Confirming rumours that have been swirling in the industry for months,BMO has officially announced its plans to return to the mortgage broker channel under the banner BMO BrokerEdgeTM.

BMO’s current launch plan will see it start originating mortgages in the channel by early 2024, potentially as early as January, starting in Ontario and Atlantic Canada. Its expansion across provinces will be gradual, with the goal of being nationwide by late 2025. BMO has also confirmed it will only start working with select brokers by invitation only.

The decision marks a significant change in direction since BMO left the channel in 2007 and is part of the bank’s new strategy of reaching clients in the mortgage channel of their choice.

“At the end of the day, our goal is to be where our clients are and we want to be able to offer them our services and products when and where they want it,” Hassan Pirnia, Head, Home Financing and Personal Lending Products at BMO told CMT in an interview prior to the bank’s official announcement. 

“And now, with over 40% of Canadians using mortgage brokers to arrange their mortgages, this was just a natural extension to our multi-channel strategy,” Pirnia added.

BMO also confirmed that its new distribution channel will be led by Justin Scully, currently Regional President, BMO Personal Banking, Atlantic, who will be assuming his new role as Head, BMO BrokerEdgeTM. Scully brings with him 15 years of banking experience split between commercial and personal lending.

Adding that more than half of first-time homebuyers now use a mortgage broker, Scully said “the consumer is telling us that this is an important channel and that there’s real value for them through dealing with the broker.”

“The fact that we’re responding to consumer preference by entering this channel and we’re doing so in a measured, thoughtful way, I think is really, really exciting,” Scully told CMT. “And I think there’s an opportunity for us to provide tremendous value not only to customers, but also in terms of broker experience.”

And elaborating on the bank’s decision to work with brokers on an invitation-only basis, Pirnia said it comes down to the bank wanting to focus on high-quality deals and establish long-lasting partnerships with the brokers it chooses to work with.

“The brokers who we want to be part of our network, they will be reached out to proactively,” Pirnia said. “We want a partner in this process. We don’t want to be in a transactional business. We want to deepen the relationship, not only with the broker, but also with the customer.”

Pirnia added that BMO hasn’t finalized if those partnerships will be limited to select brokerages.

Underwriting and product availability

BMO confirmed that it has partnered with First National to provide its underwriting and funding services.

Pirnia said BMO chose to work with First National based on its 30-year track record of broker underwriting and servicing. “We like their discipline and we like the fact that they understand the broker market,” he said.

“Obviously, we are also in the business of credit adjudication, but we know there are nuances and some idiosyncrasies with broker underwriting and we want to get that broker experience right,” Pirnia added. “And since we haven’t been in it for a number of years, we thought our entry should be with a trusted partner that could help us accelerate our growth.”

In terms of product availability at the time of launch, Pirnia said BMO will make its “standard product line up” available to the broker channel, including all standard-charge mortgage products.

However, he did confirm that collateral-charge products, i.e., BMO’s Homeowner ReadiLine, the bank’s revolving home equity line of credit, would become available to brokers at a later stage. Pirnia noted that the only reason for the delay is due to structural changes to the product being requested by the Office of the Superintendent of Financial Institutions (OSFI), which he said will take some time to be completed.

Eliminating pain points for brokers and clients

BMO has been preparing for its return to the broker channel over the past two years by listening to feedback it’s received from across the industry, both Pirnia and Scully explained.

“We have spoken to brokers, we have spoken to networks, we have spoken to insurers—anybody that we thought could add some sort of value,” Pirnia said. “We are one part of the ecosystem, so we need to make sure all parts of the ecosystem are working well to give that best experience to the broker.”

In its discussions with those industry stakeholders, Scully said the number one request was, “return our calls, be really responsive.”

“So that’s going to be a theme. It’s going to be table stakes for the distribution team that I build,” Scully said, adding that they will offer real-time (same-day) pricing response in order to eliminate friction in the origination process.

“We know for customers that’s an anxious point in time, but also for the broker, the waiting experience can cause stress,” Scully added. “And so, by giving them pricing responsiveness in real time, we think that’s going to help us meaningfully, not only from a competitive perspective, but it’s also going to simplify the process for the broker.”

No stranger to the broker channel

BMO, the country’s fourth largest bank, is no stranger to the broker channel. The bank previously offered its mortgage products through brokers before deciding to withdraw from the channel in 2007. At that time, BMO believed that direct interaction with clients would allow it to establish stronger relationships.

However, as Hassan explained, much has changed since 2007, both at BMO and within the mortgage industry as a whole. 

“The broker market has transformed over the past couple of decades,” Hassan said. “[At that time] we didn’t have an association. There were no designations and basically anybody could call themselves a broker. There were no standards and the regulations were weak.”

But Hassan says that’s now changed, noting that brokers, whether they work independently or within a larger brokerage, are more organized as an industry.

“All of that brings more trust, and it brings more discipline,” he added. “And then internally at BMO, of course, we have also transformed ourselves. Now we have this knowledge and digital capabilities that allow us to proactively reach out for compliance, stay connected with clients, and anticipate our clients’ needs better and be able to prompt a more holistic conversation beyond the mortgages alone.”

A focus on building client relationships

While the bank’s desire to build a deeper relationship with the client contributed to its decision to leave the broker channel years ago, it’s also now a central theme of its re-entry strategy.

Pirnia said that while BMO is excited to offer its mortgage products through brokers once again, he added it’s not the sole reason for the bank’s return to the channel. Instead, he says it’s about developing a deeper relationship with the client that reaches beyond mortgages.

“We are excited about the mortgages, but mortgages alone are not the reason for the entry,” he explained. “One of the key points for us is starting that warm relationship with the client and making sure we put our arms around the client and not only get that mortgage, but also other products that they may need.”

And the way BMO plans to accomplish this is through its team of Welcome Advisors, which the bank says will provide a seamless onboarding process and ongoing relationship management for broker-originated customers.

“We want to be very deliberate about how we take these broker-originated mortgage customers and welcome them to BMO,” Scully explained. “The introduction to BMO is a transfer of trust from that broker. And so, we want to be in a place where we deliver consistently excellent onboarding experiences.”

The job of the Welcome Advisors will be to speak to the clients in the post-approval and pre-funding phase and connect with them again post-funding.  

“Recognizing the significance of homeownership or refinancing, BMO aims to support customers in achieving their broader financial goals,” Scully added. “After the mortgage deal is complete, the Welcome Advisors will ensure a smooth transition to the branch, facilitating low-friction and seamless relationship management for customers.”

At the end of the day, Pirnia says BMO hopes to bring a “solid, competitive offering” to the market in order to earn business from brokers. “We need to work hard and provide value for every deal that we do, and I think we are ready to do that,” he said.

Feature image by Brent Lewin/Bloomberg via Getty Images