Once considered the last resort of consumers with shaky credit, mortgage brokers have become the go-to resource for many first-time homebuyers over the past decade. With mortgages mushrooming in size and complexity, many borrowers have discovered that a mortgage broker can help them stickhandle their way through one of the most stressful financial transactions they will ever enter into.
This growing acceptance, along with better education, licensing and credentials for brokers, has boosted the channel’s credibility. Mortgage brokers and financial advisors also are discovering that both they and their clients can benefit when the two types of advisors work together as a team.
As financial advisors cannot sell mortgages and mortgage brokers cannot sell investments, says Rob Galaski, senior manager of corporate strategy with Toronto-based Deloitte Consulting LLP, there has been integration of these functions in some offices, which makes referrals more convenient.
Indeed, better service is a key factor in the mortgage-broker channel’s growth. Says Galaski, author of a recent report on the channel: “The battle isn’t [just] about offering consumers the best price anymore; it’s about giving them information about the options for a mortgage that best suits them.”
The numbers speak for themselves. According to the Canadian Association of Accredited Mortgage Professionals’ May 2011 report, entitled Stability in the Canadian Mortgage Market, the residential mortgage market in Canada is expected to reach $1.1 trillion by the end of 2011. And, according to Canada Mortgage and Housing Corp. ’s 2010 Mortgage Consumer Survey, mortgage brokers were at the table in 39% of all transactions in 2010; that’s up sharply from 2006, when mortgage brokers were involved in 27% of all mortgage transactions.
Approval ratings for the channel also are high. Among Canadians who used a mortgage broker in 2010, the CMHC survey found that eight in 10 credited their broker with taking the time to understand fully both their financial situation and their mortgage needs.
A January 2011 study by CAAMP found that almost half of the 2,000 respondents thought that the mortgage broker channel performed “better” or “much better” than other channels on mortgage products when it came to offering competitive rates (58% of respondents), product variety (54%) and helping customers understand their options (48%).
Mortgage brokers differ from traditional bank lenders by offering clients access to different types of mortgage products outside of those offered by traditional lenders such as the big banks. For example, non-bank lenders such as Toronto-based First National Financial LP distribute their products exclusively through mortgage brokers.@page_break@In most cases, the lender pays the mortgage broker’s commission, unlike the situation when the channel first began expanding in the 1980s, when the consumer paid the commission. But lenders began paying when they saw the potential of the market. This shift is helping to drive the channel’s growth, says Gary Siegle, regional manager, Prairies, for Mississauga, Ont.-based Invis Inc. , one of the largest mortgage brokerages in Canada: “With lenders paying brokers, clients can now access a wider variety of mortgage products with no extra cost to them.”
With the channel’s growth has come tighter supervision in most provinces. Indeed, up until the mid-’90s, almost anyone could become a mortgage broker. “There were no minimum requirements for education or licensing, you didn’t need a high-school diploma,” Siegle says. “But as the field exploded early in the millennium, that began to change.”
By the early 2000s, most provinces had began requiring mortgage brokers to take an exam administered through a provincial regulator, such as the Financial Services Commission of Ontario. To become provincially licensed in Ontario, a candidate must complete the mortgage broker education program, provided by Seneca College of Applied Arts and Technology, and, within three years, apply for a mortgage broker licence. Other provinces, such as Manitoba and Saskatchewan, have similar systems, although they use CAAMP to administer their programs. Specific requirements differ across the country, but the Maritimes is the only region in which mortgage brokers can still operate without a licence.
There are now 15,000 licensed mortgage brokers in Canada. In 2004, CAAMP (which was formed in 1994) launched its accredited mortgage professional designation program, which builds on the basic training required by provincial bodies: about one-quarter of licensed mortgage brokers now hold this designation.
“At first, it was a designation designed to enhance a broker’s professionalism,” says Siegle. Now, he says, it’s considered the gold standard in several provinces. The AMP requires that mortgage brokers be a CAAMP member, meet provincial requirements for licensing and take the CAAMP mortgage practice standards course. The designation also requires errors-and-omissions insurance. If brokers have less than two years’ experience, they must also complete CAAMP’s fundamental mortgage principles program, an overview that covers basic areas, including fraud avoidance.
The convenience factor offered by mortgage brokers is also a plus, says Galaski: “People are working late hours and would prefer to deal with a lender at their kitchen table rather than trekking out to see someone at a branch.” IE
Mortgage brokers come of age
- By: Olivia Glauberzon
- August 2, 2011 October 30, 2019
- 09:51