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Mortgage Broker News | 04 Feb 2014, 10:52 AM Agree 0
The lender providing the latest 2.99 per cent five-year fixed rate has been revealed and the product, no way resembles, BMO’s controversial “no friller” that captured media headlines two years ago.
  • Dan Faubert | 04 Feb 2014, 12:27 PM Agree 0
    it may be not be a no frills in your eyes, but no bridge financing? I hope you're all disclosing that in your Statement of Mortgage. For me its a real problem.
  • Ron Butler | 04 Feb 2014, 01:01 PM Agree 0
    It's definitely a problem if the client needs a bridge but since there are no pre-approvals on this program we only see live purchases where we know exactly where the DP is coming from and whether a bridge is needed.

    It is simply the truth that every single applicant will not qualify but many will.
  • Steve the broker | 04 Feb 2014, 01:19 PM Agree 0
    isn't there a restriction on paying out before first 3 yrs? and aren't the penalties calculated on the bond rate making it incredibly expensive to get out?
  • Ron Butler | 04 Feb 2014, 01:23 PM Agree 0
    As have stated elsewhere a very normal penalty other then a scaled re-investment fee that goes from $500.00 year one to $100.00 year five BUT other gimmicks at some Big 5 banks may produce a worse penalty depending on future rate movements. The mortgage is portable so for hi-ratio buyers its a very good deal all around.
  • Steve the broker | 04 Feb 2014, 01:33 PM Agree 0
    bond rate to calculate penalty. can't payout in first 3 yrs... so why isn't this considered a No Frills product?
  • Ron Butler | 04 Feb 2014, 01:37 PM Agree 0
    Steve the Broker, can I not make this any clearer: YOU ARE WRONG. Normal penalty calculation other than the re-investment fee for the term of the mortgage. Your 3 year comment is just nonsense.
  • Dan Faubert | 04 Feb 2014, 02:04 PM Agree 0
    Ron is correct, IA removed their expensive IRD penalty on bond market rate more than a year ago, so only negative is the no bridge loan availability. And its not now, of course you know where your client is coming from, it is the unknown of the future sale and purchase of the property that is the restriction. When is the last time you bought and sold your home on the same day? Never for me. So we all have our thoughts on this. I don't believe any rate savings, let say a .25% is worth the gamble of taking on this product, or a no frills product(early payout penalties etc). All I can say is that you all better be disclosing the lack of bridge in your signing docs. This buying down of rates is a complete other topic that I don't even want to get into, but making less than 80 beeps to me is starting precedence that can only lead to making us less and less money down the road, and I don't like it.
  • Ron Butler | 04 Feb 2014, 02:11 PM Agree 0
    Dan, thanks for your honesty and logic. We are doing a lot of first time buyers on this program and also some refi's where there is no bridge issue.
  • Dan Faubert | 04 Feb 2014, 02:28 PM Agree 0
    wait till they sell during term, and it happens. I've been around awhile. No bridge should always be an issue. I don't believe your(and a few others) advertising of these bought down rates is good for our industry. They're fictitious rates that don't in fact exist, thus shouldn't be advertised. You want to offer them to keep a client, all the best, but to advertise them in my opinion is wrong. Rate and good product go hand in hand, as it is when should when watching out for a clients best interest. Anyhow, I'm back to work, have a great day!
  • Dan Faubert | 04 Feb 2014, 04:24 PM Agree 0
    so I guess we didn't get the rate sheet from IA, 2.99 60 day closing(not sure when it came out, yesterday or Friday). So not bought down, a Promo, I was wrong. BUT my other issue still stands, no bridge is a big issue, I'll sell 3.19% with full features any day if the clients will listen.
  • Steve the broker | 04 Feb 2014, 04:41 PM Agree 0
    good to hear the IRD based on bonds is removed.. but if I hear you correctly, it's similar to the BIG 5 BANKS? And that's not good.. in fact, these are the worst penalty formulas out there... that's why we are seeing $15k, $20k, $30k penalties.. I refuse to be associated with mortgages that carry these outrageous penalty formulas... and Dan makes a very good point. Advertising fictitious rates that are only available IF commissions are used is more than wrong. it's bad for our industry... a good mortgage is more than just rate.. there's a saying that comes to mind 'you only want to pay peanuts and you'll get monkeys'. these bought down rates and rate shopping sites don't help brokers. i'm not sure why they get any air time in our broker community or associations.. Lenders, take a poll... ask how many brokers would support the elimination rate buydowns... we don't want or need them..
  • Lior | 04 Feb 2014, 04:41 PM Agree 0
    I'm just looking at an article in the Financial Post about sub-3% mortgage rates and how a few brokers are already offering this rate.

