TD-First-NationalTD Canada Trust, Canada’s fifth largest broker channel lender, needed a better underwriting and fulfillment system. But it didn’t want to build one itself. So it announced today that it’s contracting out that task to First National, the second-largest broker lender.

First National is renowned for its mortgage-processing capability. It has one of the fastest approval turnaround times in the business.

TD is just the opposite. In last year’s CMP Broker on Lenders survey TD ranked last overall. (Mind you, CMP’s rankings need a grain of salt. They also ranked TD behind several monoline lenders in “Product Range,” which is a farce).

A big factor in TD’s less-than-stellar reputation with brokers is its approval and document processing delays. They can be molasses-slow if you’re not one of TD’s biggest brokers.

But all of that is set to change, starting in January. First National is building a customized version of its phenomenal “Merlin” application-processing system to handle TD’s broker deal flow. In First National’s press release today, it added that “TD will fund all the mortgages underwritten under the agreement and retain full responsibility for underwriting guidelines, mortgage servicing and the client relationship.”

TD could have built a new system itself, but clearly decided that First National’s solution was more economical. Moreover, banks are notoriously slow in rolling out enterprise IT projects (think years), and TD truly does need process improvement now. This arrangement demonstrates TD’s “commitment to the broker channel,” as it said in an email to brokers today.

All in all, it’s a good news story. TD is an important lender for brokers. It has a wide array of mortgage products, including niche offerings available from few other lenders. Moreover, it is often competitive on rates, especially with fixed terms less than five years (albeit its buydown policy is among the worst in the business).

TD’s Achilles Heel has long been its processing times. It loses a ton of business as a result. Many brokers won’t send a deal to TD unless they have to. But outsourcing to First National should remedy that problem and, by later next year, this could lift TD’s broker market share from its current 8.1% level (that’s a first-quarter stat from D+H).

stephen-smithStephen Smith, Chairman and Chief Executive Officer of First National, said, “For First National, it provides a new source of income that we hope will grow over time…It’s a clear endorsement of our industry-leading technology…”

First National has long had a strong relationship with TD.

This news may pave the way for mortgage-processing outsourcers (like First National, Paradigm Quest and MCAP) to do similar deals with other large or mid-size financial institutions. In fact, it may even encourage a few more lenders into the broker channel if they become aware that turnkey solutions exist for processing brokered mortgages.


Rob McLister, CMT (email)