Broker Financial Group (BFG) and Real Mortgage Associates Inc. (RMA) announced today that they plan to unite. The two brokerage companies say they’ll enter a joint share purchase agreement and take ownership in the other.
The reported benefits of the deal are sharing of technology, administrative resources, payroll, compliance and corporate relationships. Of course, with mortgage revenue being volume-based, the combination should also help the two garner slightly better compensation from certain lenders. “The industry pays on volume,” says BFG CEO Joe Rosati.
Both firms are relatively small as far as broker networks go. The companies haven’t disclosed their volume but we hear it’s in the $1.5 to $2 billion neighbourhood, combined. By teaming up, the two will also improve their economics with financial partners for greater cross-sell opportunities.
Both organizations will continue to operate their separate brands. Some might think that focusing finite resources on one brand would be wiser, but Rosati says the two firms don’t want to disrupt their brokers’ branding and operations.
The advantage that BFG heralds most is its “Scarlett” broker technology, with its CRM, digital marketing and back-office functionality. (Here’s a look at “Scarlett.”) “A partnership with BFG gives RMA access to a piece of technology that is vital to the future growth of our organizations,” said RMA President David Yuzpe in the company’s release today.
Brokerage consolidation is well underway in the mortgage business. This deal is just the latest example and the trend will only intensify. In a thin-margin industry that measures profits in basis points, scale can make or break a business model. The big boys (e.g., DLC, VERICO, Mortgage Alliance, TMG, etc.) are all looking to capture the highest producing agents. Hence, smaller shops may increasingly try to protect themselves and bulk up, to make their offerings more compelling. In that vein, this combination appears to be a sound move for both BFG and RMA.
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