Opinion | The Faceoff: Digitization primed alternative lender Home Capital Group for the pandemic shift and a growing market, however First National is exposed to less risk

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The Faceoff: Digitization primed alternative lender Home Capital Group for the pandemic shift and a growing market, however First National is exposed to less risk

This specialized alternative lender has been in the news recently for the high-profile appointment of former Rogers CEO Joe Natale to its board of directors.Maria-Gabriella Khoury, senior vice-president of North American financial institutions at credit ratings agency DBRS Morningstar, said Home Capital’s customer base includes many self-employed, new immigrant or otherwise alternative borrowers, a market she predicts will only grow in the coming months and years.

Because Home Capital already offers higher-priced products than institutions that deal primarily in prime rates, the firm has some flexibility in adjusting to rate hikes that other firms might not have, said Khoury. Home Capital has less competition than First National, one of the largest nonbank mortgage finance companies, according to DBRS Morningstar, which is primarily competing with other institutions offering prime rates. That’s because First National’s customer base is narrower, said Khoury, as it mainly deals directly with the mortgage brokers, while Home Capital deals with brokers, borrowers, depositors and others.

First National does have some alternative lending products but they’re not the company’s bread and butter, unlike Home Capital, said Khoury.Because of these differences, however, First National is generally exposed to less risk than Home Capital. During the pandemic, this paid off — its 2021 financial report shows that despite the volatility of the pandemic, the firm benefited from its business model.

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