Counsel Corporation has seen its stock price double in less than a year – success that could be worth some attention by mortgage brokers, who are more focused on new volume than renewals.
“If you use an intermediary, like insurance brokers or investment banking for example, you don’t end up paying them over and over and over,” says Fred Westra, an analyst at Industrial Alliance Securities, told MortgageBrokerNews.ca. “Some of the larger, more sophisticated brokerage houses do step up on renewals, but for the most part, brokers are focused on new volume.”
Westra sees Counsel’s dramatic mortgage volume growth representing an enormous, latent source of future profitability – and that is because mortgage lenders aren’t required to pay broker fees upon renewal, generating rich profit margins on the rollovers.
“What is compelling for me is that this is on business that’s already written, without any expansion in spreads, without any growth,” Westra told the Globe and Mail.
Estimates place last year’s business – once it comes up for renewal in four years – could generate some $50 million in pretax earnings, which would far outstrip the $18.5 million for all of 2012.