Street Capital purchase a broker channel boon

Street Capital purchase a broker channel boon

Street Capital purchase a broker channel boon

RFA Capital Holdings’ purchase of Street Capital is a sign that B lenders should brace for an influx of investor capital.

“Street Capital tried so hard to go the Schedule A bank route that they almost shot themselves in the foot because they don’t have a B side to speak of, and, as such, a lot of investors are looking to put more money into B lenders than A lenders because the margins are better,” said Matrix Mortgage Global’s Laura Martin. “I’ll be interested to see if their guidelines change and if they focus on any other activities other than mortgage lending at this point.”

Although much of the B-20 acrimony has focused on disadvantaged borrowers, Martin says the last few days are evidence that there are, in fact, more casualties.

“OSFI basically squeezed out (Street Capital) because their margins are small and their approval rates are lower,” she said. “This is an example of the stress test, and the regulator, not just affecting borrowers but now lenders too in their ability to provide to the market. As far as I’m concerned, they got hit by OSFI because they tried too hard to be a Schedule A bank, and like all other Schedule A banks, they saw a decrease in the approvals they could give people.”

According to a confidential source, RFA had been trying to purchase Street Capital since as early as October. “They have ideas for how to operate the business that’s different than how it’s been operated in the past,” said the source. “These guys are very deft cost controllers and they come from a world that’s different thank banks. They don’t believe in having a million people floating around a company to do things; they believe in the lowest possible number of people to get things done. They’re a good operator and take a different approach.”

Indeed, it’s only a few months ago that Street Capital laid off 30 employees—an indication that the writing was on the wall for the lender.

However, the purchase bodes well for the broker channel, says Ron Butler—adding that with more financial backing, Street Capital is now in a much better position.

“100%,” said Butler. “They can do things that Street could not. They can do commercial mortgages, which is something Street wasn’t involved in.”