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Mortgage Broker seeking clawback of commission
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But, surely the terms (amount/duration/method of calculation) are done by the bank, and would change, depending on the actual bank used, the term of the mortgage, the duration up to when the change was made, how much commission was paid by the bank to the broker, etc? The broker can't always know these exactly as many are down to the conditions of the actual mortgage. That is probably why the contract may seem so vague?
There may be some weird maths formula behind it all, but this is more likely set by the bank, than by the broker. They just want to claw back the difference between what they should be paid and what they were actually paid.
It's a complex enough situation, between the bank, broker, OP and then the changing of the mortgage.
The commission and structure thereof is an arrangement between the broker and the bank. If the broker wants to pass this on then the parameters by which this would be passed on should in my opinion be fully disclosed to the customer.
It was not in the conditions of the now redeemed loan agreement with the bank. Not sure why you think it would be.0 -
The commission and structure thereof is an arrangement between the broker and the bank.
It was not in the conditions of the now redeemed loan agreement with the bank. Not sure why you think it would be.
I never said it would be. But, the commission and structure would impact on the amount paid to the broker, and then also the amount they need to clawback, as per the contract you signed, when the mortgage was change to another bank.
So, the broker wouldn't have any specific terms in the contract you signed, which is why it seems so general. But, this, in no way, changes the fact that you agreed to pay the clawback fee, and that is why they are chasing now.0 -
I never said it would be. But, the commission and structure would impact on the amount paid to the broker, and then also the amount they need to clawback, as per the contract you signed, when the mortgage was change to another bank.
So, the broker wouldn't have any specific terms in the contract you signed, which is why it seems so general. But, this, in no way, changes the fact that you agreed to pay the clawback fee, and that is why they are chasing now.
I see that point of view but I don't think it's in any way sufficient. I paid for professional advice - that advice amongst other things involved selecting an appropriate product.
I find it odd that professional advice would fall short of disclosing and detailing the full parameters and conditions of that product selected by them and recommended to me and exactly what was to be considered as early redemption for this product.
But it seems many are happy enough to stand behind such sharp practices.0 -
But, surely the terms (amount/duration/method of calculation) are done by the bank, and would change, depending on the actual bank used, the term of the mortgage, the duration up to when the change was made, how much commission was paid by the bank to the broker, etc? The broker can't always know these exactly as many are down to the conditions of the actual mortgage. That is probably why the contract may seem so vague?
There may be some weird maths formula behind it all, but this is more likely set by the bank, than by the broker. They just want to claw back the difference between what they should be paid and what they were actually paid.
It's a complex enough situation, between the bank, broker, OP and then the changing of the mortgage.
I am not aware of how the clawback is calculated, but the commission paid to the broker by the bank has got absolutely nothing to do with the client. The bank remunerate the broker for business and each will have a defined methods of clawback terms for each product.
Whilst a generic 'terms of business' letter was signed by the client at the outset (I would agree that it is impossible to put the exact figures on it at this stage), I would think that an example should be put on at point of sale, and then when the client is approved perhaps forward the exact details?? I would have thought a process like this would be a minimum requirement as it generally mirrors other financial products I.e. Generic at outset...specific at product drawdown.
I personally think that the broker should be entitled to reasonable reimbursement, but if the amount and method of calculation is not specified at outset, I believe it is unfair to the client....it is akin to signing a blank cheque. At the end of the day, the broker is the financial professional and the client is financially 'lay'? It is up to the professional to be more transparent and in this instance I believe it is a bit sloppy on their side.0 -
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Leprechaun77 wrote: »I am not aware of how the clawback is calculated, but the commission paid to the broker by the bank has got absolutely nothing to do with the client. The bank remunerate the broker for business and each will have a defined methods of clawback terms for each product.
Whilst a generic 'terms of business' letter was signed by the client at the outset (I would agree that it is impossible to put the exact figures on it at this stage), I would think that an example should be put on at point of sale, and then when the client is approved perhaps forward the exact details?? I would have thought a process like this would be a minimum requirement as it generally mirrors other financial products I.e. Generic at outset...specific at product drawdown.
I personally think that the broker should be entitled to reasonable reimbursement, but if the amount and method of calculation is not specified at outset, I believe it is unfair to the client....it is akin to signing a blank cheque. At the end of the day, the broker is the financial professional and the client is financially 'lay'? It is up to the professional to be more transparent and in this instance I believe it is a bit sloppy on their side.
The amount and method of calculation cannot be specified at the outset, the op received advice, but obviously the broker does not have the mortgage offer in hand when agreement between the op and the broker is signed. If the op recieves three mortgage offers from different lenders, each one may have different claw back T&c's so a generic "future" timeframe is the best that can be offered. The actual clawback period and amount can only be outlined in the mortgage offer the client chooses.
If the broker is independent, then the op has to assess each mortgage offer on its merits, including penalties for early redemption. The conditions outlined in the offer will refer to the penalties. As in most cases, the op probably considered only the amount and the interest rate, but didn't take due heed of the penalties attached.
