CMP: MortgageBrokers.com & Mortgage Architects to Merge

MortgageBrokers-comCMP reports that Pacific Mortgage Group is merging its two brokerages. It cites a leaked internal email that suggests MortgageBrokers.com (MB.com) will fold into Mortgage Architects (MA).

If this goes through:

  • There may be some unhappy MA campers who think MB.com brokers water down MA’s “elite” status in the industry. (“Elite” is a term that MA founders have used to market the firm because MA was built specifically to cater to high volume mortgage professionals). MA brokers, on average, are more established and generate significantly more volume than MB.com brokers.
  • We suspect that any discontent will blow over, however, and that Pacific Mortgage Group point man Ron Swift will start delivering in 2012. He didn’t put his impeccable reputation and career on the line to join MA for no reason. There’s got to be something good cooking.
  • A merger should save the parent company a decent chunk of change. There’s certainly some redundant personnel and operations costs, in addition to the added expense of marketing two organizations.
  • We have to wonder what will happen to MB.com’s stock (symbol: MBKRD), if and when MortgageBrokers.com disappears. The company reverse split 1-for-30 on Nov. 14. That dropped its shares outstanding to 1.29 million, with a market value of just $323,000 (25 cents a share). Will Pacific Mortgage Group roll itself into the stock? We have no idea, and management is mum about it. It sure would be nice if they did, assuming Pacific’s lender (Radius Financial) gets its bank status and ramps up volume and profitability. It’s going to take a lot of execution by management though, and we can only hope they won’t dilute existing shareholders, as has been done in the past.

Disclosure: CMT editors are agents of Mortgage Architects and own stock in MB.com. (Definitely, not our best stock pick of all time—so far anyway.)


Rob McLister, CMT

  1. Why would anyone want to own a tradtional mortgage brokerage? You manage 1,000 agents only to clear $500k profit a year if you’re lucky? There is no money in the 95/5 split model.

  2. I always question the integrity of people who make disparaging comments about others in a public forum and then conveniently fail to leave their real name. It is just such people who give our industry a bad name and should be removed from it. What type of person makes such comments about one of the hardest working and best managed teams in the industry. It most definitely is someone who is far removed from the situation and very much lacks any real knowledge about it. Let me set the record straight:
    MortgageBrokers.com was the first publicly traded mortgage brokerage in Canada. The purpose of it being public was to be completely transparent to our brokers; to gain access to a wide network of potential partners that could help us build a full service financial services company expanded outside of brokerage; and to create access to growth capital. We feel that we have accomplished all of these.
    In general, brokerage operations are break even enterprises at best. We don’t feel the end goal is create a national brokerage – it is the starting point. The broker market is losing ground and we need to begin to think differently and invest in our brokers to allow them to have the tools and capabilities to more fully service the Canadian consumer – or else our industry will continue to be marginalized. Through affiliated businesses in the lending and insurance markets (manufacturing), our company is able to continue to invest into our brokerage network (distribution).
    I am very proud of our accomplishments, the support of our brokers and of having the industry’s best management team bar none. In five short years, I was able to:
    1. build our organization and be recognized by profit magazine as the fastest growing emerging growth company in Canada by Profit magazine;
    2. Secure the resources to acquire a billion dollar portfolio lender and a quality national brokerage almost three times as large as ourselves. We are now the only brokerage in Canada that has it’s own CMHC, Genworth approved lender with in excess of a billion dollars of assets under administration and growing;
    3. be the only company in the industry with a world class blue chip board of directors including Alfred Apps, the right Hon. James Peterson; Barry Pickford, and Todd Halpern; and,
    4. Attract one of the best management teams in the industry led by Ron Swift including Alice Chan, Dong Lee, Dan Putnam, Meini Eckert, Joanne Vickery, Luisa Simonetti, Raj Singh, Suzanna Stefanec, Lorraine Sato, George Zhang, Gary Cilevitz, Robert Hyde,…
    Today, we have the seasoned management team, PROFITABLE business and access to LOTS of capital to continue to grow our organization into Canada’s next full service financial services company. How about you?
    Alex Haditaghi
    Founder and Vice Chairman
    Pacific Mortgage Group Inc.
    alex@radiusfinancial.ca

  3. All I can say is, the stock was pitched to brokers as a way to build wealth. That goal was NOT accomplished.
    The ownership model is completely flawed. Brokers will NEVER get rich being owners in a superbrokerage.
    Instead, find a brokerage that enables you to best serve your clients. Look for a company with the most favourable split and no strings attached – like ridiculous monthly advertising fees or long term contracts.

  4. Interested Observer, I think you should give your head a shake. As someone that works for one of the big banks as an accountant and worked in the industry for over 12 (including MA and myNext during it’s infancy) I can tell you that the model is far from flawed, in fact, it’s genius.
    When you can design a business model that allows ownership in non only the broker but the lender, in addition to reduced and even eliminated splits depending on volumes to the parent lender I think you have a pretty good chance of attracting and retaining the best brokers who in turn will generate a slew of originations for the lender. If that isn’t clear to you maybe you’re in the wrong industry.
    The lender is going to be the high margin profit driver and if you don’t think the brokers/shareholders will do well off of that, just ask the folks from Home Capital Group and other publicly traded “B” lenders
    how their investments have done.
    Sure MBKR may have missed the mark, but believe me when I say this is far from the end, in fact it’s the beginning. I don’t think a board like this could have been assembled if something major wasn’t up their sleeves, nor would they be able to attract and hire Ron Swift.
    Major consolidation in the broker industry will continue, times are chaning and so far I have yet to see a better story than this.
    Marco M

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