Trailer fees require accountability

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Lenders need to be held accountable for trailer fee commissions, and CAAMP is the body that should do it, says one B.C. broker.

“I think trailer fees are fantastic, but we need to bring clarity to the different elements of trailer fee agreements,” says Layth Matthews, CEO RateMiser Mortgage Advisors. “What protection does the broker have when the fine print states that the lender is no longer obliged to pay in certain circumstances?”
Matthews suggests a regulatory body or association,  like CAAMP, step up and set guidelines, a standardized frame of reference, that would highlight key terms in trailer agreements to protect the flat fee all the way – and be a body of recourse when lenders stop paying fee commissions.
“I’m giving up 30 per cent of my revenue for trailer fee commissions. I would like an organization like CAAMP to ensure that I can count on that money,” he says.
Although Matthews deals almost exclusively in trailer fee mortgages, he goes into them with eyes wide open.
“There are naïve notions out there that we can count on this for our retirement. I have diversification in my portfolio,” Matthews told, explaining that he understands how some smaller lenders can become absorbed or disappear from the channel altogether, necessitating the need to spread his “eggs” out in many baskets.
“I don’t want to be a salesman for a particular lender. For brokers, trailer fees should be based on a relationship with the lender – affording for the broker and the lender with a sense of stability.”
The aspect of income stability is what attracts Matthews to trailer fees, pointing to the Australian model as one that works.
“It is more widely embraced in Australia. It is a saner way for people to get compensated in a seasonal business.”
  • Uncoveredoption on 2013-03-06 4:41:39 AM

    Just get your job at the branch back?

  • Robert Stanfield, Invis Agent on 2013-03-06 5:26:19 AM

    I think there is a case to to be made for trailers as I do use the trailer fee model lenders, but not exclusively. Regarding myself, it is more about being paid on renewal by a lender so I don't need to flip my clients to another lender at renewal. It not only creates loyalty between a lender and broker, it also makes the broker channel lucrative for the lenders if they keep the client at renewal. Regarding the request above that CAAMP gets involved, CAAMP can't regulate the finders fee agreement so all lenders are the same as each lender is different and their trailers are paid differently.

  • Layth Matthews, CEO RateMiser Mortgage Advisors on 2013-03-06 7:25:38 AM

    Holy Cow! Did I say all that? Not exactly.

    First of all, in no way do I wish to complain about CAAMP or Financial Services regulation. Well maybe I do, but certainly not with respect to trailer fee lenders. What CAAMP could do is simply put out a glossary of terms used in Trailer fee agreements and maybe even a matrix for easier comparison of what such lenders are actually committing to. Or maybe CMP could do that - which I did suggest. I certainly do not wish for more regulation, whew. The "flat fee all the way through" remark was cut and misplaced.

    Second, I do not doubt the integrity of trailer fee and renewal fee lenders. If anything I trust them more. I have worried about the long-term reliability of Trailer fee income, but as I mentioned yesterday, I have come to the realization that one only needs 3-5 years to rationalize a trailer/renewal fee mortgage origination - from a compensation point of view.

    Finally, I think trailer fee lenders offer a new dimension that, is extremely helpful and supports a more ongoing, less sales, more financial coaching relationship between brokers and clients. Consequently, all things being equal, I have made a strategic decision to place as much business with trailer fee lenders as I can, but I choose my lenders on behalf of my clients, one deal at a time. As often as not, that means a non-trailer fee lender.

    I would like to see more lenders offer trailer fee compensation models. I think it's great for mortgage brokers.

  • CDN_GUY on 2013-03-06 8:21:00 AM

    Must be a slow news day when a quote from a single broker can be spun into a "new" news story.

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