True North Mortgage, one of the country’s largest mortgage brokerages, recently launched its own lending company – but don’t expect other industry players to follow suit, say two leading brokers.
“I see no batch of new, small lenders opening soon; some big brokerages will think about what Dan [Eisner] has done but right now most of those big brokerages are more focused on high yield MICs than anything else,” Ron Butler
, a broker with Butler Mortgage, wrote in an email to MortgageBrokerNews.ca. “Being a CMHC approved lender is an expensive to start, slow to make a profit business.
“There is a reason that only one serious company, CMLS
, entered the broker lending market in the last 5 years: They were already a large commercial / multi-residential lender who had existing relationships with insurers and investors so the capital and infrastructure was already in place.”
True North Mortgage launched a CMHC-approved lender arm, THINK Financial in late May. The news was first reported by Canadian Mortgage Trends.
The national brokerage is no stranger to disrupting the industry; it was one of the first to rely on a rate buydown and rate site strategy – as well as a salaried workforce.
The launch of THINK Financial will help drive business to its brokerage, giving it a price advantage, according to Butler.
“Being a discount broker operating your own lender means you gain more basis points of margin that allows you to be more rate-competitive in the marketplace,” Butler said.
That said; don’t expect other brokerages to hop on the bandwagon.
“Consider that TNM management, due to its salaried staff structure, has far greater control over where mortgages are directed,” Dustan Woodhouse
, a broker with Dominion Lending Centres
Canadian Mortgage Experts, said.”Then consider that a $1.1 billion dollar brokerage is essentially a collection of [individuals] who all run their books their own way and take very little directive from anyone on where they send files.
“Further, I would suggest that few broker owners would have the capital requirements in place, and [those] that do have that liquidity, fewer still would want to tie it up in such a venture due partly to the reason I reference above.”