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We are on a quest to transform the mortgage industry.
We believe there needs to be more transparency, which is one reason why we decided to share a monthly report on what we have learned, what worked and what didn’t, and what’s next in our plans to grow a Billion Dollar Brokerage.
We hope you find a few useful ideas and tidbits to help you in growing your mortgage business.
Welcome to November 2023
Brokerage Stats
Production Since August 1, 2023
Total volume: $1,017,312,446
Files Funded: : 2,314
October Production
Volume: $97,172,665
Files funded: 206
October Agent Stats
Rookies: 121
Pros: 97
Total: 218
Production Comparison Year over Year
Our volume, year over year, has increased by 382%. This is amazing, and is the result of building some amazing brokers through our rookie program, and attracting other top-quality brokers.
I believe we are heading into a slower season for the next couple of months. As a variable rate holder myself, I am hoping that rates come down a bit next year.
We Finally Crossed $1 Billion in Funding!
We like to track everything at BRX. In the month of October, we finally crossed the $1 billion threshold in funding since launching BRX on August 1, 2021.
The lucky agent to help us crack that $1 billion was Zach Lofeudo! Zach is a pro agent who has been with us since February 13, 2021.
Now to be fair, it took a lot of people to reach that milestone, but it is still fun to pause and celebrate the actual crossing over the goal line.
The new goal is to fund $1 billion in a 12-month period. If we stay at our current run rate and continue to add more agents, there is a decent chance that we will hit that by August 1, 2024.
We will keep you posted!
Live Underwriting Support Expanded to 55 Hours a Week
We are big believers in the value of having live underwriting coaches available for our rookies, to answer questions on files.
When we launched, we had 40 hours a week available, where a rookie could visit a live Zoom room and bring any question they wanted on files.
As BRX continues to expand, we realized we had more agents in different time zones, and wanted to be able to support them.
This has led us to increase our live Zoom support from 40 hours a week to 55. Our live Zoom hours are now from 8 am EST to 7 pm EST, Monday to Friday.
We believe our live UW support is one of the reasons our rookies have funded 1,000+ mortgages.
BRX agents can get help on files by visiting www.gobrx.com.
Why Does No One Talk about Volume Bonus? (Part 2 of 2)
We are doing a series on volume bonus, where we are sharing information about all the money possible in a mortgage file.
If you want to understand our philosophy, you can check out Part 1 of our volume bonus breakdown here.
We will update these posts regularly, as lender compensation programs evolve and change. If you notice an error on this page, please email us at ask@brxmortgage.com.
In this post, I break down MCAP’s and Scotiabank’s compensation structures.
MCAP Compensation
BRX’s current MCAP compensation, available to all our agents, is:
110 BPS (FF + VB) + 5 EB Performance Bonus = 115 BPS possible
MCAP combines their VB and commission into one single payment. The status level is determined by either the number of files funded or total volume, in the previous fiscal year. MCAP’s fiscal year is from Dec. 1, 2022, to Nov. 30, 2023.
MCAP’s VB and commission is paid in one lump sum about 2 weeks after closing.
Volume Bonus Thresholds
MCAP also has an efficiency bonus that they call a Performance Bonus. The Performance Bonus is paid out monthly, and is based on the funding ratio of the previous month.
MPoints is MCAP’s rewards program. Basically, 1 point is equivalent to $1. The MPoints can be redeemed for buying down rates, or for file-related or marketing expenses. As of 2023, MPoints can also be used to pay for client gifts, or to purchase personal items.
All our agents earn 110 Basis Points, and we allow our agents to redeem any points they have earned on files they have closed.
Also, we recently went from 150 MPoints per file to 200 MPoints per file, which is great.
MPoints Thresholds
We also pay out the Performance Bonus to our agents, provided that we have hit the 75% funding ratio for the previous month.
Scotiabank Compensation
Scotiabank has a more complex compensation plan than most lenders. It is designed to reward small teams of agents who are doing a high volume and are funding a very particular product mix.
Before I can explain how we attempt to solve this at BRX, I first need to break down how Scotiabank’s Volume Bonus and Broker Scorecard work.
Then I will give a brief history of volume bonus and Scotia’s unique Broker Relationship Manager (BRM) model.
Scotia has two tiers for volume bonus: Partner’s Club, and President’s Club.
The Broker Scorecard is measured and paid quarterly to brokers who qualify for Partner’s or President’s Club tiers.
