Beyond the Banks
As we use and rely on the Internet more each day, the World Wide Web truly is changing the way we view the world and interact throughout our day-to-day lives.
Last May, Statistics Canada released data showing that more than 73% of Canadians used the Internet in 2007. That number jumped to 80% in 2009. An article in the Globe and Mail this March suggests that the average Canadian spends 43 hours per month on the Internet, compared to the world average of 23 hours per month. This gives Canadians ‘tops in online engagement’. This level of engagement means that Canadians are confident and comfortable online.
One aspect that has changed considerable over the past few years is online banking and financial transactions. Companies such as ING Direct and PC Financial were novelties just a few years ago, but have since become household names. At the time that we started to see their magnetic orange branding, ING didn’t have any ‘bricks and mortar’ branches. Years later we still don’t see ING branches, but we all know ING and what they represent: innovation, savings and not your ‘traditional’ bank.
The savings that ING was able to pass on to customers is also true for the mortgage industry. As many are finding out, there are many options available outside ‘The Big Five’ banks. But as Canadians secure more financing outside the ‘Big 5’ do they know these other institutions? Many of these companies fund billions of dollars each year but, unlike ING, they don’t have flashy advertising. They too don’t have traditional ‘bricks and mortar’ branches and overhead costs, instead passing these savings on to clients in the form of more mortgage options and lower rates.
Below are just a few of the non-bank lenders available:
In 1995, CIBC bought FirstLine Trust and transformed it into FirstLine Mortgages, a division of CIBC Mortgages Inc. FirstLine focuses on selling mortgages through independent mortgage brokers and is a leading issuer of mortgages through mortgage brokers in Canada. CIBC has invested in FirstLine and, as a result, FirstLine has grown from originating $0.5 billion in mortgages in 1995 to originating $10 billion in 2005: www.firstline.com
First National Financial (TSX: FN) is a Canadian-based originator, underwriter and servicer of predominantly prime residential and commercial mortgages. With more than $53 billion in mortgages under administration, First National Financial is Canada’s largest non-bank originator and underwriter of residential mortgages, and is ranked third in market share in the growing mortgage broker distribution channel: www.firstnational.ca
Since commencing operations in 2007, Street Capital has rapidly grown to become a significant and successful participant in the prime residential mortgage market in Canada, originating more than $5.3 billion in mortgages to date. Street Capital was ranked 8th in the Canadian mortgage broker channel in terms of mortgages originated during the quarter ended September 30th, 2010.
Recently Counsel Corporation (TSX: CXS) signed a non-binding letter of intent to acquire 100% of the outstanding shares of Street Capital. Counsel Corporation is a private equity investor and alternative asset manager: www.streetcapital.ca
MCAP is Canada’s largest independent mortgage and equipment financing company, with more than $25 billion in assets under administration. The company operates in four key lines of business: residential mortgages, commercial mortgages, construction loans, and equipment financing. MCAP originates, underwrites, securitizes and services mortgages, and has more than 100 institutional investors and more than 130,000 borrowers: www.mcap.com
Institutions such as the ones described above are typically at the forefront of bringing innovations to the mortgage industry with unique mortgage features, payment options and payment frequencies. Although these institutions are not considered banks, they have to follow the same rules, regulations and underwriting guidelines as the major banks. These non-bank lenders and many others help create a robust and competitive mortgage industry in Canada.
