To The Pointwith Boris Bozic
Commentary, Opinions, Thoughts and Discussion on Current Events, Politics and The Mortgage Industry

0 Comments Candidly Speaking – Part 2

Article written by Boris Bozic on the 07 Jul 2011 in Lenders,Mortgage

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,



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Greg Williamson Website Reply

Boris, (insert me standing and clapping) Very well done. I am loving your blog and as one industry blogger to another I am certain your candour will serve you well.

I as well am concerned. As a quasi leader in the broker channel I am screaming from the hilltops as well that we as brokers need to change our ways. My biggest concern is apathy or ignorance. Someone of your stature in the lender field laying it CLEARLY on the line for brokers will help.

As I say “The Game is Changing and we should give a SHIFT”

Thank-you Boris.

July 07 2011 15:43 pm Boris Bozic Website

Hi Greg, thank you so much for the kind words. Every organization, and in this case an entire industry, has to be careful to not allow hubris to set in. There’s no greater risk to a business than believing it can never happen to “our business”. By the way, I love the play on words. I wish I had thought of it.


CE Reply

In a way this sounds as though you’re giving the Broker Channel a warning…. the banks are coming, including Merix when it comes to customer retention.

A key selling feature that Merix currently prides and promotes itself to Brokers is the fact that Merix is always going to promote the Broker as being the first contact to the client and refers the client back to the Broker.

There’s no crystal ball on what the future will hold with Merix, but as an example: FirstLine started as a Broker-only focused channel and built a huge book of business, turned huge profit and got a great many of Brokers secured in their clutches with status levels, discounts and points programs. Once you’re in that deep, it’s really hard to spread the business around, resulting in reduced options for your clients. Isn’t the job of the Broker (both ethical and professionally sound) to put the client in the best possible mortgage given their situation?

FirstLine’s tune has since changed and they are VERY aggressive with existing clients are not the market leader in the Broker channel any longer. Greed has taken over, they have forgotten to built their success and they are losing market share and long term loyal Brokers who have seen the clear picture of the future. I sincerely hope that Merix doesn’t follow in these footsteps!

Why is that so many Lenders offer deeper discounts to these status Brokers or require minimum funding amounts or ratios? Given the decline in clients that are available and the reduced amount of new mortgages to go around, shouldn’t the Lenders be happy with what they do get rather than put minimums in place? In this market, it just doesn’t make sense to me! Lenders are forcing Brokers to operate in a way that is opposite of what we are meant to do!

July 08 2011 12:44 pm Boris Bozic Website

Hello CE,
Thanks so much for reading my blog and for taking the time to comment. With respect to your comments that I’m warning the broker channel about customer retention, that’s exactly what I was attempting to do. Being in business requires that we identify potential threats, and then we have to figure out a solution. I go through this exercise on a daily basis. I have to because the completion is fierce, and my challenge is to stay one step ahead of the game. I think it’s no different for mortgage brokers. Brokers should spend time on identifying potential threats to their own business. The key of course is what action steps do you put in place to mitigate those risks. As for Merix and customer retention, our success in this regard is your reward. I know I’m biased but I can’t think of a better CRM program than the Merix trailer fee model. We retain the customer, and then we pay you for it. This is a win, win, win. The customer, the broker and Merix all get what they want.

With respect to minimum volume requirements, funding ratio’s and preferential pricing, I can only speculate as to why other lenders are doing this. As for Merix, we did away with minimum volume requirements over two years ago. It was almost 2 ½ years ago that we determined that the market was headed in this direction. We determined that many brokers would not be able to deal with lenders directly, and they would be forced to pool their business. Yet many of these brokers provide good quality business for lenders. This was an opportunity for Merix, as well as the mortgage broker. The one thing we didn’t change is the minimum efficiency ratio. There’s a direct co-relation between efficiencies and service levels.

CE, the one thing I’ve learned after all these years in this business is that brokers are survivors. Brokers look at the landscape and say, “we don’t make the rules but we’ll figure out a way to get ours”. They always do. I don’t think it will be any different with two issues I raised.


Sharon B Reply

I don’t disagree with any of the comments here. However, while the Bank may feel they own the client, the client may have different ideas. Banks may be winning right now on retention , but it is costing them big time as they offer huge discounts, in some cases pay penalties, and in one case I was involved in paid the clients CMHC fee as well as a rate of Prime minus 1% . I had offered client Prime minus 1%, but was not going to pay the CMHC premium. I’M sure there was lots of profit in that deal for RBC LOL( 5 year Amort , customer here on a 3 year work visa)

July 08 2011 12:48 pm Boris Bozic Website

Hi Sharon,
I agree it’s costing the lenders to retain a portion of these customers. I guess that’s any indication to what lengths lenders will go to retain the customer. I also agree that the customer may have different ideas. However, the more hooks a bank puts into a mortgage customer, i.e. selling ancillary products, the higher their retention rate is. I used to work for a major bank, I’ve seen the statistics. Sharon, not for a moment am I suggesting it’s doom and gloom. What I am suggesting is…”it is what it is”.

Sharon B Reply

Hi Boris,
I just returned from the Verico conference in Vegas and heard you speak on this very subject. I also worked in branch banking for many years ( 1979 to 1998) and understand the mindset. I have been a mortgage agent/broker since 1998, and I have a huge dedicated client base, some who would not even think to renew before they met with me and listened to my suggestions on the best option. Thats why I continue to be sucessful and a leader in my market year after year. At the end of the day there is plenty of business for all of us:)

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