The easiest way to calculate compensation is to follow the 4 steps below:
Step 1 – Calculate volume or units, to determine if you have reached Partner’s or President’s Club status. Earn 25 to 35 BPS.
Step 2 – Calculate the percentage of mortgages that are set up with a Scotia Total Equity Plan. Earn 2 to 4 BPS.
Step 3 – Calculate the percentage of mortgages that are default insured. Earn 1 to 2 BPS.
Step 4 – Calculate the number of agents who pooled together to reach those numbers. Earn 2 to 4 BPS.
The maximum possible compensation is: 75 BPS FF + 35 BPS VB + 10 BPS SC = 135 BPS
To understand why Scotiabank rewards small productive teams, you have to understand the history of volume bonus.
Volume bonus was originally intended to reward individual agents who submitted a lot of volume to a lender.
However, as lenders raised the annual volume required to meet the bonus, agents began to realize they weren't going to be able to hit volume bonus with all their lender partners every year.
Inventive brokers began “pooling” volume through a single submission agent in order to earn top VB.
This also led to a consolidation of a bunch of small brokerages into larger brokerages or networks.
Basically, although the actual volume was coming from multiple agents, a brokerage would use a single agent as the submission agent for each lender, to ensure the highest possible lender status.
Pretty smart, right?
This works for most lenders. However, Scotiabank’s model has commissioned underwriters, called Broker Relationship Managers (BRMs), who can underwrite more volume than a small army of normal bankers.
The BRM model was adopted by Scotiabank after they bought a company called Maple Trust in April 2006. Maple Trust had the most productive, and highly paid, underwriters in the industry. Scotiabank didn’t want to mess with a good thing, and have more or less left it alone.
For an underwriter, getting a job as a Scotiabank BRM is the equivalent of getting drafted into the NHL.
The pay is high, the pressure is high, and they are all wicked smart. To reach their targets, the BRMs want to work with the smallest number of agents possible.
I believe this is why Scotiabank will pay more compensation to teams of less than five. It encourages brokers to work in smaller teams, and helps support their BRM model.
Here’s the thing ... When you run a brokerage whose mission is to help your agents earn more revenue per hour, that creates some unique challenges.
Thankfully our COO, Denise Laframboise, figured out a way to solve this by having two options available.
Option 1 – Scotia Hub
The Scotia Hub is for our rookie agents, or agents who are unable to qualify to get on a BRM team. The Hub is managed by a BRX employee, and all files going through the Hub are reviewed and submitted by one of our team.
The pro of this is that our agents currently enjoy Partner status, which means they get paid more. The con is that they are unable to contact the BRM directly.
This is the best place for new agents, or agents who are unable to maintain the volume required to join a BRM Team. Once an agent is able to demonstrate enough Scotia volume, they then get an opportunity to join a BRM Team.
Option 2 – BRM Teams
Our higher-producing agents are divided into small groups on BRM Teams. The goal is for them to work together to earn Partner or President status.
Each team is responsible for hitting and maintaining status with Scotia. Some of our teams have reached status already, and some are working towards it.
We work with our teams, to ensure that they maximize their compensation while also ensuring that we are being a good partner with Scotia.
If you missed it, check out Part 1 of our series on Volume Bonus, where I break down TD’s and First National’s compensation structures.
How Often Do You Get Paid?
In August of 2022, we decided to make BRX a brokerage for ALL agents, not just rookies. I wanted to make a brokerage that I would personally join if I was still brokering.
We now call this philosophy being “agent-centric,” which basically means that we run everything through the filter of, “Will this help our agents be more successful or make their job easier?”
If the answer is “Yes,” we look for a way to implement it.
One of the things we have heard from some agents is that they had to wait to get paid on files that are compliant.
When I wasn’t a broker owner, I often asked myself why brokerages didn’t pay every day. Once a file is signed off, it seems that the logical thing to do is to hit the pay button. (This turned out to be more complex than I expected.)
The first thing to realize is that there is a small cost to sending money to our agents. We use a platform called Scarlett, which has been great. We pay a monthly fee per agent, plus a cost per transaction.
The cost for us to send an agent their money via electronic funds transfer (EFT) is 80 cents. We are charged the same amount, whether we are sending payment for one file or 10 files.
Our target for the first year was to fund 400 mortgages. I did the following calculations to estimate the cost. (We funded 441.)
$0.80 per EFT x 400 files = $320 EFT fees
However, that number turned out to be a little inaccurate.
If you have read my blog post on volume bonuses, you will know that lenders do not pay all the various types of compensation at the same time. The VB or EB may be paid at the same time as the commission, or it may be paid monthly, quarterly, or even semi-annually.
