Alternative mortgage provider Home Trust has entered into a merger agreement with lender Fairstone Bank, with changes set to primarily streamline internal operations, leaving customer and broker experiences largely unaffected.

According to Home Trust president and CEO Yousry Bissada, many of the changes will happen behind the scenes as the two companies share resources and streamline their operations.

“Certainly, this year Home is going to continue to be independent, after that it will continue to be business as usual,” he said. “I would hope that being part of a larger organization creates more opportunities for the brokers; I’m unclear of how at this time, but I would think that something will come that’s more positive for brokers over time, whether it’s in product or pricing or service.”

Bissada adds that the merger also does not affect Home Trust’s ongoing efforts to provide more digital tools and solutions for brokers to better serve their customers. “That will continue this year and well into the combined entity,” he said.

Bissada explains that most of the planned changes will be in back-office operations as the company seeks to eliminate redundancies.

“We both have finance departments, treasury departments, risk departments, HR departments — that’s where we’ll look a little bit more to determine what makes sense to put together as a single team,” he said. “Otherwise, each of the companies are doing very well in their space, and we think together it just makes us even more competitive.”

Reaching the same customers with different products

Both Home Trust and Fairstone provide alternative lending solutions to similar customer profiles, but their products don’t directly overlap, making the two entities “very complementary,” according to Bissada. Furthermore, while Home Trust exclusively operates through the broker channel, Fairstone interacts with customers through its network of 250 branches coast-to-coast.

“Fairstone is not in the mortgage business, and Home is not in the unsecured business,” he said. “Fairstone will offers their products and services in the branches and Home will continue with the mortgage broker distribution channel — whether there are synergies and ways to offer products to the other side is still to be determined.”

Bissada adds that the two brands will likely retain their existing names, given their established track record in their respective markets, though they could end up sharing a brand in the future. 

“We’re very fortunate to have very strong brands in Home Trust and Home Bank, and Fairstone Bank is also a very strong brand,” he said. “I suspect the names will survive; what’s not clear is which will be the top name, but I suspect we will rename with a combination of the two names we already have… maybe one’s on top with subsidiaries.” 

Home Trust’s ongoing evolution

While the agreement has been inked, the merger is far from official. Regulatory approvals are needed from the Competition Bureau and the Office of the Superintendent of Financial Institution before seeking a sign-off from the Minister of Finance, a process Bissada says typically takes six to nine months.

This is not the first major shakeup for the alternative mortgage provider in recent years. In fact the composition of Home Trust has been in flux since before Bissada joined as CEO in 2017.

In 2015, Home Trust acquired CFF Bank, which enabled the creation of its “Home Bank” brand, which offers some traditional banking products like Visa cards and deposit products. In 2020, Home Trust left the prime lending space to focus on alternative lending, and in 2022 the company was acquired by Stephen Smith’s Smith Financial.

“When I joined in 2017 it was a public company,” Bissada said. “We were taken out of the public market when we were acquired by Stephen Smith, which closed on August 31, 2023, and we have been private since September first.”

In fact, Bissada says that’s what eventually led to the Fairstone merger, as Smith Financial also owns a 40% stake in Fairstone Bank. If the merger is ultimately approved, Smith Financial will retain a majority interest in the combined entity.

“Home is approximately $25 billion in assets under admin today, Fairstone is about $6 billion, so the combined company will be about $31 billion,” Bissada said. “Maybe most importantly is the size of the customers: when you combine the customer base of these two companies, we’ll have over two million customers, which would rank seventh for financial institutions [in Canada].”

Bissada adds that neither company’s customer base is likely to change as they both target similar profiles with entirely different products.

“We continue to serve what we call the ‘alternate clients,’ who are a combination of people who own their own businesses, new immigrants, and people who have a temporarily damaged credit,” he said. “That’s why we believe we’ll be the leading alternative lender in the country; because we’ve got two companies that are focused on the same area with completely different, complementary products.”