Broker channel lenders are increasingly taking a page out of the banks’ book, says brokers concerned about the growing difficulty in switching clients out of their mortgages as monolines ramp-up retention efforts.
“There’s no question that the retention teams of broker lenders are becoming more aggressive with switch-outs,” said Jeff Attwooll, a mortgage consultant with Dominion Lending Centres Your Mortgage Partners. “Some are now insisting on talking to the client before they sign off on the discharge of a mortgage. That’s relatively new for broker-lenders and is what the banks do. Of course, that’s not good for brokers.”
With originations and refinances having slowed in most markets across the country, brokers are increasingly looking for opportunities to switch clients out of their existing mortgages, at relatively high rates, and into new loans, offering today’s rock-bottom pricing. Even after penalties, said Attwooll, a high-volume originator based in Cambridge, Ont., breaking an existing mortgage often makes financial sense for many of his clients.
But a growing number of monolines are actively looking to block that move, said Dustan Woodhouse, with Dominion Lending Centres Canadian Mortgage Experts on B.C.’s Lower Mainland, by insisting on the same kind of client-lender meetings – usually by phone – that the banks do before agreeing to the discharge. As at the branch level, those discussions are focused on presenting borrowers with a more competitive rate on a new mortgage.
Unlike some of the Big Five, broker-lenders aren’t going so far as to eat their own penalties in order to retain clients, said Attwooll, although their retention has the same potential to cut the broker out of the equation.
“Of course, we don’t get a commission on the new mortgage with the same broker-lender,” Attwooll told MortgageBrokerNews.ca.
On a larger scale, broker trainer Greg Williamson is identifying “disintermediation” as a growing industry trend. In common parlance that means lenders are looking for ways to beat a direct path to the customer.
“Lenders will always be looking for a shorter route to the client,” said the broker, as part of his webinar “180 DEGREES ACADEMY - Winning the Rate War.” “That means cutting out the intermediary. There is only one way to stop, or slow down, the process of disintermediation, and that’s through innovation.”
The frank talk followed on the heels of Macquarie Financial’s decision to quit the broker channel. Much smaller lender Concentra also ceased originations through the broker channel in late June. The collective exit, sped up by a protracted period of thin interest rates spreads, has raised concerns about broker channel viability in the face of an onslaught by the banks. Brokers have a right to be concerned, Williamson said, suggesting other lenders may seek to cut the middleman from the originations process as a way of meeting that crisis head on.
But improved broker efficiency and a more aggressive lead-generation strategy can effectively block disintermediation without mortgage professionals having to sacrifice compensation, Williamson said. “As a group we can push back against it.”