Despite all the profit pressure and talk of lenders departing the market, Canada’s residential mortgage space continues to attract new entrants. One of the newest will be CMLS Financial Ltd. when it launches a new broker-channel lender in early 2013.
CMLS is a commercial lender and servicer that started 38 years ago. For 2012, it’s tracking towards $2 billion in commercial multi-residential mortgage originations. As a compliment to this business, President Chris Brossard says CMLS now plans to become a key player in single-family lending. It’s aiming for annual volume in the “single-digit” billions.
Dan Putnam, former President of MortgageBrokers.com and Mortgage Centre, will head up Sales & Business Development. Putnam notes that CMLS will “not be open to all brokers.” He says, “We’ll take a targeted approach” and “focus on ‘A’ business only.”
We asked Putnam how CMLS plans to compete with the behemoth balance sheets and funding edge of the banks. He said the company’s business model relies heavily on its capital markets strategy.
“As a private non–OSFI regulated player we have significant cost savings and from a funding perspective we have conventional securitization and terrific wholesale funding relationships.”
“We’re also a CMHC approved lender with issuer and seller status. That gives us a real cost advantage with direct access to the NHA mortgage-backed securities market and Canada Mortgage Bond program.” (CMLS is one of few non-OSFI regulated companies to have this privilege.)
With direct issuer status comes big capital requirements. CMLS needs to post minimum capital equalling 2% of originations, or $40 million to fund $2 billion in mortgages. While that’s presented a challenge and growth constraint for some upstart lenders, “Raising that sort of capital is very plausible for CMLS,” says Brossard.
The company will start with “bread and butter” products when it launches in 2013 (we’ll post more on its products as specifications become available). It will also service its own mortgages by building a mortgage servicing platform from scratch.
In terms of rates, “We want to have a combination of competitive rates with the right products and great technology,” says Brossard. “Our rates will be as competitive as anyone’s.”
They’ll need to be. With mortgage growth falling and so many competitors pressuring brokers for volume commitments, it’s tougher for agents to allocate deals to new lenders.