Rate buydown debate heats up

Rate buydown debate heats up

Rate buydown debate heats up A controversial profile in CMP stoked the fire of indignation for one broker who argues buydowns cheapen the industry.

“(When) selling low rates, the advice isn’t there and the only thing the client gets is a low rate? What is a lower rate if, say the client bought it two years ago at 2.79% and we can now do 2.49%?” Nick Bachusky, an Ottawa-based broker, told MortgageBrokerNews.ca. “He gave the lower rates then but it won’t benefit the client now because they aren’t getting any advice.”

Ron Butler, one of the industry’s most successful brokers, was recently featured as an Industry Icon in the latest issue of CMP. And in the article, he claimed the future of the industry was a higher prevalence of bought-down rates.

“Wouldn’t it be nicer if the client just got the best possible deal and didn’t have to meet anybody to do it? Someone online or on the phone could meet with them – something that is efficient and easy to do,” Butler told CMP. “Nine out of 10 brokers are so wedded to their model of earning 125 basis points on every file.

“If you want to give better rates than (another) broker is offering, you can’t cling to legacy models.”
It’s a future Bachusky and, indeed, thousands of brokers across the country want to avoid.

“When I picked up the issue and I read that, I just shake my head. That is backwards; that’s where quality suffers and that’s when we lose our jobs and that’s when robots take over,” Bachusky said. “That’s not why we became mortgage brokers; buydowns are not why we became mortgage brokers.

“We love our clients, we want to be in communities, we’re viewed as people who can do the best job and we care about clients’ debt ratios.

Which side of the debate do you fall on? Have your say in the comments section.
  • David Larock 2016-03-17 9:18:08 AM
    “Nine out of 10 brokers are so wedded to their model of earning 125 basis points on every file."

    That is a ridiculous statement.
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  • Morgan 2016-03-17 9:34:07 AM
    Rate buy downs actually present an ethical issue. As a broker we have the ability to get the client a lower rate but in turn we receive a lower commission. As long as lenders present us with the ability to buy rates down, ethnically speaking we should be doing this or at least disclosing to our clients that we didn't for what ever reason we use to justify it. service, guidance, etc.

    Bottom line is a better rate is available and they didn't get it for one reason or another. Lenders either need to stop allowing buy downs or brokers need to disclose that they essentially did not get their client he best available rate.
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  • Jeff 2016-03-17 9:50:03 AM
    It seems, over the past few years that FSCO has been emphasizing "knowing your client" and require brokers/agents to take extra efforts in determining the most suitable product for our clients. How well do brokers with models such as Bulter and his team "know their clients"? Eventually FSCO may look into this low rate, stripped down advice model, and demand some changes which may create more work than is worth it for them.
    Also, when you run a model such as this, eventually the bad reviews start to pile up and can eventually destroy your reputation.
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