As per my previous blog, I will now address the second question I answered as a panelist at the VERICO Business Forum . “What is one thing that a lender can do today to ensure long term sustainability, and what can mortgage brokers do in kind”.

Simply stated there is no one thing that a lender can do today to ensure long term stability. Usually when we’re asked these questions, in a public forum, the answers are sprinkled with ambiguity, and a pinch of fluff. The reality is, if a business is going to be relevant tomorrow it requires careful planning, and a wee bit of luck.

Careful planning requires a full understanding of your customer’s needs.  Sales today is far different than it was years ago.  The customer is far more sophisticated today, as is the sales person.  At Merix we serve two customers, the borrower and the mortgage broker.  For too long in this industry the mortgage broker has been viewed simply as a conduit between the borrower and the lender.  This has to change.  The evolution of this industry requires that we change how we treat our customers, the mortgage broker.

I believe greater transparency is required between the mortgage broker and the lender.  Our dialogue and operating practice has to change.  We will not be able to thrive and grow our business if we continue to work in an environment where one entities profit is another entities loss.  Long term sustainability of our industry requires the broker owner, the mortgage broker and the lender to profit.  If one of these three is left out of the profit equation the industry is doomed for failure or at the very least stagnation.  Therefore, I believe lenders have to become more transparent about their own business.  If every conversation is about more VB (Volume Bonus) or higher finder’s fee, it’s a race to the end.  The challenge we face today is in understanding one another’s business. We’ll never get there unless we present the facts.  The only way we’ll all be able to grow is by giving each other a look behind the curtain.

In terms of what a mortgage broker can do to ensure long-term sustainability?
Be prepared to face two significant challenges, customer retention and increased competition from the bank’s mortgage sale’s force.

Customer retention is the nasty little issue that no one wants to discuss in an open and honest way.  So I’ll give it a shot. There’s isn’t a lender out there who doesn‘t believe that once a broker accepts the finder’s fee and VB, the customer belongs to the financial institution.  Mortgage brokers believe the lender is renting the customer for five years. I can assure you that every lender you deal with, including MERIX, is allocating more resources to customer retention.  Every lender will fight tooth and nail to retain the customer, and so far lenders have been very successful. For illustration please note the most recent CMHC survey relative to customer retention. The banks are winning the customer retention game, and they plan on keeping it that way.

The second significant issue mortgage brokers will have to confront is increased competition from bank’s mortgage sales force.  You’re probably familiar with the two banks that dominate the space today, but I can assure you that all the banks are either investing in that channel today or they’re about to do so.  I mean all of them.  The banks learned from the broker channel.  Subject matter expertise, and a focus on service, is a formula that works.  Imitation is the highest form of flattery, so mortgage brokers be flattered.  That being said, the banks are coming, and they have deep pockets.

Until next time,

Cheers