Desmarais-Backed Mortgage Firm Nesto Acquires Lender CMLS

Desmarais-Backed Mortgage Firm Nesto Acquires Lender CMLS

Nesto Inc., a Canadian online mortgage company backed by Montreal’s Desmarais family, struck a deal to acquire real estate financier CMLS Group, vaulting it to more than C$60 billion ($43.8 billion) in mortgages under administration.

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Published Jun 21, 2024 • 1 minute read

Homes in Hercules, California. Photo by David Paul Morris /Bloomberg

(Bloomberg) — Nesto Inc., a Canadian online mortgage company backed by Montreal’s Desmarais family, struck a deal to acquire real estate financier CMLS Group, vaulting it to more than C$60 billion ($43.8 billion) in mortgages under administration. 

The companies didn’t disclose financial terms of the deal, which will result in a merged entity with more than 1,000 employees across 10 offices. The transaction was backed by investments from Diagram Ventures, Portage and IGM Financial — all three are affiliated with the Desmarais clan — as well as National Bank of Canada and others, according to a statement Friday. 

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The major banks use legacy systems that are highly complex, Nesto Chief Executive Officer and Co-Founder Malik Yacoubi said in an interview, but by building a cloud-based platform from scratch, the company is able to bring automation and efficiency to the process of granting mortgages. 

The acquisition of CMLS opens new lines of business for the company, including commercial lending. “We’ll continue to operate the CMLS business units as they were. We’ll just make sure we’ll bring value where we can,” he said. 

In May, Canada’s banking watchdog warned that some homeowners who took out mortgages during the pandemic are facing a payment shock as those loans come up for renewal at much higher interest rates. Yacoubi sees it as an opportunity to gain clients, as homeowners widen their search for competitive rates. “We can definitely say that we’re really confident in the Canadian mortgage market,” Yacoubi said in an interview on BNN Bloomberg Television. 

Demand for housing is greater than supply, so residential properties are well-positioned to maintain or increase their value, Yacoubi said. He attributed some of the strength of the demand to the inability of housing developers to keep pace with the arrival of newcomers to Canada. 

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