Question for Mortgage brokers
- Thread starter belleran
- Start date
Almost all lenders have a 'clawback' period. If your loan is paid off (either you pay it down or refinance) within the first 2 years, the lender will take back some or all of the upfront commission paid. It's common place and has been in the industry for as long as I can remember.
Some brokers attempt to recover their income by charging it back to the borrower. It's a fair argument, if a broker does the work, they should expect to be paid.
Brokers who do charge clawback fees argue that a clawback is out of their control. In some cases that's a fair argument, the broker can't control the borrowers actions if they decide to sell. In many cases however I disagree. Doing the job well and having a good client relationship can substantially reduce the chances of a clawback.
I had 2 clawbacks in the 2013 calendar year (out of a few hundred loans written). Both of them were anticipated right from the start but I chose to write the loan because I valued the client relationship more than the money.
Every business has room for improvement, but if a broker is constantly suffering clawbacks, they've got a lot of improving to do.
Some brokers attempt to recover their income by charging it back to the borrower. It's a fair argument, if a broker does the work, they should expect to be paid.
Brokers who do charge clawback fees argue that a clawback is out of their control. In some cases that's a fair argument, the broker can't control the borrowers actions if they decide to sell. In many cases however I disagree. Doing the job well and having a good client relationship can substantially reduce the chances of a clawback.
I had 2 clawbacks in the 2013 calendar year (out of a few hundred loans written). Both of them were anticipated right from the start but I chose to write the loan because I valued the client relationship more than the money.
Every business has room for improvement, but if a broker is constantly suffering clawbacks, they've got a lot of improving to do.
Many brokers have had this in their contracts for a long time and the trend is more seem to be adding it. The reason is banks have clawback in the contracts with brokers which means in the first 2 years (some lenders 18 months) the broker has to pay back 50% to 100% of the upfront commission the lender has paid to us if the loan is paid out. There is no directive or pressure from banks to do this it is up to each individual broker.
From the brokers point of view they can spend between 12 to 16 hours per loan application and in 2 years time have their payment taken back which seems unfair compared to other industries. Personally the level of clawback is very low and generally due to a sale of a property which the customer turns around and buys another.
Are you planning on selling or refinancing the loan within 2 years? If it is a once off relationship with that broker and they knew this i would imagine they would not do the loan. If it is an ongoing relationship with multiple loans over the year they would most likely do it.