Fintech Transforms Canadian Mortgage Experience As Rocket Leaves Market

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The second-largest mortgage lender in the United States and one of the most dominant in the world, Rocket Companies Inc. (RKT:NYSE), announced last month that it was pulling out of Canada to focus on growing the American market.

According to Robert McLister writing for the Financial Post on March 7, the announced cause "delicately sidestepped" the main reason that "such a well-funded, professionally managed and technologically superior lender abandoned Canada."

He continued, "The answer, in one word, is, 'banks.'"

McLister said only a VIP list of eight lenders — mostly Canada's megabanks — have access to covered bonds, which provide low-cost funding for uninsured prime mortgages.

"Meanwhile, prime uninsured loans account for 83% of all new bank mortgages, according to the latest Bank of Canada data," he wrote. "That means bank rivals like Rocket must go hat in hand to beg banks for funding to compete with … you guessed it, the banks."

It is a lesson that many mortgage lenders in Canada learn "the hard way," as it takes patient capital and decades to build something meaningful as a mortgage lender," said Frank Mortgage founder and Chief Executive Officer Don Scott.

"We consciously chose not to be a lender," Scott told Streetwise Reports. "We believe the most efficient and profitable way to build a meaningful presence in the Canadian mortgage market is as a mortgage broker. Margins are healthy and no balance sheet is required. Also, without an affiliated lender we can be truly agnostic to deliver the best outcomes for customers."

Scott said, "The market is due for a transformation and to succeed we need to lead that transformation."

Trade Wars, Recession Affect Market

There are major differences between Canadian and U.S. mortgages, one key one is the length of the term.

"In the U.S. your mortgage term spans the length of the amortization period," BMO Private Wealth explains. "So, at the end of the term, the mortgage will have been paid in full. Canadian mortgages also have an amortization period, which determines the total length of your mortgage, but the mortgage will most likely have a number of shorter mortgage terms within the amortization period. Mortgage terms establish the interest rate and mortgage conditions for a set period of time and are re-negotiated throughout the amortization period in Canada."

Some lending rates are influenced by a central bank, in this case, the Bank of Canada (BoC), which held its benchmark interest rate steady at 2.75% Wednesday, ending a run of seven consecutive cuts, John MacFarlane and Jeff Lagerquist reported for Yahoo! Finance.

"The decision, for which the market had given roughly even odds, comes following weakening inflation data published yesterday, and as Canadian and global economies contend with U.S. President Donald Trump's twisting trade war," they wrote. "In its decision, the Bank noted various signs of the Canadian economy slowing and outlined two possible scenarios that underline the uncertainty of the trade war."

Inflation has risen so far in 2025 and went up 1.9% from the previous month to 2.6% in February, according to the consumer price index, which measures inflation in Canada. That benchmark went down to 2.3% in March.

According to a report by the Globe and Mail on Wednesday, the BoC held off publishing a central forecast amid uncertainty about U.S. trade policy, but outlined two possible scenarios. "The downside scenario sees Canada entering a recession this year and inflation rising above 3%," the article noted.

Trump's trade wars and the possibility of a recession are holding some Canadians back from buying a home.

"A report by the Canadian Real Estate Association found that the number of homes sold in March dropped by 4.8% per month over month on a seasonally adjusted basis, the fewest for that month in 2009," the report said. "It predicted a recession later this year, and said concern about job losses is leading homebuyers to retreat and anxious owners to sell."

Find the Right Loan in a Challenging Market

Frank Mortgage makes mortgages more accessible, the process easier and gives Canadian consumers a better chance at finding the right mortgage in this challenging market.

"It's the biggest financial commitment most Canadians will ever make. And they get no choice. There's no transparency. We aim to fix that," Scott said.

There are many differences between the Canadian and U.S. mortgage systems, but according to Scott, one of the key differences is the country is "five years behind" the U.S. and other countries in implementing technology in the mortgage space.

"We're looking to be a leader and innovator in that implementation of technology for the benefit of the consumer," Scott said.

The company is not a mortgage lender, and Scott said it does not want to be. It sees itself as a gateway to seeing the best rates and deals available to consumers at any given time and then guiding them through the process with less pain and suffering. Think Jerry AI for mortgages instead of car insurance policies.

Frank wants to streamline the experience, as well. Unlike the fractured process many Canadian consumers face now when you "get your mortgage with us, information is easier to find, and document collection is simplified," Scott said. "It's all just one seamless digital environment where you can get your mortgage completed."

In Frank Fintech's app, consumers can see the available rates "right on their screen, right on their cell phone, which is what all the new digital homebuyers of the future want," Scott said. "They can see information that they need to know to be able to make a good mortgage decision, readily available, (and) easy to access."

It will also "show them a marketplace of rates so they understand that there are dozens of lenders that want their business, not just the one that the typical broker will show them," he said.

Under the status quo, most of the country's residential mortgages are at big banks like RBC, Scotiabank, TD, CIBC, BMO, and Desjardins, according to Wowa Leads.

Scott said Frank Mortgage plans to building partnerships with other firms involved in the real estate and financial markets. He said the company has some existing realtor partners and is "bringing on some very significant additions to those partnerships in 2025, which will grow our volume in multiples."

Thousands of Canadians Affected

That interest rate decision will affect thousands of Canadians. According to a national report, overall mortgage debt increased in Canada to CA$2.2 trillion in July 2024.

"Renewal risk remains as 1.2 million mortgages will come up for renewal in 2025," the report also said. "Most of these will experience higher interest rates than when their term began: 85% of those were contracted when the Bank of Canada rate was at or below 1%."

Frank Mortgage's target audience includes new homebuyers, Gen Zers, millennials, and even some late Gen Xers that are first-time homebuyers, the company said. But because they don't offer 30-year mortgages, "renewal business is huge," as well.

"The good news for those getting ready to renew their mortgage is that there will be competition among banks and lenders to retain and attract customers, which could lead to better deals for consumers," Victor Tran, a Toronto-based mortgage broker told Yahoo! Finance.

Frank Mortgage is a private company.