Xceed Mortgage is halting new mortgages from the broker channel.

While disappointing, this news isn’t utterly shocking. It’s been a rocky road for Xceed ever since the credit crisis began in 2007. (See this story, for example.)

The numbers say it all. Xceed lost $17.6 million last year and its 4th quarter mortgage originations plummeted 45%.

Xceed Chairman Ivan Wahl made these statements:

• “As it turned out, the tightness of the credit markets, the cost of financing new mortgages and renewals, and intense competition in originating insured mortgages through the insured mortgage broker channel increasingly affected us throughout the year and particularly in our fourth quarter."
• The lack of “availability of credit at reasonable costs for new mortgages and mortgage refinancing” was a key reason for this decision.
• “The spreads available on insured mortgage originations through the broker channel have significantly tightened and the company has seen declines in its mortgage volume.”
• “We also have seen a reduction in the number of mortgage aggregators in the market who are willing to purchase mortgages at competitive rates.” (Xceed lost its key aggregator, Deutsche Bank, last year.)
• “Effective January 14, we will suspend the origination of insured mortgages through our network of external brokers.”

In our view, this all largely boils down to two things:

• Xceed not having access to enough low-cost capital
• Xceed trying to sell products that were purely vanilla.

Essentially, Xceed had no differentiation that would allow it to compete with the product breadth and massive balance sheets of banks and its more established competitors. Furthermore, Xceed’s reliance on the Canada Mortgage Bond Program for its primary capital source shows just how tenuous that strategy can be.

The company said it will keep managing its $1.6 billion of mortgages and assets and “will continue to offer renewals and refinancing through (its) internal sales group.”

Effective January 12, 2011, Michael Jones replaces Wahl as Chief Executive Officer. Wahl “will remain as Chairman and as an officer of the company, responsible for strategic corporate development."

Unsurprisingly, the company said its bank application will “remain on hold.”

Jones said simply: “2010 didn’t turn out as we planned.”