A new player in canada’s burgeoning mortgage-broker business, MortgageBrokers.com has recently inked two significant partnerships, building up a network of brokers across Alberta, Saskatchewan and Ontario.

The Richmond Hill, Ont.-based company, in operation for less than a year, has acquired The Elite Team, a group of about 20 Ottawa-area mortgage brokers headed by veterans in the mortgage-financing and banking industries, and Lending Source Canada Inc. , a Calgary-based team of about 35 broker-agents who operate in Alberta and Saskatchewan.

“This is evidence of our consolidation strategy of small and medium-sized mortgage brokerages,” says Dong Lee, vice president of operations at MortgageBrokers.com. Today, the company boasts almost 120 mortgage brokers across the three provinces in which it operates. The plan, he says, is to build up the network so that by the end of this year there will be about 200 brokers coast to coast. “Our goal is not based on the number of brokers but the quality,” he says.

The target — aiming for somewhere between $2 billion to $5 billion in mortgage origination volume — appears modest against the backdrop of a market that the Canadian Mortgage Brokers and Lenders estimated in a recent report will be worth $725 billion in 2006, a 10% climb over 2005 figures.

The company’s business strategy revolves around providing equity ownership for the brokers who sign on, says Lee. It is the only independent brokerage that is publicly traded (as an OTC stock) in the U.S.

MortgageBrokers.com’s strategy tackles some common issues in the industry: the retention of top producers (who often strike out on their own after building up their contacts) and the provision of a built-in career exit strategy. Lee says founder Alex Haditaghi, who ran two software companies before becoming a mortgage broker himself, struggled with both issues when he wanted to sell his independent brokerage a few years ago, in order to deal with a family crisis, but was unable to do so.

As well as equity participation, the company offers brokers the benefits of shared services, which reduce operating costs, and what it promises will become a recognizable brand name.

The domain name, which Haditaghi secured 18 months ago, is a critical element in the company’s projected success, according to Lee. “We’re trying to create a brand presence in the industry,” he says, adding that even the so-called “superbrokers” don’t have the brand recognition that top realtors, for example, enjoy. “If you ask customers to name a significant mortgage brokerage firm, they can’t do it,” he says.

Having a universal domain as a brand name is also helpful for future expansion plans, he adds. The company has feelers out in the more mature U.S. market and plans to get its foot in that door by the end of 2006, he says. The company has not yet decided how it will enter the U.S. market, according to Lee, but franchising is a possibility.

The company’s OTC listing in the U.S., which was achieved through a reverse takeover, provides access to capital and ties in with the company’s overall strategy of becoming international. (About 75%-80% of all mortgage transactions in the U.S. are handled by brokers, compared with slightly more than 25% in Canada.)

“Being alone is not all that it is cracked up to be,” says Dave Mercer, the former president of Lending Source Canada and now vice president of sales, Western Canada, at MortgageBrokers.com. He says that, since joining MortgageBrokers.com in October, he has been able to attract almost 20 additional brokers to the network, mostly because of the company’s appealing business model.

The “only as good as our last deal” side of operating as an independent is eradicated with equity ownership, he says: “We are attracting people because they are realizing that the share side of things is going to bring long-term growth and equity, and a retention and exit strategy that really didn’t exist.” Call it the “WestJet factor,” but employee share ownership makes people feel more involved, he adds: “It tends to be more of a ‘we’ company than a ‘me’ company.”

It is not lost on Mercer that the company’s moniker is also a domain address, which is key because the Internet is often the first place consumers go to research mortgage services, he says. In fact, according to the CIMBL report, more than half of mortgage holders consulted at least two professionals when taking out their mortgages. Much of that preliminary research is done online, so having a strong online presence — promoted on radio, in print and through theatre advertising — is critical moving forward, Mercer says. Lending Source’s Web site, which will be folded into MortgageBrokers.com, generated plenty of interest, he says, although final deals do need that face-to-face meeting.

@page_break@“In the end, it always comes down to forming relationships,” says Frank Napolitano, co-founder of MortgageBrokers.com’s other new network partner, The Elite Team.

Formed in April of last year by Napolitano and Michael Hapke, The Elite Team operated under the Mortgage Intelligence umbrella. While the relationship worked on many levels, it was not what the partners envisioned when they both struck out into the business from mortgage sales at TD Bank Financial Group. The sore point revolved around marketing efforts.

According to Napolitano, The Elite Team decided to sponsor a major celebrity golf tournament this past summer but found its efforts diluted by the bigger Mortgage Intelligence organization.

“There were 40 other Mortgage Intelligence brokers in Ottawa. So, in essence, we were marketing them as much as we were marketing ourselves,” he says. “But we were paying for all of it.”

That explains, he says, why the promise of exclusivity in the region of Ottawa, Kingston, Cornwall and Gatineau-Hull was a driving factor behind joining MortgageBrokers.com. The company’s two storefront offices — with two more on the way — have featured the new moniker since the sale in November, he says.

While consolidation is certainly to be expected in such a growing industry, that doesn’t mean that there will be fewer independents in the future, says Jim Murphy, CIMBL’s senior director of government relations and communications. In fact, he says, Canada might expect to see more brokerage firms in the coming years, as more agents strike out on their own — a common phenomenon when an industry is in growth mode.

CIMBL’s emphasis over the short term will be on promoting its 18-month-old accredited mortgage professional designation, Murphy says: “It speaks to our overall desire to raise the professionalism and educational standards of the industry.” TV ads will be aired this fall to promote the designation. IE