In order to adjust my estimated cost, I used an average of 2.5 transactions per file.
The calculation is as follows:
400 files x 2.5 transactions per file = 1,000 transactions
$0.80 EFT x 1,000 transactions = $800 EFT fees
That would be the maximum it would cost us to send out every transaction individually. However, if we are paying twice a week, we can divide that number by two.
$800 EFT fees ÷ 2 = $400 a year
To me, $400 a year is a small price to pay in order to ensure that my agents get their money quickly.
Initially, I wanted to pay out commissions daily. I figured that, if I was brokering, I would have appreciated not having to wait for my pay.
I also didn’t want my brokerage sitting on a pile of money that didn’t belong to me. I have heard horror stories about some brokerage owners spending their agents' money, causing a huge mess.
However, daily pay has turned out to be a little more complicated than I initially expected.
The challenge is that the person who is preparing the commission can’t be the person to hit the pay button.
We have payroll meetings twice a week, where our commission team and our payroll manager review the transactions to ensure that they are accurate before hitting “Submit.”
This is similar to a bank, where a manager needs to sign off on any large transaction.
Even though the software is good, there is still a human element involved, and to avoid errors, we do a final audit before we hit “Pay.”
As our volume increases, we are going to need to hire more commission staff, at which point we plan to increase the frequency of the commission meetings.
It may seem unnecessary to pay brokers more than twice a week, but it is one of those little details that really matter to me.
Why We Believe In Shared Equity
Let me ask you a question—when a company does extremely well, should the people who put in the vast majority of the work, and who have taken the biggest risks, reap any of the benefits?
I personally believe they should.
Let me illustrate this with an example from professional sports. In the 70s and 80s, the National Football League had a problem—the owners earned the majority of the revenue.
The players felt the owners were getting rich off their efforts, and wanted a fair deal. In 1993, a group of players decided to challenge the status quo, and negotiated a much fairer revenue-share arrangement.
This new agreement seemed only fair, considering that it was the athletes who risked career-ending injuries every single game.
I believe the mortgage industry is a lot like the NFL was prior to the changes in 1993.
Let me explain…
Currently, most mortgage brokerages are owned by a small number of people ... not unlike NFL teams.
And just like the early NFL teams, it has been the owners who have profited the most when a mortgage brokerage goes public or is acquired by another larger entity. (Think DLC went public, and Verico was acquired by The M3 Group.)
In each of those cases, the owners did quite well. However, for the average agent in that network, their life didn’t change a whole lot.
Here is the rub. The value of that network or brokerage is based on the total mortgage volume, and that volume comes predominantly from the many individual agents.
The agent is the backbone of the mortgage industry.
Add to that, the owners have very little influence over which lenders get the volume. Just like the NFL owners, the brokerage owners are primarily on the sidelines, and don’t participate in, or directly influence, the outcome of the game.
Similar to the NFL’s current arrangement, I believe a new model is needed, whereby both the owners and the agents can win.
One of the ways we have done this is through having revenue share instead of paying traditional recruiters.
The second way we believe we can create a more equitable arrangement between owners and agents is through stock options.
I personally love stock options.
We recently rolled out stock options for our employees, and have now launched phase two of our plan, which is agent stock options.
We plan to allow BRX agents to earn stock options through specific activities and actions that help the brokerage grow (I will share more specifics in a future post).
The idea is to create a win-win-win. A win for our agents, a win for our employees, and a win for the owners.
Now, you may be thinking, “What are the chances of BRX going public or having a large exit?”
I can give you no guarantees.
However, I can guarantee that 99% of agents did not benefit in any measurable way from the previous exits and IPOs in our industry because the owners didn’t allow it.
They were never given a seat at the table.
We want to change that.
We have a big vision for BRX, and know we have a lot of work ahead of us. We have an amazing team and are excited for the challenge. We are always looking for amazing agents who want to help us build something great.
The reality is that it takes many hands to build something great, and unfortunately, too often, the “many hands” get nothing more than a high five from a small group of owners.
Our mission is to help our agents earn more revenue per hour. The agent stock option plan is just one of the unique ways we are working to accomplish this.
If you want to find out more about BRX and how we can help you put more money in your pocket, visit:
PS. The NFL's unique alignment between owners and players creates a dynamic where any team can clinch the Super Bowl, fueling its status as the world's most valuable sports league with the fewest games played. That’s a big win for fans!
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