Academy

Introduction

Have you researched for mortgage conditions such as interest rates online on different platforms and wondered how it can be, that with the same inforamtion given you get different offers or even banks displayed?

Let’s have a look at the mortgage brokering process.

1. Mortgage Brokerage

Basic information

  • mortgage brokers get commissions from banks for submitting them a fully prepared application and an advised customer with no questions left that is ready to sign the banks contract
  • applications can be submitted to banks through “pools” or directly. Mortgage brokers can have access to multiple pools. Big sales companies usually use only one, because submitting higher volumes through one platform gets them bonus commissions

1.2 Direct Submission vs Platform submission

What “pools” are can you check out on my blog post about them. In short: they operate as a sort of wholeseller while fulfilling certain services for banks and brokers to act as a middleman.

While pools play a legal role, the technical part of brokering happens on one of two relevant plattforms: Europace and eHyp. Find out what these are here. 

You can think of the platforms Europace and eHyp as the two market places on which the pools run sale-stands at which the banks and the independent brokers meet. 

Legally, the pools have the agreements with the banks, agreements about the commission conditions but also the consulting liabilities and duties. They must make an individual contract with hundreds of banks. Towards the brokers they basically provide these agreements, like providing an access. On the same time they provide something like a “Human Resources” service to the banks. They check the qulifications, trade registrations etc. of the brokers before registering them. One of the main difference of a pool compared to a “sales firm” is exclusivity. An independent broker can be registered at different pools, while a sales firm will either commit exclusively to one pool or function as one themselves (if they are big enough to manage contracts with hundred of banks). 

Why different pools? In short: they have different focuses. There is a platform specifically for the almost 400 different Sparkassen or the even more from each other independent banks from the “Genossenschaftssektor” (Volks- und Raiffeisenbanken, Sparda, PSD, etc.). This is one of the advantages working with small independent brokers.

For a successfully submitted and closed costumer the banks will pay a commission to the pool. Of this the pool usually keeps a share (overhead) and forwards the remaining amount to the broker. The overhead is legitimized with a “clearing-service”. That means they have employed experts that work as a “back office”. They have experiences with different banks and can tell the broker, which one makes sense for their case and also check the applications (due dilligence) before handing them over to the banks to make sure the application will get approved. These employees quality gets measured also with their approval-ratio. So they are not happy to convey applications they don’t see a 100% chance to get approved. 

Some pools also provide software such a CRM and/or leads to buy. 

And the alternative? 

Some banks will allow to directly to submit applications to them. This can then still work through one of the “market places” Europace or eHyp. It can also happen “directly” via e-mail. The second option can be done either with a “conveying contract” between bank and broker or as a “referral” (Tippgeber). Referring a client to the bank (Tippgeber) means to not consult him with legal responsibility. He just points to the bank and the bank employee explains the mortgage conditions to the customer. This usually means a lower commission, but some banks only offer this way as a direct contact (outside of pools).