    Personally speaking, the amount of media attention to the 5-year fixed under 3% is ridiculous. According to the finance ministry, this is some kind of a psychological barrier that encourages reckless borrowing even though the difference in payment between 2.99 and 3.19 won't even fill up your gas tank.

    What I found interesting is how the article talks about brokers and their compensation, buying down the rate, and how this is not the case for this offering. The reality is any time brokers divulge this sort of information about internal procedures and compensation plans, all they do is wipe away their value proposition and set themselves up to be shopped. FSCO disclosures on compensation are there for a reason. The broker community is its own enemy. It's a joke and it speaks to the lack of maturity and respect for the profession of some in the industry. You don't see bank originators doing that so publicly. We know they earn less on deals but you don't see them giving the public information that would be detrimental to them earning a living.
  • Ron Butler | 04 Feb 2014, 05:01 PM Agree 0
    Lior, your comments are usually insightful but this was just silly. Bankers fight relentlessly on rate with each other. They buy down rates from their own compensation all the time. CIBC road reps have been offering 2.99% for 2 weeks. We are in an information age and it's here to stay. Brokers make ourselves look bad when we talk about keeping our compensation a SECRET. We look good when we pull out all the stops to get the consumer what they want.
  • Ron Butler | 04 Feb 2014, 05:20 PM Agree 0
    Steve Garganis, who is "Steve The Broker" even puts his false information about the 3 - year fully closed period of the mortgage into the comments section in the Financial Post. It's no wonder the public stops and thinks about who they deal with. Sadly the way some brokers choose to combat strong rate offers is to mislead consumers about the mortgage contract being offered.
  • Lior | 04 Feb 2014, 08:20 PM Agree 0

    The point is not that they don't compete among each other. That's obvious. My point is they don't provide the media or rate comparison websites with confidential information such as compensation arrangements and buy-down techniques that can effectively be used to significantly lower their income. This is a technique that some brokers use because they think it puts them ahead of other people. All they are really doing is devaluing themselves and in the process the value proposition of the rest of the community.

    Correct me if I am wrong, Ron, but on the bottom of most matrix sheets we get from lenders, it is clearly stated that the information is confidential and not be distributed. To disclose this information under the pretense of it's okay to do that because we live in the "information age" is incredibly short-sighted.
  • Ron Butler | 04 Feb 2014, 09:04 PM Agree 0
    Lior, it's only short sighted if you are dedicated to maintaining high mortgage rates to benefit yourself and not the consumer. In this particular case another broker identified the lender, I never mentioned the lender until other brokers did and I only confirmed because it was a PUBLISHED PROMOTION not a rate buy down. So is that what you are really against? A lender offering a great rate because it does not pay a high enough commission to satisfy you?

    So I guess I am correcting you because you are wrong: a published promotion offering a specific rate is MEANT to be discussed and offered to the public. This lender identified a promotion it wished to offer to consumers and that is what I did.

    Even if I do choose to offer the public lower rates by reducing my commission you think it I am doing something wrong?

