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National Bank to stop offering mortgages through independent brokers

National Bank says it still plans to fund the same volume of mortgages under a new arrangement.


National Bank of Canada said it will stop offering mortgages through independent brokers as it moves to outsource some of its mortgage business to other lenders.

In an e-mail sent to its network of mortgage brokers on Thursday, National Bank said it would stop accepting mortgage applications through independent brokers starting Dec. 9. Instead, the bank said it planned to fund "white label" mortgages – mortgages sold under a different brand name – through other "third-party" mortgage lenders.

National's first agreement is with Paradigm Quest Inc., which offers mortgages through brokers under the Merix Financial brand and also services and underwrites mortgages for other lenders, including Manulife Bank of Canada.

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"We're not pulling out of the market. What we are doing is changing the operating model," National Bank spokesman Claude Breton said.

The bank said it still plans to fund the same volume of mortgages under the new arrangement.

"It's really a matter of being more efficient, so having the best service for the brokers, the best technology, the best pricing," Mr. Breton said.

The move is part of a broader reorganization at National Bank. The lender has said that it will record a $175-million restructuring charge as part of its fiscal fourth quarter results, which are scheduled to be released Friday. National has said it expects to slash 600 jobs, including 80 positions at a Mississauga operations centre, associated with new changes to its mortgage business.

National chief executive officer Louis Vachon has signalled the bank is also looking to shift more of its mortgage volume online, telling an investors conference in September that web-based mortgage offerings were going to be "as attractive, if not more attractive" to the bank than selling mortgages through independent brokers.

National's move away from working directly with brokers leaves Bank of Nova Scotia and Toronto-Dominion Bank as the only two major lenders still doing large volumes of business through mortgage brokers.

The banking industry has been looking to get out of the brokered-mortgage business in order to cut costs and boost profits by not having to pay broker commissions, along with concerns that it is more difficult to cross-sell other products, such as credit cards and chequing accounts to customers who come to the bank through mortgage brokers. Banks have also found that those clients are more prone to switching lenders when their mortgages come up for renewal.

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Canadian Imperial Bank of Commerce shut down its mortgage broker business in 2013. On Thursday, CIBC executives said moving away from brokers had helped the bank win more loyal customers. "We have much deeper relationships with our mortgage clients today than we did four years ago, when one-third of our business was broker-based," CEO Victor Dodig told a quarterly earnings call.

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