comments came with the release of second quarter results pointing to a 13 per cent rise in the funded volume of residential mortgages, compared to the year-ago period.
Brokers, outside of Quebec, have contributed a disproportionately large share of that business to the bank, at the same time National has focused on cross-selling to those broker clients, according to bank officials.