Hey everyone! I hope you’re all enjoying the longer days and warmer weather, and as always I apologize for falling behind in these blog posts. I’ve been busy getting ready for the Spring Housing Market, but I just wanted to bring you all up to date on what’s going on in the Canadian mortgage world. Here goes:
For those of who you who might not have heard, there was confirmation a couple weeks ago that BC mortgage brokers will soon have to publicly disclose more information about how they get paid. This comes courtesy of Carolyn Rogers, Registrar of Mortgage Brokers and CEO of FICOM (BC’s Financial Institutions Commission), who said in an email to the media that her office “is proceeding with plans to implement improved disclosure measures for mortgage brokers in British Columbia.” Though the details of this implementation are still “underway,” the gist of it is that FICOM believes their plan will “[make] consumers aware of any potential conflicts of interest that may arise” (that’s in the words of Paul Taylor, CEO of Mortgage Professionals Canada).
And here’s the thing: improved disclosure measures for mortgage brokers sounds like a great idea in theory. In fact, I’ve written several articles about how I get paid for the sole purpose of clarifying the mortgage broker business model. It’s really not a complicated system at all, and let me sum it up right here in the simplest way possible: “99% of the time, the lender we send the deal to pays us directly.” For the majority of people making use of brokers, they get their perfect mortgage at no personal cost. The fact that that sounds too good to be true is exactly why BC consumers might be in favour of fuller disclosure from their mortgage brokers, and it’s hard to blame them for that.
So here’s the problem, as phrased by Canadian Mortgage Trends:
“Brokers from B.C. and across Canada… contend that the amount of money a broker earns on a deal is of little value to consumers without consumer education or context, and actually confuses some consumers into choosing higher-cost financing.”
That might seem counter intuitive, but to understand it you have to remember that the alternative to using a mortgage broker is going to one of the Big 6 Banks, and that these new full disclosure requirements do not apply to bank personnel. What that means is that a mortgage offered by a Big Bank might look more lucrative to a consumer than a better mortgage offered by a broker, simply because the broker’s commission disclosure skews the perception of both deals. Even RBC admits that this move is “directionally positive for banks”, and I don’t think I have to remind anyone how the banks don’t have your best interests at heart.
I’m not trying to say that consumers shouldn’t be aware of exactly how mortgage brokers make money – on the contrary, I want everyone to know that! But limiting disclosure to independent brokers, and having that disclosure be divorced from in-depth context and knowledge of the mortgage industry, is bad for Canadian consumers in the long run. But since these regulations are in the process of being implemented, it’s my duty to provide that context and knowledge, so that as many people can get their perfect mortgage as possible – be it through me, another broker, or even one of the Big Banks. To that end, here again are the links to my previous articles on how mortgage brokers get paid, and here again is my phone number that you can call at any time: (250) 782-9665. If you have any concerns or worries about how I get paid, or really any questions about mortgages in general, I urge you to give me a call and have those concerns put to rest.
As a final word on the subject, remember that mortgage brokers exist solely to make the mortgage process less painful for consumers. If we made things more difficult, or if we had a net negative result on your mortgage, we wouldn’t have our jobs.
Just something to think about as you’re checking out the Spring Housing Market!
Lori Lalonde, Your Northern BC Mortgage Broker