Stymied switches prompt new game plan

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A slowing market will grow the number of trailer fee transactions as brokers confront a spike in rock-bottom renewal rates – an effort on the part of some lenders to block switches, they charge.

“I, for one, am going to be doing more trailer-fee-option deals,” Mike Hattim, an agent with Dominion Lending Centres Forest City Funding told MortgageBrokerNews.ca. “I’m truly starting to realize where the competition really lies now and it’s not just with other brokers or the banks but with some monolines.”

Hattim is one of several brokers now pointing to clients who’ve been presented renewal offers that, in some cases, proffer rates 10 basis point or 20 off of the marketplace average.

That aggressive stance is one most brokers simply can’t match as they scout around for potential switches. The fact that those rates are being presented even before the threat of a switch means brokers are locked out of the competition before it’s begun, says Hattim.

While ostensibly that accrues to the benefit of clients, it has rubbed some brokers the wrong way as they look to shore up revenue with a falling number of new mortgages at their disposal. It’s also likely to drive up interest in trailer fees – a way of ensuring pay at renewal. Althought that won't likely help brokers through the current market slump.

They may have to lump the increased competition as lenders fight for retention. That doesn't mean they like it.

“”I guess what I haven’t thought was very productive about these renewal rate offers is that it seems as though the broker – the person who brought the client to the lender in the first place -- is now being shut out,” said Hattim. “This is supposed to be a partnership between brokers and lenders.”
 

  • KL on 12/01/2013 4:50:33 AM

    While the trailor is not everyone's cup of tea there is no doubt it is becoming more familiar. The switches have been made much more difficult by our friends at Scotia and TD. As you are all aware, they regiter as collateral and to an inflated value. This creates refi vs switch ! We still look at switches as a viable option as is just these 2 who have created the prob. There are still 3 big banks and all the CU's, never mind other mono line lenders which we can still "Switch" ! Good luck on all your choices !

  • MM on 12/01/2013 8:06:50 AM

    Most CU's are collateral as well. Don't be surprised if the rest of the lenders are all collateral in the next 5 years...

    “This is supposed to be a partnership between brokers and lenders.” A lender cannot be profitable paying a Broker 100+ bps upfront and allowing all broker clients to walk away at renewal. A lender makes most of their profits at renewal. If your business model is all about switch transactions, you will be extinct very soon. Believe it or not, the BIG 5 own the entire market and can shut us all out overnight. We need to learn to make both parties profitable if we are going to succeed in growing this channel.

  • MTG on 12/01/2013 8:31:21 AM

    Keep in mind the insurers (GNW I know for sure) will allow a port of their coverage even for TD and BNS collateral charges that have to be switched via a refi transaction meaning LTV's > 80% can be switched (via refi)despite gov't regulations as long as no new funds and existing amortization is maintained. Customer's loose by having to pay legals however many people think there is no solution to move high ratio TD / BNS collateral charges.

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