Inside DLC’s $58.5-million Filogix deal and what it means for brokers

Dominion Lending Centres’ $58.5-million acquisition of mortgage technology provider Filogix has put two of Canada’s most widely used mortgage submission platforms under common ownership.

DLC Group founder and CEO Gary Mauris told Canadian Mortgage Trends that Filogix will remain separate from Velocity and continue serving brokers across competing networks. However, others in the mortgage technology sector say the deal’s longer-term impact on competition will be worth monitoring.

According to Mauris, Filogix parent Finastra Holdings began an auction process late last year, but initial talks between the two companies were called off soon after they began in February.

“We disengaged with them, and then recently re-engaged with them over the last three weeks and brought the deal together very quickly,” he says. “We knew it was for sale, and we thought that we could be very good stewards of that asset.”

Mauris adds that Finastra Holdings is owned by Vista Equity Partners and that the Texas-headquartered enterprise software investment firm has been selling off its Canadian assets recently.

“They divested like six assets in the last 12 to 15 months, and we had done a really good job at Velocity in being a competitor, so they thought the timing was right to put the asset up for sale,” he says.

Business as usual under new ownership

Despite taking ownership of the platform, Mauris says DLC has no plans to shut it down or integrate it with Velocity.

“We’re keeping the existing management team in place and there isn’t going to be any commingling of the DLCG broker group and the technology-utility group of Filogix,” he says.

Mauris emphasizes that both platforms will continue to operate independently, though they will share some back-end services, such as human resources, payroll and compliance.

“We’re never going to cross-sell, we’re not going to sell your data, it’s business as usual,” he says. “I don’t care who you are, whether you’re with DLC or a competitor, nothing is going to change day-to-day, and now you have a completely redundant system, which is good to have.”

Mauris explains that the redundancy gives users an alternative that can help them avoid costly delays in the event of a system update or outage. He also assures customers that DLC intends to invest in the Filogix platform moving forward, particularly in its artificial intelligence capabilities.

“They were owned by a company that wasn’t making much investment into the space, and now they’re owned by a company that is all about improvement and making investments,” Mauris says. “If you like Filogix today, it’s only going to get better.”

Questions about competition

Though Mauris is adamant that the DLC-owned platforms will remain operationally separate, the deal ultimately puts two of the country’s most popular mortgage submission tools under the same ownership.

**Tom Hall, co-founder and co-CEO of BluMortgage**

“I’m just wrapping my head around it, like everybody else,” says Tom Hall, co-founder and co-CEO of CRM provider BluMortgage. “It’s an exciting deal, and I think the overall sentiment brokers should have is an optimistic one, but it’s also a situation worth monitoring.”

For much of its 34-year history, Filogix was the dominant submission platform used by Canadian brokers, with its Expert tool once used for more than 90% of all deals. That started to change in 2016 when DLC purchased Marlborough Stirling Canada Limited (MSC), which later became Newton. Today, brokers have a variety of options, including M3 Group’s BOSS, Lendesk’s Finmo and TMG’s Hurricane.

“The competition was great; it was great for brokers, and it was really great for technology providers,” Hall tells CMT. “Better features for the brokers, better connectivity for tech partners, and it was a really dynamic environment, so I guess the question is, are we going back that way?”

hough Hall says DLC’s acquisition could mark the start of further consolidation in the industry, he says the company has earned a certain degree of credibility in that regard. “They could have many times forced things on people, but they chose not to, and I think that should give people some comfort,” he says.

Mauris, meanwhile, argues that platforms like Filogix don’t come up for sale often, and that the industry has little reason to fear that it will lead to further consolidation in the future.

“If we were consolidating it, closing it down and moving everyone over to Velocity, you would have that argument, but we’re not taking choice away,” Mauris says. “We’ve got a proven track record of investing in Canadian mortgage technology and the Canadian mortgage industry, so we think we’re preserving choice.”

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