HOME FINANCING: Misinformation abounds about the role of the mortgage broker

Jared Dreyer has handled some tough challenges during his 14 years as a mortgage broker. The senior mortgage consultant at Invis in Langley has sniffed out the lowest mortgage rates at times rates have jumped around like yo-yos.

Dreyer, 34, has helped first-time buyers navigate the intricacies of prepayment and penalties. He has lined up lenders for the kind of high-risk clients that traditional lenders would have shunned.

But Dreyer has failed at one basic, if Herculean, task: He has been unable to make everyone grasp what a mortgage broker does.

"The mortgage broker is understood but it's definitely not at the level it should be," Dreyer said. "There's still a lot of misinformation out there."

Research shows that a large number of consumers turn to brokers to find the best mortgage deal but that large chunks of the population still don't understand the role brokers play. About 26 per cent of mortgages in Canada are arranged through mortgage brokers, according to the Canadian Institute of Mortgage Brokers and Lenders. That's up from about 14 per cent in 1999.

Consumer attitudes towards mortgage brokers have improved since 2001, Canada Mortgage and Housing Corp. said in another study released last month. Fifty-one per cent of consumers say brokers offer a valuable service when arranging a mortgage, up from 37 per cent in 2001.

But lots of consumers remain in a state of semi-darkness when it comes to brokers.

"Consumers are still uncertain about whom brokers really work for, with 32 per cent of the view they work for lenders and 36 per cent thinking they work on behalf of consumers," CIMBL said.

Mortgage brokers function as middlemen between home buyer and lender. They match borrowers with bankers by identifying mortgages that best suit the needs of their consumer clients. Brokers appeal to many buyers because of their track record at arranging mortgages at rates lower than those posted by the banks and they are paid by the lender.

The payment ranges from a flat fee to a percentage of the value of the mortgage. Borrowers, however, may have to pay fees if their broker is arranging a high-risk mortgage.

Lenders see brokers as vehicles that bring them more business, said Mark Webb, a senior director with CIMBL. Lenders only pay a broker if they accept a mortgage. That lets them boost their mortgage volume without having to build more branches, he said.

Over the past five years, a broker's role has evolved beyond that of rate-chaser, Dreyer said. The growing complexity of mortgage products has added a financial advisory dimension to a broker's job, he said.

These days, more than ever, it's essential to get a handle on a client's financial situation, from credit history to employment, to present them with appropriate mortgage options.

"One of the things people in the industry are saying is that if you're just going to sell rate, you're going to have a problem," Webb said. "With all the competition, you can go to more than one person who will give you a good rate."

Since 2002, brokers have increased their market penetration among first-time buyers to 32 per cent from 22 per cent, CMHC said.

But they're losing ground among those renewing a mortgage. Broker usage by renewers has fallen to six per cent from 11 per cent in 2002. Renewers, according to CIMBL research, show a high degree of loyalty to their current lender.

For front-line brokers like Dreyer, this requires ongoing professional development to add value to their service. Dreyer recently qualified as an Accredited Mortgage Professional under a program launched by CIMBL.

It also means working harder to retain clients and to trigger the word of mouth that draws new business."You have to focus long term," he said. "If you look out for customer and they're happy, then at the end of the day they'll refer friends and family."