Lender mergers: Good or bad?

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Brokers are feeling uneasy with the number of mergers taking place in the industry recently, voicing concerns that a shrinking pool of lenders may nullify their competitive advantage.

“All these lenders amalgamating and buying each other out is the biggest concern I have about the industry right now,” Mackenzie Gartside of Verico Select Mackenzie Gartside & Associates told MortgageBrokerNews.ca. “The number we have access to is shrinking and, as a broker, flexibility is one of my selling points."

However, mergers may have a positive effect on product offerings, say other industry leaders.

“Mergers may be a good thing in terms of the power the lender has in the market and their ability to offer better products through the channels,” Dalia Barsoum of Centum Streetwise Mortgages told MortgageBrokerNews.ca. “As much as people freak out and think it will decrease competition, I always look at it as a way to bring better products and services to the brokerage channel. It’s too early to say what will happen to product offerings (but) I’m not concerned about that kind of movement.”

For other brokers, it’s a different kind of merger that is causing concern, with one particularly concerned about the amalgamation of mortgage brokers.

“(With so many brokerage firms merging), the Re/Max of mortgage brokers will come out of this,” Keith Waters of CYR Funding told MortgageBrokerNews.ca.

Waters believes the best way for smaller firms to set themselves apart from the larger consolidated brokerages is to specialize – a tactic that has worked well for him.

“Smaller shops have to find their niche,” Waters said. “60 to 70 per cent of my business comes from brokers who aren’t specialized (in the areas the clients need).”

  • Ron Butler on 2013-08-30 8:03:37 AM

    Economics 101 suggests more competition produces lower pricing for the consumer. That's always a good thing. Particularly in the mortgage space, small companies feel the need to differentiate themselves and they develop products or underwriting programs to suit niches that help us close deals. So in almost all cases: fewer lenders is a bad thing.

    Fewer Super Brokers or Networks? Hard to say what difference that will make in the long run.

  • Cameron Mackie on 2013-08-30 9:23:23 AM

    Lenders have been merging for many years now, but with the merge came a stronger lender with more options for our client, this seems to be thing of the past.

    I remember saying I had access to 40 lenders, we would take that client and fit them into the proper box, every lender had a niche.
    Now when lender seems to merge they remove the niche, providing the end result of the “same box”. With the new regulations there's very little that set them apart. Now it's more like which lender work easiest with the broker to get the deal done. This has left us with only about 10 different lenders now. The rest are underwritten through the same 3rd party underwriting company and their funds are registered with the same trust company. Meaning same guidelines and same investor.....
    They all claim they have different products but I have yet to see those deals get approved.

    Same thing goes with back end insuring, were basically following the guidelines of an insurer. What ever happened to independence, niche and that word call RISK.

    It’s time for new lenders that are lenders, keep the variation and provide a good niche so we can get back to doing what we do best.

  • Paolo Di Petta | dipettamortgage.com on 2013-08-30 10:23:18 AM

    That's just the natural cycle of the lending business - lenders merge and other lenders emerge.

    As the current crop of lenders merge and work their way up the ladder to more cookie-cutter, basic deals, new lenders will fill the niches left open by the players that vacated them.

    Just the circle of life...

  • Ron Butler on 2013-08-30 10:28:03 AM

    But the circle of life is growing smaller, there have been a lot more lenders (and two huge lenders) leave in the last two and half years than have entered.

  • Paolo Di Petta | dipettamortgage.com on 2013-08-30 10:33:23 AM

    "...in the last 2 and a half years..."

    There's more to a life cycle than that. This is the winding down time.

    Not to mention, banks aren't the only lenders. My inbox is flooded with other institutional lenders looking to lend. That, and I have a pretty decent pool of exclusive non-institutional lenders who fill some interesting niches.

    When the only tool you have is a hammer, every problem starts to look like a nail...

    The reality is, not everyone is going to qualify for super-low rates anymore - there's a HUGE change in the market going on - again, all part of the cycle.

  • Paul Therien - CENTUM on 2013-08-30 11:02:21 AM

    Mergers have always happened, and it is folly for us as an industry to think that would change. If we look back over the history of mortgages in Canada, the number of players in the game today is significant. Certainly enough to give the consumer choice, and enough for mortgage brokers to be able to place business effectively.

    In most other countries that support mortgage brokering, and where their industry more closely aligns with our own here in Canada, there are actually fewer broker lenders than what we have available in Canada. As an industry having choice is important, but too many lenders in the game can also be detrimental. Having access to 30 lenders is great, but very few brokers actually use 30 different lenders. We consolidate our business with those lenders that best meet our needs as brokers and business owners. If we did not do this, we would be spreading the same volume over a greater number of lenders, which has the potential to dilute the buying power of the broker industry. Competition is healthy, but the industry numbers speak for themselves… brokers send huge volume to the banks (Scotia and TD). Before we lament the loss of a monoline lender, we need to evaluate our placement of business. The smaller a lender is the less able they are to compete on the big stage.

    I am not suggesting that Scotia and TD have not earned the support of the broker channel, they have – but when we funnel the vast majority of our volume to a small number of lenders, we have to realistically ask ourselves who is ultimately responsible when a small lender cannot compete?

  • ON Broker on 2013-08-31 6:28:21 AM

    Tired of listening to other brokers talk about how much they dislike using a bank lender, but then will submit the majority of their business to them. If we don't support the smaller lenders they will be forced to merge to survive. We can complain all we want about being worse off with less lenders, but we created this monster. I do agree with Ron...but the other basic of Economics 101 is...support a business and they will support you back by staying in business.

  • kac on 2013-09-03 9:45:23 AM

    a growing issue is the relationship with the lenders and brokers which there seems to be very little of,usually there is no dedicated underwriter and it is extremely tough to build a relationship with 20 different people that touch every deal. We try and support the lenders that support us and within the last 2 weeks i have had high ratio deals where lenders choose one insurer and if they say no to the deal they are un willing or for whatever reason unable to try and have the deal approved through another insurer so we are in a position to go to the 2nd lender and ask them if they would support the deal,of course they now know they are the second choice and seldom will make the effort. I finally after running into road blocks with lenders un willing to have the mortgage insured elsewhere sent both deals to an associate at RBC who guess what? both deals were approved through another insurer.

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