Mortgage Alliance withholds commissions, charges $100k penalties to over 50 agents - allegations

Mortgage Alliance withholds commissions, charges $100k penalties to over 50 agents - allegations

Mortgage Alliance withholds commissions, charges $100k penalties to over 50 agents - allegations

The Canadian mortgage industry was rocked yesterday when Ottawa-based broker Sue Hameed posted an open letter to the Canadian mortgage industry decrying alleged aggressive, punitive treatment she and her team of agents have received at the hands of her former employer, Mortgage Alliance, after switching brands and aligning themselves with competing network Mortgage Architects on January 04.

“This type of movement from one network to another is not a rare occurrence and happens frequently in the industry for a variety of reasons,” Hameed wrote in a public Facebook post. “What does not happen frequently and is not common practice is withholding commissions. We are in the unfortunate situation where Mortgage Alliance and M3 are withholding the commissions of hardworking agents and brokers who serviced their clients and completed their obligations by funding these deals.

“The actions being taken by Mortgage Alliance and [parent company] M3 are disgraceful and set a terrible precedent for this industry,” she continued.

Because commissions earned by mortgage brokers are not held in trust like those owed to realtors, Hameed expressed fear that her team members’ commissions from December and the beginning of January could be used by the company for other purposes, such as covering its operating expenses.

“M3,” she wrote, “you are withholding funds that don’t belong to you.”

A Quebec-based broker working for M3-owned brand Multi-Prets expressed doubt about the claims of unpaid commissions.

“M3 is way too big and healthy to withhold commissions for no reason,” the broker told Mortgage Broker News by email. “However, if this broker has left the group to change banners, payroll, logically, would hold commissions until all work-related and recurrent expenses deducted from our commissions (Equifax for example) are up to date. It gets even more complex if this person is a team leader or in a team.”

But according to Hameed, unpaid commissions are just one aspect of the alleged Mortgage Alliance assault. She and her team members have also been charged with “reputational damage to MAC as a result of early termination/abandonment”, to which the company has, she claims, affixed the price tag of $100,000. Each.

“Every single one of our agents received demand letters, even agents who had never funded a deal,” Hameed said by phone. “They were brand new. They literally just got their licenses in October or November. We’re talking over 30 agents, over $3 million in demand letters out there.”

As Hameed’s team terminated its relationship with Mortgage Alliance prior to the end of a five-year commitment, the company claimed its actions were justified on contractual grounds. But as Hameed explained, and as Mortgage Alliance repeatedly told her, she claims, the terms of the contract she signed as team leader, and therefore the penalties that contract is now triggering, do not apply to individual agents.

“That communication is not only verbal, it’s also in writing from Mortgage Alliance,” Hameed said. “They’re trying to hold [agents] to the same standard as the team leader, which, from my understanding, has never been the case with Mortgage Alliance in the past. This is something I think even many individuals within Mortgage Alliance are confused by.”

Misery loves company
Hameed’s team is not alone in its anger and distress. 6ix Mortgage Group, which also left Mortgage Alliance for Mortgage Architects in the first week of January, is facing a similar situation: withheld commissions and demands of $100,000 from each of the team’s 22 agents, it is claimed.

“We’re in the exact same boat,” a member of 6ix Mortgage Group, who wished to remain anonymous, told MBN. “We were with Mortgage Alliance for over three years. Contracts were signed, but none of the sub-agents were contractually involved with anything.”

The source found the timing of Mortgage Alliance’s approach – smack dab in the middle of an unprecedented economic and healthcare crisis – outrageous.

“Companies and organizations are going out of their way to help their people and provide them with some sort of funds during this difficult time. We’ve got single parents on our team. We’ve got an agent whose husband owns a restaurant and the restaurant shut down – and then the husband got diagnosed with cancer. And on top of that, all their money is locked up,” the 6ix source said.

The source added that it has seen written communications from senior Mortgage Alliance leadership – vice president of business development MaryAnn Nasrallah, senior vice president of corporate development Joe Pinheiro – clarifying that the obligations agreed to by team leaders do not apply to a team’s sub-agents.

“So either [Mortgage Alliance] misled us or these contracts were signed in bad faith. Which one is it?” the source said.

In addition, the source accused Mortgage Alliance of interfering in the completion of over $40 million in impending deals.

“Not only are they not paying us, they’ve also stopped supporting us to complete and comply these deals,” the source said. “They cut off our access to [M3’s proprietary submission platform] Boss, so if I’m trying to fund a deal with, say, Scotiabank or TD Bank, I can’t even comply this deal and finish it off. They’re not even helping with that. It’s a major, major mess.”

A representative of 6ix Mortgage Group called Mortgage Alliance president Peter Aceto on Friday and urged him to pay out the commissions owed and drop the $100,000 requests. The source relayed Aceto’s response, which reportedly amounted to, “Sorry, it’s with the lawyers.”

Industry reaction
Mortgage Alliance’s alleged actions have left some of the industry’s biggest players disgusted.

“Never in our industry has a company said, ‘I’m going to hold all of your commissions from all of the agents who are licensed with you,’” DLC Group of Companies CEO Gary Mauris told MBN. “Withholding agents’ money is completely offside. I think what Mortgage Alliance is doing is embarrassing. It’s despicable.”

In Mauris’s view, any legitimate contract disputes that exist between Mortgage Alliance and the teams involved should be negotiated by the company and the associated team leaders, with an eye toward avoiding unnecessary collateral damage. Agents should not be caught in the crossfire, where they will almost certainly be shredded.

“Withholding commissions is immoral and it’s unconscionable,” Mauris said. “These are single mothers and people who just finished trying to give their families a good Christmas who worked hard to get these deals done.”

Mortgage Architects president Dustan Woodhouse described Mortgage Alliance’s demand for $100,000 in reputational damages from each agent, including some who have yet to close their first deal, as “arbitrary”, “petty”, “spiteful”, and “egregious”.

“No judge will ever rule against those agents,” Woodhouse said. “But you have a company that is now headed by a lawyer, and that’s the system. ‘See you in court.’”

Woodhouse found Mortgage Alliance’s alleged litigious approach not only cold and impersonal, but utterly unnecessary.

“Never in my life have I picked up a phone and told a lawyer to write a letter. There is nothing you can’t talk your way through,” he said. “Why do we need to hire $250-an-hour people to speak for us? I think it is chickenshit behaviour to hide behind the line, ‘We will settle it in the courts.’”

Mauris’s fear is that because of M3’s gargantuan presence in the industry, agents, brokers, lenders, and even executives will feel too intimidated to speak out.

“It’s the equivalent of watching someone getting beaten up by two or three people and not stepping in,” Mauris said. “Somebody needs to step in and say, ‘Shame on you. You are wrong.’”

In response
On Tuesday, M3 president Peter Aceto provided the following comment to Mortgage Broker News. “There are two sides to every story and clearly what’s been posted in the public domain so far is only one side of it. We at Mortgage Alliance and M3 (unlike some of our competitors) are not a litigious organization and we only use this course of action as a last resort when we do not have a choice, in order to protect our brokers and our network. A contract is an agreement between two parties, and at Mortgage Alliance we have, and will continue, to honour and respect our contractual commitments, always. Mortgage Alliance and M3’s 8,000-plus brokers collectively are the lifeblood of our business, and remain our number one priority.”