Disclosure rule could lead to undercutting

Disclosure rule could lead to undercutting

Disclosure rule could lead to undercutting The industry could see a major change next year when it comes to disclosing income to clients, and one broker is arguing the ramifications could be dire.

“There will be no protection from under cutters, and you will see flat rate brokers who offer cash back to steal broker business,” Dustan Woodhouse, a broker with Dominion Lending Centres Canadian Mortgage Experts, told MortgageBrokerNews.ca. “Clients will bring in approvals to these companies, let the brokers do the planning, and they will take any approved deal.”

According to Woodhouse, FICOM’s proposed disclosure rule implementation – which will clearly indicate on mortgage applications what brokers make – will result in a number of companies popping up that will offer commissions back to the client.

He uses the example of a fictional company called 999Mortgage.com, which would hypothetically charge a flat fee of $999 and offer the rest of the broker commission back to clients. After the client has worked with a mortgage broker – who has done the work -- and received an approval, of course.

And one lender verified the model would work.

“The lender will go with the client the broker wants,” the anonymous professional, who works with a large channel lender, told MortgageBrokerNews.ca.  

The channel is keeping a keen eye on the proposed rule implementation, which could go into effect in British Columbia next year. However, industry players say the change could have far-reaching implications for the industry as a whole.
  • Ron Butler 2015-11-18 10:10:04 AM
    Thanks Dustin, I have just acquired the domain 999mortgage.com with GoDaddy.
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  • Dustan Woodhouse 2015-11-18 11:42:36 AM
    For the record 999mortgage.com was registered by a Broker this morning (he sent me a thank you email), I did not bother myself as the name is a red herring.

    I await emails from the next 900 or so Brokers who register 998mortgage.com all the way down.

    Hopefully this thought exercise of drilling the mortgage business down to the sandwich artist franchise model with mortgages being processed by 18yr old kids for minimum wage while a single licensed manager overseeing the operation will resonate with Brokers, lenders and regulators alike.

    Our industry does not need bucket shops. Our industry needs the opposite. It needs skilled Brokers that can differentiate between 30 different lenders selection of a dozen or more mortgage products. It needs Brokers that earn enough to be able to educate themselves.

    And while many consumers may choose fast food for lunch we all know how smart that is in the long run.

    For the discount houses running on a full buydown model they are already at 999 or less on mortgages of 200K or so and below. This would be a step up for some of them in certain regions.

    When I am traveling I do not eat 99cent hashbrowns from a chain, I look for the artisanal hashbrown maker who knows there stuff and I pay triple. Debate away as to weather I am throwing my money away.

    No doubt the debate on this topic will be spirited for some time.

    Footnote: Hey Brokers, did you know that your lenders, and your regulators are reading the comments as well? Keep it classy folks, type comments like they are the first words you are speaking to your future in-laws.
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  • Evan W 2015-11-18 12:26:37 PM
    Regulators need to understand how brokering works. The lack of understanding lead them to misdirect regulations. This kills legitimate business. The misdirection is damaging mortgage brokering. Without mortgage brokers, many borrowers will be left at the mercy of their lender because they will not understand the marketplace and options. In the end, the consumer pays.
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