Responding to a story published on REP sister website MortgageBrokerNews.ca, one industry player argues agents could “split” the fees they collect from sending a customer to a bank with the actual client, creating a win-win for all parties involved.
“I think it could catch it on,” agent Dick Brady in Cobourg, Ont., told REP. “You definitely need to inform your client that you’re getting (a referral fee).”
Indeed, disclosure is not only key to these programs; it’s also required under law in provinces such as Ontario. Agents must provide at least three sources when recommending services for clients, and must inform those clients that they’re getting a kickback, whether cash or reward points.
Disclosure issues aside, some agents are pointing to their relationships with mortgage brokers, which could be put at risk.
“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,” says Ira Jelinek, an agent in Toronto. “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.”
Discussions around referral fees have been renewed after an email from a National Bank mortgage specialist promising commissions for agents who bring referrals directly to a branch was released.
That National Bank employee refused to comment on the referral program.
“I can’t speak on behalf of the bank,” Helen Prasad, mortgage development manager for National Bank told MortgageBrokerNews.ca. “The information you received was for Realtors that were in some way in my database through business or through other means but to find out any more details you’d have to contact National Bank; as you know at a bank we are not at liberty to talk about bank policies unless it’s with our contacts.”
The original email, obtained by MortgageBrokerNews.ca contained information on how the referral system works:
• Meeting is set with the client at the location of their choice
• The client’s file is processed quickly, Realtor is advised of status
• The file is followed up until the funds are disbursed
• Referral Commission is sent to the real estate office after closing
“I don’t like it and I don’t think any brokers will,” Mark Fidgett of Verico NotaPennyDown told REP sister site MortgageBrokerNews.ca. “I think it’s going to drive a lot of brokers to really think about who they are supporting.”
Real estate agents are suggesting a bank’s referral fees could be a value-add for clients and themselves, but the very idea has mortgage brokers up in arms.