Some brokers may be eating their words. The broker channel’s biggest proponent of trailer fees is expecting to pay out a whopping $5 million of that compensation in 2012, billing it as a validation of the model and evidence of a maturing market.
“It’s a good news story for both Merix and the brokers originating 75 per cent of the mortgages under the trailer fee model instead of the upfront one,” said Jason Kay, the mono-line’s VP of sales and corporate development. “It also answers sceptics who said lenders wouldn’t be around at renewal to pay out the trailer fees and it’s good for brokers because it has helped them increase the value of their business.”
Merix has been consistent in that messaging for more than six years, although brokers as a whole have been more ambivalent, say analysts. Not all, however.
“One originator, alone, will collect $100,000 in trailer fees this year,” said Kay, pointing to a small team submitting under one broker.
Industry veterans hoping to convince more brokers to follow that lead suffered a setback with Macquarie’s departure last year. The lender was another fan of trailer fees, although Merix led the introduction of the model that borrows from other financial services professions.
The overall number of brokers moving to adopt trailer fees hasn’t greatly increased since it hit the channel, with few lenders showing any signs of moving to include that compensation as an option.
Still, the concept of across the board renewal fees like those Merix offers on upfront compensation deals is gaining traction as a way of decreasing unnecessary switching.
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“I don’t know if the banks would do it or not,” David Hetti, an Invis agent in Oshawa, told MortgageBrokerNews.ca, “but it would also encourage brokers to work with the banks at renewal instead of against them. If the banks that use the broker channel are willing to talk about it and do move to offer renewal fees of even 15 basis points that will strengthen their relationships in the broker channel, where the mono-lines already benefit from higher broker loyalty.”