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How Brokers Operate

by | Sep 15, 2014

Re-shared from
GLM blog post 9 15 14
The vast majority of mortgage brokers recommend suitable mortgages, according to a new report from the Mortgage Broker Regulators’ Council of Canada (MBRCC). That’s vital because, as MBRCC Chair Kirk Bacon states, “Unsuitable mortgages can have a devastating financial impact on borrowers and their families.”
To find out how brokers operate, regulators surveyed 1,113 of them in Ontario, Alberta and Newfoundland. They discovered practices that were mostly reassuring, with a few stats you may find surprising.
These were some key findings:

  • 55% of Ontario brokers said brokering wasn’t their primary source of income
    • Note: The number was only 11% in Alberta and 25% in Newfoundland
    • It would be interesting to know how many consumers are willing to entrust their biggest debt to a part-timer
  • 53% of brokers maintain records of why they make the recommendations they do
    • That’s a problem, regulators say. “…There should be written records” of how the broker’s recommendation corresponds to his/her needs assessment of the borrower, notes the MBRCC
  • 34% of brokers have been licensed for at least five years
    • In other words, only about 1 in 3 brokers have had clients renew a 5-year mortgage
    • This stat primarily includes Ontario brokers (Alberta was excluded from this question)
    • Out of active Ontario brokers, only 1 in 3 do more than 25 mortgages per year
  • 81% of brokers say they “always” search for suitable mortgages from the lenders available to them
  • 69% of Ontario brokers use more than three lenders “on a regular basis” (76% in Alberta)
    • 7% of Ontario brokers use only one lender on a regular basis (and they call themselves brokers?)
  • 40% of brokers do independent research on mortgage products “daily”
  • 2 in 3 Ontario brokers say they represent “both” the lender and borrower
    • 30% say they represent only the borrower
    • 4% say they represent only the lender (if only these brokers admitted that to clients)

The MBRCC outlines three factors in recommending a suitable mortgage:

  • Appropriateness of the mortgage, given the borrower’s needs/circumstances
  • Affordability of the mortgage, given the person’s ability to repay it
  • Alternatives available to the broker
    • Some consumers are under the misconception that brokers recommend mortgages from all lenders. Very few do. In fact, the majority (53%) of brokers say their role is only to educate clients on the mortgages they, the broker, can directly sell
    • While regulators don’t expect brokers to know all products, they do, however, expect brokers to recommend the most appropriate mortgage that they have access to

One other key takeaway from the report involves setting expectations. The MBRCC says it’s vital for brokers and customers to have “a common understanding” about the type of product(s) or advice being provided by the broker. You don’t want a situation where clients think they’re getting objective advice but the broker does 80% of his/her business with one lender. Disclosure is everything.
So, what can consumers draw from all this? Well, there are always exceptions and other criteria apply, but if you’re looking for the best possible service and advice, odds are you’ll get it from a broker who:

  • Makes brokering their full-time income source
  • Has been in the business for at least five years (or is under the direction of a broker who has)
  • Compares all of their lenders to see which offers the most suitable mortgage (or knows which do, without needing to compare)
  • Documents why they make the recommendations they do
  • Regularly uses more than 3 lenders
  • Follows the rate and mortgage market daily
  • Does a comprehensive assessment of the borrower’s needs and mortgage affordability
  • Believes they represent the borrower, but recognizes their obligation for full disclosure to the lender
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