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Strive Financial enters the Canadian mortgage market

The Broker Channel Gets Another Prime Lender: Strive Capital

Strive is live — and it’s Canada’s latest prime lender in the mortgage broker market.

Now, let me be the first to say what many of you are already thinking, “Do we really need another mortgage finance company (MFC) in the broker channel?”

Think about all the well-established non-bank options that brokers have already: First National, MCAP/RMG, XMC, Merix, RFA, CMLS, Radius, credit unions and so on.

So, when Strive came along, I was unsurprisingly skeptical. Would it be just another vanilla non-balance sheet lender to crowd our inboxes with poorly formatted, overly wordy sales epistles?

No, suggests co-founder and CEO Marty Frenette.

“We believe there is a niche in the broker channel for an entity that truly values its broker relationships, is transparent (with guidelines/eligibility, processes, etc.) and predictable with broker partners, while also offering competitive rates and commission,” he says.

Well, okay then. With that, I spoke with Mr. Frenette and co-founder Stephen Kissuk to see if there was really something worthwhile cooking at Strive. Here’s what I found…

On how they’re different:

  • Strive wants to create “personalized broker relationships” and marry that with technology. In particular, the company is gung-ho on lending “robots.” It’s building what it calls “market-leading auto-adjudication,” the likes of which are “not currently available to brokers anywhere in Canada,” Frenette says. Ideally, that automation will eventually translate into greater efficiency and lower rates. From what this author understands, the system will deploy within three to six months.
  • Another tech item in the works is its broker feedback system. Strive will provide “auto feedback on what you need to do to qualify your client” if declined, Kissuk explains. For example, the bot may suggest that the client clear certain trade lines (debts) so that his or her debt servicing ratios fit. This technology is coming, but may not be fully ready in 2022.
  • Strive is also working on document uploads via leading broker submission platforms, like Filogix Expert.
  • The company says “common-sense” lending will be at its “core,” which is something all MFCs want, but few can truly provide given the constraints of their funders and insurers.
  • The company also promises “same-day turnaround on deals and docs.” Frenette says Strive’s internal QA “…ensures faster turnaround time.” Once all its systems are a go, it’s ultimately targeting a consistent 2- to 3-day “app-to-fund” timeframe (assuming a fully qualifying deal with docs provided upfront). That may sound ambitious to some but it’ll soon be a more frequent reality in our increasingly digitalized mortgage market.
  • “We are committed to providing brokers with ‘red-carpet’ service,” the company maintains, and that’s something all MFCs say. The truth is, however, it’s easy to be fast when you’re small and volumes are low. The proof will come only after Strive experiences volume surges like brokers saw last spring. That’s when all too many lenders forget about their service level agreements and sacrificed turnaround to get deals in the door.

On products:

  • The company sells standard 1- to 5-year terms with a 120-day rate hold.
  • Forget about refis, 30-year amortizations or $2-million purchases for now. Its products are just insured/insurable today. But, “We’ll quickly be expanding to prime uninsurable and ALT-A in 2022,” says Frenette.
  • Strive qualifies as a “fair-penalty lender,” which is good news for clients. That means its interest rate differential (IRD) on fixed-rate mortgages is based on reasonable rates (these) as opposed to artificially inflated posted rates that drive up penalties.
  • The company’s mortgages are portable, which is common (and essential), particularly in a rising-rate environment. Strive allows a minimum of 60 days to port without penalty but will “consider doing ports without penalties up to 120 days on case-by-case basis.” The broker industry average is about 67 days.
  • It’s got three useful product niches, including:
    • A purchase plus improvements (PPI) product that allows up to $100,000 for renovations. Most insured lenders cap PPI renos at $40,000, or 20% of the purchase price.
    • A “streamlined” rental income worksheet for all rental deals (Note: Clients can own up to six doors plus the borrower’s owner-occupied home plus the subject property. That’s a few more than most lenders).
    • A business-for-self (BFS) program with a “higher average approval rate” than its peers, according to the company.
  • Early renewals are not permitted without a prepayment penalty.
  • Blends are possible with a prepayment charge built into the rate. (If you wear a consumer hat, you won’t be a fan of this one, albeit multiple MFCs have the same limitation.)
  • Strive lends only across Ontario, but plans “to be national by end of 2022.”