The broker is being penalised because the op moved lenders, and the agreement between the broker and the op allows for that penalty to be passed on to the op.0 -
The amount and method of calculation cannot be specified at the outset, the op received advice, but obviously the broker does not have the mortgage offer in hand when agreement between the op and the broker is signed. If the op recieves three mortgage offers from different lenders, each one may have different claw back T&c's so a generic "future" timeframe is the best that can be offered. The actual clawback period and amount can only be outlined in the mortgage offer the client chooses.
If the broker is independent, then the op has to assess each mortgage offer on its merits, including penalties for early redemption. The conditions outlined in the offer will refer to the penalties. As in most cases, the op probably considered only the amount and the interest rate, but didn't take due heed of the penalties attached.
The broker is being penalised because the op moved lenders, and the agreement between the broker and the op allows for that penalty to be passed on to the op.
So when the actual clawback period and amount isn't outlined or disclosed in the mortgage the client chooses then what?
There were no conditions referring to early redemption penalties either in the loan offer.
caveat emptor I presume0 -
I posted earlier in reference to the fact that you had paid your broker a fee, I worked for a banking organisation arranging mortgages for clients, my commission fee depending on if I also arranged the insurances was up to 1% of the mortgage amount.
Did the fee you paid the broker come close to this 1% and if it did I believe he was paid twice for his time and effort.
Clawback of commission was usually on a sliding scale over three years, however your broker may have lost his index linked commission fees on your insurances(if you changed provider for these also) paid on an annual basis to the broker.
The clawback arrangement was between the broker and the bank not the broker and the client, it looks like sharp practice to me that a broker along with charging you for his services tried to prevent you from moving your mortgage provider by passing his clawback arrangement with the bank onto you the client.
The mortgage adviser in the bank is to all intents and purposes a broker, he works for the bank to get them the best deal from you, along the way you get your mortgage the bank gets a lifetime customer and the mortgage adviser got a healthy commission for arranging the mortgage. Has anyone ever been approached by a mortgage adviser in the bank to sign a clawback clause, I doubt it, because clawback is between the broker/adviser and the bank not the client.
As a further point to those people that alluded to the amount of hard work a broker has to do to arrange a mortgage on your behalf, its not that time consuming to fill in the applications for the mortgage, the life insurance or the home insurance, once filled in the are sent to the relevant bank and they then tell you what else they require.
If you know what you are doing you will have prepped your client to have all the paperwork available at time of signing applications.0 -
Fries-With-That wrote: »The mortgage adviser in the bank is to all intents and purposes a broker, he works for the bank to get them the best deal from you
As a further point to those people that alluded to the amount of hard work a broker has to do to arrange a mortgage on your behalf, its not that time consuming to fill in the applications for the mortgage, the life insurance or the home insurance, once filled in the are sent to the relevant bank and they then tell you what else they require.
With all due respect, the adviser in the Bank is NOT a broker. He is effectively an employee/agent of the bank who can only offer products and services from that particular bank. From a processing perspective, he is probably doing the same thing on an individual mortgage, but is certainly not in a position to offer a proper market-wide comparison where a more suitable product may be available. There may be better rates/terms/underwriting available elsewhere in the market, and you would think a broker would have better access to these.
With regard to the initial clawback query (and even leaving out the fee paid), is it fair that a broker can insert a clawback clause to recoup the full/outstanding commission given by the lender? Just because a lender pays 1%, or potentially more, does this accurately and fairly reflect the work put in? If I take out a mortgage for €400k and the broker gets 1%, should I be liable for a figure of remuneration paid by a bank, or else liable for any fee I would have paid for the work on a standalone basis? The previous poster alluded to the fact that there is not that much involved in the process, so just because lenders have lucrative broker remuneration, should the client be put on the line for the full amount to preserve the brokers inflated commission.
I personally believe that if the client is getting a brokers service, they should be informed of the full cost of this service. If the commission is higher than this, a rebate should be given, and if the commission is lower the client should have to top it up. There should be a full transparent disclosure to the client of the magnitude and calculation of any potential clawback.0 -
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Leprechaun77 wrote: »With all due respect, the adviser in the Bank is NOT a broker. He is effectively an employee/agent of the bank who can only offer products and services from that particular bank. From a processing perspective, he is probably doing the same thing on an individual mortgage, but is certainly not in a position to offer a proper market-wide comparison.
You are correct of course. I was merely using the mortgage adviser in the bank as an example of someone that is paid commission on a mortgage and suffers the consequences of claw back arrangements, in a similar way that a broker does.
I smiled reading thisLeprechaun77 wrote: »There may be better rates/terms/underwriting available elsewhere in the market, and you would think a broker would have better access to these.
You would think that a broker would have access to these and offer them to a client, call me cynical if you like I am of the belief that brokers will offer your business to the banking organisation that pays themselves the highest commission.
I am of the opinion that if a broker is arranging something on your behalf with a banking or insurance organisation, and they are being paid by those organisations you as a client should not have to pay them also.0
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