A question for the brokers

[PHF]

A question to all you brokers.
Where a client has made a few botched loan applications and has a number of recent credit enquiries on their record, does this make your job harder, ie is it then more difficult to secure that client a loan?

If so, do you then charge an upfront fee to that client?

I'm thinking if you did, the general public might be more inclined to use a broker in the first place, and get the loan application right the first time around. It seems a lot of borrowers seem to go it alone in their finance application and only use brokers as a last resort. I'm sure a good broker is much more useful if the borrower hasn't already screwed their credit record.

The other benefit to such an upfront fee is that you might at least cover some of your costs on those loan application where there is little chance of success.

Just a thought..... I'd be interested to hear what brokers have to say about this.

 

[alexlee]

If it's the type of client who wouldn't use a broker for free, why would they be willing to pay an upfront fee?

 

[PHF]

Hi Alex,

the viability of the idea hinges on the first question - is it harder to have a loan approved if the client has burnt their credit record with a few recent knock backs from the banks?


So...the type of borrower I am talking about is the client who has been knocked back by a few banks and has now decided they need professional help.
They didn't use a broker in the beginning because they thought Barbara from the bank would lend them the money without any problems.


I am not suggesting an upfront fee for everyone that uses your services, just for those clients that see brokers as a last resort, and have reduced the chance of a succesful loan application by damaging their credit record.

You could refund the fee if their loan got approved?

The idea behind the fee is to cover your costs on the loan applications that have a marginal rate of success, due to the client burning their credit rating.
It might also serve as an incentive for borrowers to use a broker in the first place, thus avoiding the fee altogether, and giving the borrower a greater chance of having the loan approved.


Just an idea

 

[Rolf Latham]

heheh

thats a fun one

Until recently, some state laws prevented charging upfront fee for servce unless it was directly connected with obtaining a FORMAL approval.

Sooooooo, one spends 8 hours working out a scenario, trials it, BDMs it etc. goes back to client, explains it in detail , provides full disclosure of what why where and how...................................

Then some will try it on with their own banker or a rebate style broker to save some rate or get some dollars back.

Thats why in some cases one MUST charge an up front fee and have claw back provisions in place.


ta
rolf

 

[bcoombs]

This is an interesting question and because of the banks, mfaa, asic and the general public's attitude one that will be more relevant in the near future.

Firstly the MFAA has done a rather pathetic lazy job of promoting brokers. Yes people used to use brokers when they couldn't get finance from their existing bank or we had better rates. Then everybody into property would recommend a broker they new who did the job. Every client would walk into the office stating 'get me the money'.

Times have changed and are about to get a lot worse. Our commissions have eroded and our service level from the banks has diminished. Not only that but the workload required has gone up. Non of this has been addressed.

My fear is that we will have to start charging a fee, largely for the same product someone can get walking into a branch. Sure brokers do more than just get a client finance. There are many issues we address due to different circumstances. But will people pay for it?

The financial planning industry is going through the same issues. No upfronts and at the same time large groups advertising on tv "sms us your age and sex" and we will send you a life insurance quote. Wheres the advice?

In relation to banks and commission cuts, where was this passed onto the client? Banks are constantly stating that cost of money is rising, while recording higher profits.

If fee for service is a forced hand, our industry should be demanding "wholesale" only bank products. Discounted rates than over the counter rates. Otherwise don't sell them.

 

[Spectre]

Theres more brokers charging fees all the time. No reason not to in a hell of a lot of situations. IMO the days of brokers running a free service is limited.

Theres brokers (for example) who charge a flat .65% upfront, if bank pays .60 then client makes up the extra .15. If bank pays .77% upfront (for example not that it happens) clients get rebated the .12%

 

[HLE]

Our services are free for most customers. However we do charge in some situations:

• A customer lies on their application. Just wastes everyones time!
• If a customer is using other brokers / lenders at the same time as using us.
• If a customer has impaired credit, but does not inform us. If they are unsure we do a free credit check.
• If the loan is repaid in the first 18 months (24 months with some lenders) we will ask for the customer to pay any clawback charged to us by the lender.

Professional mortgage brokers should not work for free. In particular clawback is unfair on mortgage brokers and I believe in time all mortgage brokers will require customers reimburse them for this.

 

[Evachange]

Nothing in life is really "free" someone somewhere pays for it..

 

[dl2276]

Just curious...

For a broker that does charge an upfront fee, then is the perception/assumption from the borrower that they will be 'guaranteed' a successful loan ?

The broker I use doesn't charge a fee so just interested to get some feedback on how a customer would view it. For example, borrower has been turned down for applications made directly with a lender, so they just pay a broker a fee in the full expectation that because they paid the fee then they will get a loan successfully.

 

[Qlds007]

We dont charge fees on residential loans so difficult to comment from that side of the fence but in many cases i know of Brokers who do and their arguement would be to compensate for the time spent on the deal.

You would pay a Solicitor something for his time even if you didnt proceed to Settlement so they same could be argued.

I think the non conforming area is certainly one where an upfront fee could be justified.