With First National deal, Brookfield beefs up Canadian mortgage business in a big way
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Brookfield is already a significant player in mortgage insurance, following its 2019 purchase of a majority stake in Genworth MI Canada. The balance of Genworth, now called Sagen Mortgage Insurance Co. Canada, was purchased the following year.
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First National underwrites and services mostly prime residential — single-family, multi-unit — and commercial mortgages. With more than $155 billion in mortgages under administration, it is one of Canada's largest non-bank mortgage originators.
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Brookfield's strategy of pursuing growth in the non-bank mortgage segment of private credit goes beyond the potential to integrate mortgage lending and insurance in Canada. The global asset manager has already expanded into the United States with the spring purchase of New York-based mortgage lender Angel Oak Cos. LP.
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Over the past decade, Angel Oak has originated more than US$30 billion in residential mortgage loans and issued over 60 securitizations, a pace that was expected to accelerate as a result of 'growth in borrower segments that are underserved by traditional lenders,' Brookfield said in April.
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Brookfield's growing credit division, which encompasses partnerships with industry players such as Oaktree Capital Management Inc. and 17Capital LLP, already manages more than $300 billion of assets globally.
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The division focuses on a range of private credit investment strategies, including infrastructure, renewables, real estate, asset-backed and corporate credit, with return profiles spanning investment grade, sub-investment grade and opportunistic.
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'Generally, Brookfield seeks to leverage the ecosystem to drive upside for any of their portfolio companies,' said Jaeme Gloyn, an analyst at National Bank of Canada.
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However, he said there are elements in the latest deal that will put some limits on the integration of mortgage underwriting and insurance in Canada. For one thing, Stephen Smith, First National's co-founder and one of its controlling shareholders — who will remain a minority indirect shareholder in First National after the transaction closes — is also an owner of Canada Guaranty Mortgage Insurance Co., the country's other large mortgage insurer that competes with Genworth/Sagen.
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