On Strive’s rates:

  • The company is an aggregator-funded monoline, so you can’t expect the world-beater rates. But Strive is competitive enough at:
    • 1.89% for a high-ratio 5-year fixed (same as the base rate at TD and countless other MFCs, as of Sept. 20) and
    • prime – 1.10% for a high-ratio adjustable rate mortgage. “Service is paramount, but we’re not leaving rate behind,” says Frenette.
  • For 80% loan-to-value insurable loans, add 30 basis points to these rates.
  • Strive pays brokers standard compensation that’s higher than the 107 bps industry average, with “no volume minimums until next year.”
  • Its 3- to 5-year terms allow unlimited buydowns, unlike many other short-sighted lenders. (Buydown limits are a killer if you’re in a pinch and have to match an aggressive competitor.)
  • Pre-approvals are 10 bps more, which is about par for the course.
  • Strive also has decent enough 1- to 4-year rates, all at 1.89% paying solid comp.

On how they’re funded:

  • Strive relies on aggregators like most other MFCs. It had interest from at least five such mortgage investors during its startup, it says, including major banks.
  • “Pricing comes from the funding source at the end of the day,” says Frenette, adding, “I’ve been on the other side when small lenders come looking for funding. After a decade of dealing with half a dozen funders, you know which are most flexible [on pricing and compensation].”
  • The company says it’s approved by all three insurers.
  • Strive’s cheapest source of funds is through its allocation to the Canada Mortgage Bond program, which Frenette calls “low-hanging fruit” for mortgage funding.
  • “We are over-subscribed on insured/insurable product [funding],” says Frenette, who notes that banks and fund managers are flush with cash right now. They need high-quality assets like insured loans, creating aggressive demand for Strive’s offerings, he adds. “We are well capitalized and in this business for the long-run.”

On the founders:

  • Marty Frenette
    Strive Co-founder and CEO, Marty Frenette

    Strive’s founders all came from Street Capital, including:

    • Marty Frenette: Co-Founder, President & CEO (former mortgage trader at Bank of America and Treasurer at Street Capital Bank). He was previously “running Merrill’s mortgage book” and brings strong capital markets experience.
    • Gary Taylor: Co-Founder, CFO & CRO (former EVP, CRO at Street Capital Bank)
    • Steve Kissuk: Co-Founder, Chief Credit Officer (former SVP, Head of Credit at Street Capital Bank)
  • Their move to start their own lender began after Street Capital was acquired by RFA in 2019. My sense is that the group was put off by how the merger panned out, and didn’t want to deal with their old company’s legacy constraints. “Strive is truly independent and not captive to any other FIs or MFC entities,” says Frenette. “We’re certainly not a Street 2.0.”
Strive Co-founder, Stephen Kissuk
Strive Co-founder, Stephen Kissuk

In Sum:

What we’ve got here is more competition in the broker space, which is always a plus.

We’ve also got yet another lender with generic products and rates, for now at least. On the other hand, Strive cites ultra-fast turnaround, an old-school broker “relationship” approach and unique technology. The thing is, fast approvals should be table stakes and most consumers don’t care about broker technology as much as they care about product flexibility and value.

In terms of origination, Strive is 100% broker fed — i.e., no conflicts with retail channels, internal direct-to-consumer sales, affinity channels, etc. We don’t know what the company’s targets are, but if it gets the basics right (e.g., adds mid-term refis) and uses efficiency to improve pricing, it could top those targets—especially if its tech initiatives come to fruition.

If anything, it’s got a motivated, highly experienced management team that talks the right talk and seems to actually care about brokers.