Do we have to pay a Mortgage Broker due to refund of commission?

[SoLittleTime]

Hi everyone, We recently moved our loan else where and were told by the mortgage broker that he had to refund his commission because we didn't stay on for a certain duration.

Our current term loan ended and we managed to get another bank with better rates so we moved it. I'm wondering what will happen next? Do we have to compensate him? Will all of his commission be taken away or is it pro-rated?

Any advice or comments are welcome. Cheers.

[BusyLizzy]

What does your contract or other paperwork say?

[steven anderson]

The payment of commission is a matter between the broker and the lender, as a result of a sales agreeent. I would be surprised if there was anything being owed by you.

Probably what the broker is referring to is "claw back" of the commission as you have not kept the loan with lender for long enough for them to receive their full payment. More than likely it will be pro-rated.

I'm surprised your broker could not get you a better deal to protect his/her commission "trail".

[[email protected]]

Brokers problem unless you signed something weird, definitely not your concern. Broker should have done his job properly :-)

[drelly]

This happens in insurance all the time. It's part of the job. I expect it's the same with mortgage brokers.

[MoatMaster]

Unless as Dean mentioned, unless you signed some weird agreement (not industry standard) then definitely not! Even if you did sign an unusual agreement, I would be very surprised if it would stand up. Industry is now focussed on total disclosure...that's good thing...sorts out the riff raff
Majority of brokers are order takers only - a select few take the time and care to find out what you need - so if they had done their job properly you would have gone to them.
Short answer - his commission is his problem

[SoLittleTime]

We didn't sign anything weird (i hope)

Not to our recollection did we sign any document that seems off. Unless there are fine prints within those loan documents.... going to take a closer look (just in case).

Thank you all, will update this thread if there are more development. Meanwhile, we shall wait...

[MoatMaster]

no there won't be anything in the loan docs as they are from the lender so no problem let that broker cry on his own shoulder

[speights boy]

Good on you SLT.

You got a better rate on renewal by doing it yourself.

Was it with a bank that the broker never quoted you (ie one that didn't pay broker commission) ?

He / she is just having a bleat. Ignore.

cheers
SB

[Jurgs]

Many brokers, including myself, have a provision for clawback in the Authority and Declaration document you sign as part of your application form. This is a legal document and allows a broker to interact with a bank on a clients behalf, so I dont see why the provision for clawback wouldn't stand up. However it must be disclosed, and I have always clarified this point with my clients, and they always fully understand the implications. If I have done my job well, they will discuss with me any pending move, and there will be no surprises for anyone. So not generally an issue.

As of 2 weeks ago I have left the broking industry for an IT sales role, partly because I was offered a great opportunity, and mostly because the broker game has been devalued and depowered so significantly that it is extremely difficult to grow and maintain a functioning business in this environment.

For too long brokers marketed themselves as free, which a) implies no value, hence clients treat them as many of you describe above, and b) allows their suppliers (banks), to control their remuneration, which they done in a reducing fashion for several years now.

Trail almost no longer exists, and brokers have had to become more transaction focussed than relationship based in order to survive.

It has been a great ride for many years, and having known many of the brokers in the NZ market, over a long period of time, more than half are top notch, honest, ethical operators who provide far better advice than the average banker and are completely undeserving of the dismissive 'catch all' comments frequently posted here.

Unfortunately though, many arent up to the mark, and that has contributed to the some of the difficulties facing the industry today. I hope regulation has the desired effect and continues to clean up the industry, and that trail commissions return, so that good brokers can go back to forming long term sustainable relationships with their clients.

[speights boy]

Excellent post Jurgs.

cheers
SB

[brokerman]

I second that! Having been in broking for nearly 20 years this is the toughest environment I've encountered. It is certainly weeding out the chaff and even really good brokers are getting out in droves, which is a shame. Consumers are much better served by an independent broker network than individual Banks.

The 'free' part of the promotion has always amazed me, (I moved to NZ in 2006) totally agree with poster in that it devalues the broker and so the client has no perception of the worth of the service.

As far as clawback is concerned I've probably had two or three over the years so not a big deal, again as had been said insurance brokers have it all the time.

Having said that if I arranged a loan for a client and setup up a review in X months and then the client went away without saying anything causing a clawback I'd be pretty pissed off. There in no difference in this than having your car fixed or house painted and refusing to pay.

Don't sweat it I guess but don't be surprised if that broker didn't want to act for you again

[Rolf]

While I can understand that brokers may loose their commission now and then I'd say if they have nothing in writing then don't pay anything.

I've had this happen to me too, by a well known broker. Same story, I sold the house and paid back the loan after only a few months, and suddenly they wanted me to pay for their commission - without having anything in writing to back it up. Even more astounding was the fact that this was a lease option where the TB bought the house, and I approached the broker specifically regarding lease option finance - so they shouldn't really be surprised that the house was sold, that's how a LO works after all...

I told them I would not pay and they accepted after a string of emails back and forth. Because they backed down I haven't named them publicly, otherwise I definitely would.
Very amateurish I thought and I have deliberately not used them since - loose a commission once or loose a returning customer, it's really their choice.