The privacy commissioner has moved her focus from Facebook’s privacy policy issues to Canadian mortgage brokers, as she said yesterday that mortgage brokers still have a ways to go to ensure the privacy of their clients are protected.

Jennifer Stoddart said that the privacy office investigated the case where hundreds of credit reports were stolen by a person impersonating a mortgage broker 2 years ago, and found that the brokers who were investigated have tightened up their security but still have a ways to go.

The main areas of improvement need to be:

With mortgage broker‘s only making up 25-30% of mortgage origination market share, the last thing the industry needs is concerns over the privacy of clients information. Mortgage broker market share is much higher in the UK for example, and was in the US too, before the housing crisis.

RateSupermarket.ca Pledges to Inform Canadians of Mortgage Money Saving Options

TORONTO, March 9, 2010 … RateSupermarket.ca, Canadian consumers’ one-stop-site to quickly and easily compare over 500 mortgage rates from the country’s top providers, is embarking on a campaign to educate Canadians that shopping around for the best mortgage rates at renewal time could save them thousands.

“Mortgage rates are at near all time lows and many Canadians are missing an opportunity to get better rates by staying loyal to their existing mortgage providers,” said Kelvin Mangaroo, Founder, RateSupermarket.ca. “We want to let Canadians know that they have many options when renewing their mortgage and are in a position of power. By comparing lenders and brokers on our site you could easily save thousands.”

A recent poll of 413 Canadians conducted on the RateSupermarket.ca site showed that 50% of consumers renewed their mortgages without shopping around for better rates. This means that half of the surveyed Canadians are likely paying above what they should for their mortgages. A standard Canadian bank posted 5 year fixed rate is currently 5.39%, but the lowest 5 year fixed rate on RateSupermarket.ca is 3.69%. That difference could cost Canadians an extra $3,407.52 a year in mortgage payments (assuming an average home loan of $300,000 paid over 25 years.)

“Even if you’re a savvy negotiator and can get your banks posted rate down 1.00% to 4.39%, you’re still looking at paying an extra $1,368.84 a year by sticking with your existing lender,” added Mangaroo.

Case Study:

Allen
Oakville, Ontario

Back in July, Allen and his wife purchased a house in Oakville when the credit markets were very tight. They secured a mortgage at Prime + 0.70%, which was the best rate they could find at the time. Afterwards, Allen kept a close watch on the 5 year variable mortgage rates on RateSupermarket.ca as he wanted to refinance when rates dropped.

“In January of 2010, mortgages started to enter that prime minus environment that I was waiting for,” said Allen. “As a recent first time homebuyer I did not really know my options so I continued to visit RateSupermarket.ca to watch the rates and educate myself on my options.”

Allen used the website as a resource to answer his questions and further educate himself on mortgage rates. A consultation call with a broker through RateSupermarket.ca empowered Allen with some great negotiating tools and resources. “I explained my refinancing situation to Jim and he was able to give me a lot of interesting facts on what to expect in terms of costs and breakage (penalty) fees in raw numbers. He also asked some good questions about my living situation to determine if it was worth my while to refinance at this point.” added Allen.

In the end, armed with insight from RateSupermarket.ca, Allen re-financed his mortgage and will save thousands over the next few years.

“We want Canadians to know that they always have options when it comes to their mortgage,” added Mangaroo. “Even using a mortgage broker might not be enough to ensure you’re getting the best deal. Different brokers have different relationships with various lenders, and some brokers, due to the large volumes they process, are able to access special rates and products that others can’t get. So it makes sense to not only compare banks against brokers, but the top brokers against other brokers, as we do on RateSupermarket.ca.”

Case Study

Christie
Calgary, Alberta

Christie had been with Royal Bank for over 13 years, her first mortgage was with them and she had many accounts both business and personal.
“I have an excellent credit score. I have a high income and I’ve never missed a payment on anything,” said Christie. “I usually make frequent additional payments to loans, yet when my account manager left and I was designated a new account manager they would not even match mortgage offers from banks I’d never done business with on my mortgage renewal 3 years ago. I was shocked and angry.”

Christie went to RateSupermarket.ca looking for a better deal and compared many rates and options with an approved mortgage broker. The broker found her a better deal with a lower rate and the switch was completed within one week.

“Due to the economic conditions and favourable interest rates I’ve chosen to pay a penalty on my previous mortgage and have switched lenders,” added Christie. “Bottom line – there are better offers and options out there. I should be able to save thousands of dollars and pay off my mortgage a few years sooner. All you have to do is ask. I’d never have thought it would be that simple but it was. Gone are the days of putting on your best suit, hat in hand to the bank manager begging for a loan!”

About RateSupermarket.ca (www.ratesupermarket.ca)

RateSupermarket.ca is an independent, impartial resource that is not affiliated with any mortgage lender or broker. It is the only resource in Canada that allows visitors to compare the whole mortgage market in the country. RateSupermarket.ca also compares insurance products, credit cards and GIC rates.

You’ve been to the open houses, explored various neighbourhoods and perhaps even checked out local schools before settling on the home of your dreams. Now it’s time to negotiate your first mortgage, a process which done right, could save you tens of thousands of dollars.

