Macquarie Financial Ltd., the 8th largest broker lender by volume, is removing its brand from the Canadian broker channel.
Paradigm Quest Inc. will now service all of Macquarie’s $8.5 billion mortgage book and 35,000 customers. Canadiana Financial, a partner company with Paradigm, will assume Macquarie’s broker origination functions.
Macquarie Financial’s current CEO, Grant MacKenzie, will join Canadiana Financial as CEO on July 1, 2011. Pamella Mulek will be Canadiana’s President & COO.
“In addition to fostering new mortgage-broker relationships, there will be additional scope to expand Canadiana’s partnership with Macquarie,” said MacKenzie. “I look forward to my new role as we focus on providing even better service to a larger group of brokers.” (Macquarie had previously catered to what it called its “Top 100” brokers.)
“We’re very pleased to expand our strong relationship with Paradigm to include our full mortgage portfolio,” said Matt Rady, Head of Macquarie Banking and Financial Services Group, North America.
In speaking with Rady, he suggested the move was prompted in part by razor-thin margins. “Our mortgages were all insured and funded predominantly directly through the Canada Mortgage Bond…Fundamentally, the Canadian mortgage market is one of the most competitive in the world, which is great for borrowers but challenging for regulated providers.”
“We’ve always tried to offer great rates to our clients,” he added. But, Rady says, generating a “return on capital has been challenging for some time” given the competitiveness in the market.
Talking separately with MBN, Rady said: “The treatment of broker commissions, coupled with those tighter margins, have put a strain on returns on regulatory capital.”
Paradigm, which is only five years old, will manage Macquarie’s $8.5 billion in mortgages and fund its new deals. Today’s news is a huge win for Paradigm, which is an outsourcing provider of underwriting and mortgage servicing. Macquarie chose Paradigm over other well-established servicers like MCAP and First National.
“Paradigm has had a strong relationship with Macquarie for years,” said Kathy Gregory, Founding President & CEO of Paradigm Quest. “We are thrilled to broaden our partnership with Macquarie and welcome their many talented employees to our organization.”
As this suggests, some of Macquarie’s employees will move to Paradigm and Canadiana, including some of its BDMs and underwriters.
Macquarie Financial’s mortgage brand will continue in Canada, but only under its “direct channel,” says Rady. That means Macquarie will enter into a white label arrangement with Paradigm Quest, and offer mortgages to consumers through its in-house channels like Macquarie Private Wealth (which was bolstered by its acquisition of Blackmont Capital in December 2009). “In the past six months we’ve seen increasing (mortgage) volume through that channel,” notes Rady.
Macquarie’s new white-label agreement will be the 10th such private label partnership for Paradigm. Brands that Paradigm services include Merix Financial, Canadiana Financial, and Lendwise, as well as white-label offerings to brokerages such as DLC, Mortgage Group, and Invis/MI. Verico and Mortgage Alliance may also remain under Paradigm’s fold once today’s deal closes.
(As a side note, one has to wonder if there will be any material difference between white label offerings now that Paradigm is the back-office/funder on most of them. Will brokerages start turning to firms like AGF Trust [which funds for Verico] or other lenders to differentiate themselves? Will private label volume tail off? Or will Paradigm leverage its growing economies of scale to continue to compete agressively?)
Canadiana, which is a privately held broker-lender, will see its volume spike because of today’s news. That’s good news for its investor Five Fathom Partners Inc. Five Fathom wholly owns Canadiana, which launched in March 2010.
In a statement, Canadiana said it is “committed to grow the existing strong relationships Macquarie has already established with their brokers.” Mulek told us, “The product and compensation models will be finalized once Grant and the team has had the opportunity to meet and strategize.”
Mulek added: “Canadiana pays brokers (half finders fees) on renewal.” That is different from the trailer fees Macquarie was known for. She confirmed, however, that brokers who’ve funded Macquarie deals in the past will continue to receive their trailer fees through Paradigm Quest.
Going forward, Canadiana may add multiple compensation options to cater to both existing brokers and brokers used to Macquarie’s model.
The announcements above are subject to certain conditions and regulatory approvals. No financial terms were disclosed by any of the parties.
Customer note: If your mortgage is presently with Macquarie you should have nothing to worry about. The company says “there is no change in the status of your loan.” There’s more info on its homepage.
Rob McLister, CMT
Last modified: April 26, 2017
Macquarie Bank are really struggling to arrest the rapid decline in its ROCE. I take my hat off to them for still being around after the pasting they have taken in the financial markets this last few years.