Lendwise – what some brokers call the lender of last resort – is reporting 70-per-cent year-over-year growth in funded volumes for May, as brokers respond to increasingly fierce competition from the banks on rate, rate and more rate.
“It’s up 70, yes, but the overall volume is still very small,” company VP Lloyd Pritchard told MortgageBrokerNews.ca. “The fact is we will do less in volume in one year than what (our parent company) Merix will do in a month. We still see our product as a ‘save your deal option;’ that’s how we sell it; that’s how we market it.”
Merix virtually built the division up from the ground floor, launching it in January 2010 as a rock-bottom rate provider for brokers fighting to keep clients from going over to the banker-side. That tool – specifically, access to rates as low as 3.44 per cent on a five-year fixed – comes at a cost, namely, compensation. The finder’s fee on that same five-year fixed, the company’s bestseller, is 55 basis points and there are no volume bonuses. For the client, the mortgage’s terms are largely in line with industry standards on prepayments and other key areas.
Still, taking a deal to Lendwise is a bitter pill for mortgage professionals to swallow. May’s increased demand may reflect the kind of tight situation brokers across most markets find themselves in as the banks pull out all the stops in order to woo the dwindling number of homebuyers. Lendwise’s increased demand is evenly distributed across Ontario, Alberta and B.C., said Pritchard.
While May ushered in a modest uptick in volume sales across the country, that performance better reflects the very slow year-ago period, in the aftermath of the first round of mortgage rule changes. Originations for many brokers have, in fact, slowed this spring, say industry insiders, and the banks are prepared to better most of the broker channel’s best discounted rates in order to close deals. The hyper-competitive environment has created an opportunity for Lendwise, but one many brokers would like to see withdrawn.
“Sacrificing rate in order to compete only on rate is essentially a race to the bottom,” Greg Williamson a Calgary broker and mortgage industry trainer, told MortgageBrokerNews.ca. “That’s because today your rate may be the lowest, but tomorrow it may be someone else and pretty soon you’re working more for less money.”
He’s preparing to lead 1,000 brokers in a webinar dubbed “Winning the Rate Wars” on July 6, a discussion focused on using social networking and other next-generation marketing tools to grow business outside of dangling low rates.
“It’s about what to do when you’ve been bested on rate,” said Williamson, who also provides broker training. “You don’t have to go to that level.”
But one successful brokerage head has turned to Lendwise over the last year, if only in exceptional cases and only if “a client was walking out the door on the way to the bank and had a verifiable bank commitment letter in hand,” said Tom Lam, owner of Alberta’s Urban Mortgage.
“It’s a last ditch effort to keep the client, because a client is better than no client, and our business is all about the referral.”
Brokers often only turn to Lendwise after they’ve looked at whether it’s feasible to buy down their rate with another lender, something that would allow them to protect a possible volume bonus. Pritchard encourages that kind of research.
“Our product is meant to be an option in those rare conditions – a back-pocket option,” he told MortgageBrokerNews.ca. “In an environment where it is increasingly competitive, brokers need as many options as they can get, and there’s a pretty big distinction between using low rates as a primary driver of your business and using it in order to save a deal. We always have to be thinking about keeping the deal with the mortgage broker and keeping the client out of the hands of a non-broker channel lender.”