Unsurprisingly, mortgage brokers were the first to broach the topic, accusing agents who accept referral fees from the banks of do so without revealing the practice to their clients.
A former top-producer at one of Canada’s largest banks and current Toronto-based mortgage broker spoke with REP sister site, MortgageBrokerNews.ca on condition of anonymity and revealed a number of controversial practices that were rampant when he was a bank road rep.
“The bank pays Realtors 50 basis points to send deals to road reps but in 99 per cent of cases the Realtors are not disclosing this to their clients and in over 80 per cent of deals the rates and products are far worse than that in the broker channel,” the broker told MortgageBrokerNews.ca. “Also all mortgages are collateral charges and the road reps do not disclose this in the mortgage commitments.”
Canadian mortgage brokers have increasingly complained about the monetary incentives banks offer agents referring clients for mortgages. However, sales reps on the ground argue that claim is hardly common practice.
“It’s not about if they work for a bank or a mortgage brokerage,” says Ira Jelinek, an agent in Toronto. “It’s more about the relationship I have with them. If I think they can do a good job for a prospective client, then I will give them the business, regardless of whether they work for RBC or Monster Mortgage.”
Jelinek says he and many of his colleagues don’t collect fees from banks, instead choosing to focus on the mutually beneficial nature of these relationships.
“I just prefer to do it in more of a way that isn’t contractual and where I give in good faith and I get back in good faith,” he says. “When a client is looking (for a home), the first thing they need to get in order is their finances, so we need to have relationships with mortgage brokers. And sometimes vice versa, if (prospective buyers) go into a mortgage brokerage first, they need representation. It’s a mutually beneficial relationship.”
Agents are fending off allegations that accepting bank referral fees undermines the industry and harms clients.