Mortgage Brokers Gain Respect.
Professionalism, low interest rates have won confidence of home-owning public.

Tony Humble
Your Mortgage
Financial Post

You've probably heard the joke about the accountant who "ran off with the accounts payable." Ironically, when it comes to obtaining a mortgage, Canadian homeowners still seem to fear just that.

During my seven years in the mortgage brokerage industry, I constantly was dumbfounded by the reluctance of average Canadians to borrow from a lender that wasn't a household name, although its rates were significantly below those posted by the big banks.

Those who were willing to take the leap of faith and borrow from a no-name lender usually obtained a better rate or a more creative mortgage product -- or both.

The normal way to access these "no-name" lenders is through a mortgage broker. However, these middlemen have been notoriously reticent about promoting their services despite the fact that other institutions are able to offer mortgages at cut rates, and are lenders that are household names.

However, "no-name" lenders now seem poised to blow their trumpets. About four years ago, the Canadian Institute of Mortgage Brokers and Lenders (CIMBL) was formed, bringing together all provincial mortgage broker associations and producing a single set of guidelines for conduct. This gave consumers a place to go to obtain information about the industry and to find out with whom they could deal in their area.

Each year CIMBL grows in both size and stature, as most financial institutions -- and a majority of mortgage brokers -- have become members. CIMBL executive director Michael Ellenzweig says the organization "is now a force to be reckoned with . . . . We have 1,250 members across Canada, and truly represent this growing industry throughout the country."

A particularly active member of CIMBL in Quebec is Multi-Prets Hypotheque. With four offices and 125 brokers, the brokerage firm expects to arrange mortgage financing totalling $700-million in the next year. That's about 1% of the Canadian total.

"We work with 28 lending institutions to bring the best deals and terms available in the marketplace to our customers: very low rates, long closing rate guarantees, cash-backs etc., all with a level of service that banks simply can't touch," says Pierre Martel, vice-president of Multi-Prets.

It's no wonder the banks -- albeit with some notable exceptions -- are beginning to jump on the bandwagon and offer cut-rate deals through brokers.

Karl Straky, president of Jordan Mortgage Services of Windsor, Ont., has a similar story to tell. He funds a quarter of a billion dollars annually in mostly prime (top quality, qualifying) residential mortgages annually through 24 agents. That's a stunning $10-million in mortgages per agent. These are the kind of numbers that most financial institutions can only look at and sigh.

"A mortgage broker is in most cases an ex-lender [with a bank or trust company] . . . and is in an ideal position to negotiate the best deal on behalf of the customer,"Mr. Straky says.

They are in a position to select "the most appropriate product for the customer from many pre-negotiated discounted deals with multiple financial institutions." That makes them a sort of mortgage Price Club compared to the limited offerings of a corner store.

In Calgary, Executive Mortgage Masters in Calgary sells directly to the public via advertising and the Internet rather than through real-estate agents.

"More recently mortgage brokers have evolved into full-service mortgage professionals [who] sort through the products, advise on credit issues, help organize income verification for self-employed customers, and many more professional functions," says John Reid, a broker with the firm.

"Most of our agents have many years of financial institution experience, but get the business in the door through the kind of exceptional service that their previous employers cannot match." says Kevin Clark, president of Complete Mortgage Services, a Vancouver-based mortgage brokerage with about $400-million in annual mortgage business. This is doubtless due to the fact mortgage brokers get paid for results, rather than collecting a salary.

Across the country, mortgage brokers seem to have realized that, to bring substance and credibility to their offers of low rates, they had to view themselves as mortgage professionals -- and demonstrate their abilities to consumers. CIMBL has helped this process, but the clincher has been brokers' ability to show they can be more professional than their bank counterparts.

The new approach is taking hold, as evidenced by the rapidly growing proportion of mortgages arranged by brokers. CIMBL 's Mr. Ellenzweig says one in five mortgages will be handled by a mortgage broker this year -- "and we have an opportunity to double that number over the next five years".

In the United States, where the mortgage market is extremely efficient, he says mortgage brokers command almost two-thirds of new mortgage business.

The next time you're in the market for a mortgage and see a great advertised rate a whole percentage point below what your bank is offering, don't automatically assume that there's a catch.

If you're worried about the nature of the deal -- or have no knowledge of the broker offering it -- call CIMBL at (416) 385-2333. Every dollar you save on your non-deductible mortgage interest is an after-tax dollar, which as much as doubles the true pre-tax saving.