“What you do matters, but why you do it matters so much more.”
Let me preface the next 1,308 words by clearly stating that indeed there are many degrees of uncertainty within any profession. In no way I am suggesting Residential Mortgage Brokers are a special case with an extra rough go-of-it.
All professions have concerns about their livelihood being hurt by a new competitor, new product, government regulations, technological advance… the list goes on. And on. As we know, ‘if it were simple then everybody would be doing it’.
Among these usual concerns related to getting the business in the door, Residential Mortgage Brokering, some would argue, has a unique challenge.
Mortgage Brokers in British Columbia are unable to charge advance fees. This is not an unreasonable limitation, but it is a bit more difficult to accept that there is also a limitation on charging fees for work which has arguably been 99.9% completed, instructed, and ready to fund.
Ninety-nine point nine percent of the way is still considered ‘in advance’. That is, a complete mortgage approval has been produced, underwritten, approved, documented, all conditions met, instructed to a lawyer’s office for signing… but until the mortgage is registered and funded there is no ability to collect a penny of compensation from the client.
Do clients walk away from fully committed mortgage approvals, which Brokers, Lenders, Realtors, Appraisers, and Lawyers have all put time into? Yes, it happens. A key distinction in that scenario is that of these five professionals, all but the Residential Mortgage Broker have recourse to collect compensation for their time and expenses.
Mortgage Brokers are expected to complete their entire task, often investing hundreds of dollars, several hours — sometimes dozens of hours over a period of weeks or months — into a complicated file, with no ability to form a binding contractual guarantee of compensation. There is an element of risk throughout the entire process.
Admittedly, it is not without good reason that Residential Mortgage Brokers are limited from charging what would amount to advance fees, or fees prior to a mortgage being funded. One need look no further than the film American Hustle to see a demonstration of the predatory potential for fraud and misrepresentation. (An excellent film, worth the time).
The case against having Mortgage Brokers collecting advance fees is an undeniably strong one as it opens a Pandora’s box of regulatory red tape and required policing if allowed. There would be grey areas, rather than the current clear-cut, black-and-white regulations.
At the risk of sounding like a delusional special snowflake who has it tougher than other professionals, I will acknowledge that although the difficulties we face may seem unique, every industry has its own unique and equally frustrating challenges. We are not so special.
Arguably, it does take a special individual to deal with what can be at times tremendous waves of rejection which inevitably take some degree of emotional toll on all but the coldest of us.
As important as underwriting skills, application-taking skills, nunchuk skills, and bow-staff skills, is the very special ability to put on a happy face every moment of every 12-, 14-, or even 16-hour day.
Why yes, Everything is always Awesome! Thanks for asking.
The income challenge in our specific trade, compared to other financial services, is compounded by the fact that there is little in the way of annual trailer fees or renewal fees, at least not when placing clients with credit unions, chartered banks or the majority of non-bank lenders.
This risks creating an (unfortunate) ‘eat what you kill’ mentality, rather than that of a farmer nurturing their crop of content clients. Retention statistics demonstrate that what the typical Broker harvests 3-5 years later from those initial seeds is quite poor: 70% of clients renew with their current lender, and in many cases do so with the pro-bono assistance of the original Broker. Such assistance almost always generates a referral, and is thus time well spent.
However, there is still a dichotomy of sorts wherein the talented Broker must have an aggressive ‘Go-Get-’Em’ side, as well as a refined, unflappable, amazingly tolerant side. This combination is not simple to find nor to cultivate.
The pressure to perform with a client starts from the first phone call, and extends at least until the completion date. Unlike a Realtor whose compensation is more or less guaranteed once subjects are removed on a purchase transaction, a Mortgage Broker still risks zero compensation for that often highly intense week or more of work on a file leading up to the subject removal date. We remain exposed to zero compensation until the date of completion arrives. It’s not easy to stay in tune and on top of every detail for anywhere up to six months between subject removal and completion.
There is significant pressure on a Mortgage Broker to perform in a timely and professional fashion. This in itself is not special, and the majority of us rise to this challenge 99% of the time, despite there being no true guarantee of compensation. It is all ‘maybe-money’.
An 80-hour workweek with not one dollar of income to show for it can make it exceedingly challenging to show up for work the following Monday morning with a smiling face and the energy for another 14-hour day.
Yet the majority of us do so.
Are we all just gamblers doubling down and rolling the dice for a bigger win next week in the face of a loss this week?
Rare is the Broker who at some point has not questioned their own sanity in the face of a string of collapsing files.
Perhaps it is the potential of a big payday when several files close at once that carries us through the long dry weeks of no pay at all. This would be only a short-term view though, as money is rarely the root motivator. This is well documented in a great You Tube video titled Drive: The surprising truth about what motivates us.
How does one remain positive and upbeat in the face of this challenging compensation system?
Simply put, because there is no other option but optimism. Is the (regulatory) system likely to change? No. Advance fees, fees billable at subject removal, fees billable at ‘File Complete’ status with lenders, are in my opinion all wishful thinking.
Such a system would be too complicated to police and to regulate effectively and too laden with potential for fraud, which risks giving the entire industry a black eye. After the thousands upon thousands of hours the industry has spent educating consumers in order to elevate their understanding of, and respect for, what Mortgage Brokers do, would it be worth it?
The energy spent wishing for another way is perhaps better spent focusing on taking the high road with that client leaving you in the eleventh hour. Step aside graciously and offer continued support with an annual review moving forward. You will not regret it, nor will the client.
Thus the Residential Mortgage Broker must, in my view, be a hard-wired eternal optimist. And for any of those who attend MBABC, CAAMP, and the variety of other forums and events, this air of optimism tends to shine through over and over again whenever conversing with top-producing Brokers.
Never. Give. Up.
A mantra for all.
It is a love of helping people, of doing quality work, and of working within a circle of other optimistic professionals with a shared mutual respect that binds us to our chosen profession. In this we are also quite similar to all other professionals.
These positive attributes keep us coming back each day with a smile, no matter how daunting the challenges ahead, no matter how challenging the week behind.
Today I work with people I like and respect at a profession that I love.
Tomorrow I am compensated… maybe.
And this is A-OK.
This is Brokering!