    You may think so but consumers do not.
  • Steve the broker | 04 Feb 2014, 09:43 PM Agree 0
    Guess Ron Butler knows everything and everyone. Good guess, but wrong. Lior, I agree. This is a race to the bottom.
  • Agent | 04 Feb 2014, 10:16 PM Agree 0
    How is this a race to the bottom? Butler is offering a published rate of 2.99 and making 90bps commission. Further, this offer is available to all agents out there so stop complaining and use it as we'll. With respect to the race to the bottom, the race to the bottom in this industry is still a well paid industry. As mortgage professionals, you must all agree that we are grossly overpaid for the service we offer. Anytime we make as much money as we do for our efforts we must be realistic and admit that we are fortunate to be in this business. For example, we do a $500,000 mortgage and make $5,500 or so for our effort, an effort which amounts to about 1 hour of work. Hey - surgeons make less than this. Come on boys, be realistic and stop bashing Butler for his buys downs. Good for him to be able to work for 50 bps and make a go of it.
  • RLH | 05 Feb 2014, 12:48 PM Agree 0
    So if a lender had an advertised rate of 2.59 paying us 5bps, would you sell that? Point being, that is where the waters get muddy about being a race to the bottom. In this case, you did not buy the rate down but if you advertised and used this product, you are devaluing the value of a broker and if that became the norm, we would likely all be out of business which is not good for the consumer. So where is the line where brokers should not accept any lower of a commission?
  • Lior | 05 Feb 2014, 12:50 PM Agree 0

    It's not the disclosure of the lender or the rate. It's the disclosure of compensation structure with the lender that is prohibited. Is it coincidence that the person who commented on broker buy downs in a major financial newspaper happens to be the owner of the website where you are a key advertiser?

    At the end of the day, Ron, some consumers will pay a higher rate. Whether it's because they are higher risk or they need a longer rate hold, the job of a broker is to bridge everything together and secure competitive pricing based on the applicant's circumstances. Your strategy, however, is quite different in that you offer no value other than price and you price the products based on volume even though sometimes the lowest price is clearly not in the best interests of consumers (i.e. cost prohibitive breakage fees, no portability option, etc.) Shopping for a mortgage should not be like shopping for a book on Amazon.
  • Ron Butler | 05 Feb 2014, 01:10 PM Agree 0
    If the lowest rate is not to the consumers benefit we produce the next lowest rate that is the right fit. If I can achieve even a 1000th of what Amazon has achieved for the consumer I will be very happy. Lior, take care that you do not end up as the equivalent of the best buggy whip maker in Toronto. The future will arrive whether you like it or not and the future is: the lowest rate with quality service. That is what the consumer wants.
  • MarcF | 05 Feb 2014, 06:18 PM Agree 0
    I agree with Ron, on all fronts. I have always though it was silly that the broker industry and agents who comment on here and other blogs shout from the mountain tops about offering better rates than the big bad banks, BUT as soon as there is internal competition, within the broker industry, using options, or promotions available to everyone, the whole thing is horribly wrong. This is so laughable, and the "race to the bottom" is the ridiculous catch phrase everyone like to throw around. What is the bottom? Can anyone really clearly explain what this means? Maybe if more agents were around when 70 BPS was a great deal instead of expecting 100 BPS on every deal, you may have a different take on this whole issue. I will buy down a rate by 5 or 10 bps and use all of the promos out there if it fits what the client wants and still make a great living. As someone said earlier, brokers and agents make more per hour worked than most doctors or lawyers.

    I've been around banking and mortgages for over 20 years, in many different roles, and agree with Ron, the client will determine what they want, and over time the market will determine "who is right"
  • Lior | 05 Feb 2014, 07:54 PM Agree 0
    I disagree, Ron. Given how FSCO is in the process of randomly selecting brokers for a mandatory questionnaire about how they advise clients about their mortgage options, I believe this will put pressure on brokerages who derive a sizable portion of their business through those rate websites.
  • Mukesh | 06 Feb 2014, 10:43 PM Agree 0
    All of this bickering and the media around the IA offering has now forced IA to cancel this offering after tomorrow. thanks.

    This rate offered to brokers is supposed to be unpublished, but in our industry that is impossible because some brokers love to talk on social media more than work.

    By the way, this argument will never have a winner because not all clients fit the same program, everyone knows that, so to say that our industry is headed towards any one direction is short sighted, either way.
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