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Behind Mortgage Architects’ Argentum Purchase

Mortgage-Architects-ArgentumScale is power in mortgage brokering, and that reality has prompted another buyout. Mortgage Architects (MA) announced today that it has purchased Argentum Mortgage and Finance Corp. for an undisclosed amount. (Press release)

Argentum, which launched in 2009, has 500+ mortgage agents. Once this deal closes, it will bring MA’s total to over 1,000.

Assuming the price is reasonable, Argentum could be a decent strategic fit for Mortgage Architects. The reason: MA’s parent is the only brokerage-related company that owns a CMHC-approved lender (Radius Financial) and over 10% of MA’s volume is routed through it. This new combination will feed Radius even more volume, which means far greater revenue than commission splits alone.

For more on what prompted the Argentum deal, we asked Ron Swift, CEO of MA’s parent, Pacific Mortgage Group Inc.:

CMT: There have been some notable brokerage acquisitions in the last few years. Why has scale become so important in the broker channel?

Ron-SwiftRon: With the evolution of the mortgage brokerage business, company-retained margins have shrunk dramatically, while the demand for value-added services from brokers has grown. Just being an aggregator for brokers to get higher volume bonuses from lenders is not sustainable. Brokers are looking to their company to provide them with meaningful tools such as Customer relationship management (CRM) and activity-based management, enhanced marketing support and training & development programs.

With scale, brokerage companies can be more cost-effective in delivering these services. As a brokerage company grows, there isn’t the need to keep adding the same amount of fixed costs to manage the business. Scale also enhances revenue opportunities; the larger you are, the better deals you can make with your suppliers, such as lender and insurance rebates. Scale helps companies afford to create other products and services that smaller companies cannot afford or justify. Large brokerages can (also) cost-effectively hire the necessary professional staff to manage, develop, build and deliver the services a broker needs to be competitive.

CMT: Given shrinking spreads and competition, can small brokerages compete long-term with a large broker network?

Ron: I believe it will become more difficult to attract and retain quality brokers if the smaller brokerages can’t provide all of the tools, services and programs that will be needed to keep them competitive.

CMT: How much did having more distribution for Radius (your lender) factor into the decision?

Ron: Having Radius in the picture definitely makes this and future acquisitions make more economic sense.

Almost all agents use Radius, but we do not mandate its use. Like all lenders, Radius does have to earn their business every day.

(On this last point, Argentum founder Albert Collu adds: “The ability to reimburse commissions and fees for our brokers [who use Radius] is
extremely empowering and unmatched in our industry.”)


According to the company, Argentum will rebrand as Mortgage Architects. The deal is scheduled to be completed by Q1 2014.

The Argentum acquisition is undoubtedly one of more takeovers to come in our industry. Small and mid-sized brokerage operations will be increasingly squeezed by shrinking finder’s fees (a trend exacerbated by rate buy-downs), as well as broker demand for higher commission splits and more services.

Seventeen (17) months ago we wrote that most mortgage brokerages may never achieve a higher valuation multiple than they had last year. With intensifying rate competition and the withdrawal of some banks from the channel, we believe that now more than ever.

Rob McLister, CMT