First National Financial LP

First National Financial celebrates $100 billion milestone

In 2017, First National joined an exclusive club, previously shared only by Canada’s biggest banks, when it crossed the $100 billion threshold in Mortgages Under Administration.

To mark this achievement, we asked members of senior management to share their thoughts on how a non-bank lender managed to grow so large without branches and without taking deposits.

First, let’s talk about what this milestone means.

Stephen Smith, Chairman and CEO: In the financial services industry, size and corporate longevity are important, so this milestone means a lot to us because it serves to reinforce First National’s position as Canada’s largest non-bank mortgage lender, and Canada’s largest CMHC multi-residential lender. It also demonstrates staying power. Our journey to $100 billion began in 1988 when we wrote our first mortgage.  

Moray Tawse, Executive Vice President: $100 billion is quite impressive but it is the journey to get there that has been most rewarding. Along the way, our team has helped tens of thousands of Canadians realize their goals for real estate ownership. In real estate terms, $100 billion represents an investment in the properties owned by almost 300,000 single family borrowers and over 5,000 commercial borrowers. And it’s those individual accounts and the service we provide to them that really matter to us.

What’s the secret to First National’s success within the single family mortgage market?

Stephen: There is no secret. We attribute our success to several factors, but certainly our decision to embrace the mortgage broker channel in Canada is chief among them. All of our single family origination volumes – which have averaged almost $12 billion per annum over the past five years – have come through that channel and it’s clear that mortgage brokers have become an indispensable part of the real estate purchase process in this country.  It is through their efforts that Canadians have discovered First National’s value proposition.

So that’s why you do not need branches like the banks to serve the single family residential mortgage market?

Scott Mckenzie, Senior Vice President, Residential Mortgages: Correct. We work together with mortgage brokers to offer borrowers great service. In serving borrowers and mortgage brokers, First National tries to go beyond what other lenders do to champion each opportunity. We put in the time to find the right financing solution and we try to be a reliable delivery partner by responding to 90% of applications in under four hours.

What’s driving your success in commercial markets?

Jeremy Wedgbury, Senior Vice President, Commercial Mortgages:  There is no single answer, but one of the factors that commercial borrowers really appreciate is the entrepreneurial culture at First National. Commercial borrowers value the Company’s ability to solve problems, provide business advice and ultimately, get deals done faster and more efficiently than the competition. When Stephen and Moray founded First National, their intention was to fill opportunity gaps in the commercial mortgage market with an entrepreneurial spirit that fostered deep relationships with our borrowers and investor partners. It’s my job to make sure that the 140 dedicated employees in our Commercial business understand and apply this approach daily. I think they do and the $23 billion of commercial mortgages we now have under administration is a good indicator.

How is it possible for a team of less than 1,000 people to administer $100 billion of mortgages and give borrowers, mortgage brokers and your institutional partners good service?

Stephen: It takes more than teamwork, that’s for sure. The answer is that First National employs dedicated, knowledgeable and highly productive Canadians across the country who are supported in their daily activities with robust, customer-facing technologies. With our Merlin mortgage tracking system, First National was the first in the industry to give mortgage brokers real-time insight into each stage of the underwriting process.

Scott: For single family borrowers, My Mortgage serves as a secure online portal they can use to change payment dates, calculate interest savings from payment date changes and access mortgage balances. We put practical technology in our customers’ hands, but we’re also available almost 12 hours a day by phone or at should they need additional assistance and advice.

Jeremy: Experience allows First National to be efficient and effective even though our team is relatively small. For example, our institutional partners including CMHC on the multi-residential side understand that every opportunity we bring forward has been thoroughly vetted by in-house experts who have years of experience in assessing market risks and property values to structure competitive transactions. When we present an investment, our funding partners know it has the First National seal of approval, which makes their due diligence that much easier. Experience is why investors come to First National and stay with us.

Moray: When you consider that First National underwrites about 40,000 mortgages every year, even though we built strong proprietary technologies, it all comes back to people. We’ll be a bit immodest here and say we believe we have the best people in our industry and we’re really proud to note that our customer service is regularly recognized through industry awards.

Stephen: Most of First National’s founding employees remain with the business today and their experience enables the Company to provide the highly responsive service expected by our customers.

First National does not take deposits. Where do the funds come from to lend to borrowers?

Rob Inglis, Chief Financial Officer: As Jeremy said, we maintain a broad range of institutional funding partnerships together with access to securitization vehicles including NHA Mortgage Backed Securities, the Canada Mortgage Bond program and asset backed commercial paper. Our ready access to these cost-effective sources of funds means we can provide borrowers with interest rates that are competitive with the big banks and their balance sheet-driven lending.  

Stephen: More generally, the rise of securitization has been a very significant factor in First National’s growth over the past three decades and has created a market in which the big Canadian banks have to compete for mortgage business, which is very advantageous for residential and commercial borrowers.

First National is a public company, listed on the Toronto Stock Exchange. Has the growth achieved in mortgages delivered value to shareholders?

Rob: Yes, since First National’s IPO in 2006, the Company has paid almost $1 billion in combined distributions and dividends while maintaining a healthy payout ratio.

Looking forward, do you expect to grow beyond $100 billion?

Moray: That same question was probably asked of us about 10 years ago when First National had $20 billion in Mortgages under Administration and again in 2013 when we hit $50 billion. I would say we absolutely intend to continue grow.

Stephen:  With continued focus on good service, leading technology and competitive rates, Moray and I believe First National has the means, the opportunity and the dedication to continue to grow well into the future.

Any final thoughts?

Stephen: We are incredibly proud of the role our Company has played in helping hundreds of thousands of Canadians to achieve their real estate ownership goals for almost 30 years. Our sincere thanks to First National’s employees, our institutional partners, the mortgage broker community and of course our customers for making $100 billion a reality.