Today’s low interest rates have made buying that first home easier but it can also breed complacency. Rates will rise eventually so purchasers need to not only find a place they can afford, but ensure that they have negotiated the best mortgage terms possible and educated themselves on the document they are about to sign.

When it comes to mortgages, the first lesson is that not all mortgage lenders are created equal. That become quickly apparent to Naysan and Nahid Hariri, both 28, who are mortgage shopping for a $438,000 home now being built for them in Richmond Hill, Ont. “I found that a couple of institutions were a number of (interest) points higher than others,” he said.

The Hariris also found that the big banks, which tend to have higher posted mortgage rates than smaller financial institutions, were reluctant to lower their rates. “My understanding with banks is that if you have services with them, they tend to work out something better for you.” Because first-timers typically have less money parked with a particular institution, they tend not to have the leverage to demand lower rates.

Read the rest of the article here.

The Real Estate Council of Alberta (RECA) recently recently commissioned Weaver Marketing Research (WMR) to conduct a focus group study in Calgary and Edmonton in June 2009 to learn more about how the mortgage brokerage industry is perceived by consumers, what consumer perceptions and expectations are before and after using a broker, and to what degree mortgage brokerages are complying with the RECA disclosure requirements contained in the Mortgage Broker Disclosure Document.

One focus group in each city was for participants who have used the services of a mortgage broker in the past 12 months, and the second focus group in each city was for participants who intend to use a mortgage broker in the next 12 months. Overall, the results of the research are positive news for Alberta’s mortgage brokerage industry.

For obvious reasons, the responses were different between the two groups as a direct result of one group having already used the services of a mortgage broker. Overall, the individuals who had used a mortgage broker had a positive experience. The group that had not yet used a mortgage broker was more reserved and not as informed as the other group, however they anticipated a positive experience.

In the summary of WMR’s report it states:

“consumer understanding of compensation and relationships in the mortgage brokerage industry varies considerably, depending on the prior real estate experience of the individual and also on their personal level of interest in being informed. Nevertheless, it appears that a majority of consumers go in to the transaction with a reasonably accurate but very high-level sense of what a broker will do for them. It further appears that some more detailed information about industry relationships and compensation is being disseminated to most consumers much of the time; however the format and comprehensiveness of the information is highly inconsistent.”

As each of the focus groups progressed and more information was provided to participants, such as the Mortgage Broker Disclosure Document, participants’ understanding increased and there was a general acceptance of a number of concepts.

The WMR report further states:

“After lengthy group discussion and review of the Mortgage Broker Disclosure document, new learnings evolved that demonstrated the close relationship of the broker to the lender. By the end of the groups therefore, these participants tended to shift more toward the idea that a mortgage broker acted as an intermediary between borrower and lender, all the while maintaining a responsibility to serve the interests of their client. The potential “conflict of interest” presented by this arrangement did not seem to trouble most respondents. They continued to believe they were receiving elevated customer service and obtaining better mortgage rates and terms than they would obtain independently.”

Focus group participants who have previously used the services of a mortgage broker indicated that they had a pre-existing sense of trust with a mortgage broker because in most cases another person of trust had referred them to the broker. While some participants initially focused on the best mortgage rates that the broker could arrange, it became apparent that it was not so much the rate as the overall terms and conditions of the mortgage that is of key importance.

Other findings of the focus groups indicate that:

The findings of the focus groups confirm that consumers have a positive view of the mortgage brokerage industry, that they perceive the broker as working in their best interest at all times, and that they have little concern for broker-lender relationships, types of compensation or regulatory safeguards. However, upon learning more about how brokerages work and the types of relationships brokers might have with clients and with lenders, focus group members became more interested in the information brokers are supposed to provide about potential relationships and compensation.

The final summary of the report comments:

“Group discussions provided some insights in to what consumers are looking for and are willing or interested to receive. It suggests that consumers who currently do not find industry disclosure information to be of value or relevance can be convinced to shift this view, with a bit of information pointing out what they now don’t know. It points to the value of better publicity and communication about the existence and function of RECA and the disclosure regulations, and suggests a mandatory, standardized multi-level approach for satisfying information needs of a broad spectrum of home-buyers.”

I saw an interesting story on a side effect of the credit crunch yesterday. Despite the fact that the article is on the UK market, and the fact that the mortgage market in the UK is much worse shape then Canada, could it be a sign of things to come?

The article stated how some of the UK’s biggest lenders have withdrawn their best deals from the broker channel and are only offering them to customers going direct. The reason behind this is to try and create a bottleneck to slowdown demand for mortgages and control their uptake until the economy stabilizes. As a result, the UK mortgage broker market has seen a 15% decrease in its membership to approximately 26,000 brokers, and the number homebuyers using brokers has halved in the past year (Council of Mortgage Lenders).

The UK mortgage broker market is massive compared to Canada, as almost 3/4 of the £15 billion annual mortgage market are sold through brokers. The FSA has said it won’t step in to alleviate the situation, and a London broker was quoted as saying, “this dual-pricing is to the detriment of brokers but it also to the detriment of consumers, pushing them away from advice and leaving them in danger of not getting the right deal for their circumstances. Brokers have helped the mortgage market move on. No one wants to step back ten years.”

Indeed. Let’s hope the Canadian mortgage market never gets into these sorts of problems.