Introduction
In an industry where private lenders come and go, Three Point Capital has built a reputation for consistency, transparency, and conservative lending practices. Founded from the ashes of Paradigm Mortgage's challenges in the late 2000s, Three Point Capital has emerged as a trusted partner for brokers across BC, Alberta, and Ontario.
In this episode of Behind the Lender, we sit down with Brad Graham, Chief Credit Officer and Principal Broker, and Loren Hawkins, Director of Broker Relations for Western Canada. Together, they share the remarkable story of Three Point Capital's transformation and their approach to building lasting broker relationships.
From Banking to Private Lending: Brad's Journey
Brad's transition from TD Bank's commercial division to private lending wasn't without its challenges. After 19 years in commercial banking across Western Canada, he joined what was then Paradigm Mortgage in 2009 – arguably at the worst possible time.
"I probably jumped ship at the exact wrong time," Brad reflects. "But I would look at it as I probably jumped in at the right time because we put together a great team between 2010 and 2015 where we worked our way through a lot of problems."
The team's approach was refreshingly direct: "We chose never to bury our head in the sand. We hit the problems head-on. We were fully transparent with our investor group." This transparency and determination laid the foundation for what would become Three Point Capital in June 2017.
Loren's Multi-Faceted Industry Experience
Loren brings a unique perspective to Three Point Capital, having seen the industry from multiple angles over his 30+ year career. Starting as a teller in Victoria's credit union system in 1993, he worked his way up through retail lending, eventually managing broker divisions for credit unions before spending time as a broker himself.
This diverse experience proves invaluable in his current role. "I've been around for a while and the broker side's just a great part of the industry," Loren explains. "Having the ability to see this business from a bunch of different lenses allows you to give more of a holistic landscape to the broker market in general."
Three Point's Conservative Philosophy
What sets Three Point Capital apart is their unwavering commitment to conservative lending practices. Despite Brad's commercial lending background, the company deliberately focuses solely on residential properties.
"I am the biggest advocate against commercial lending within a mortgage investment corporation," Brad states firmly. "After what we went through with Paradigm, we wanted to refocus on residential only."
The numbers speak to their conservative approach:
- Average mortgage size: $550,000
- Average loan-to-value: 55%
- Annual book turnover: 70%
- Recent fiscal period losses: Under $50,000 on a $270 million fund
Innovative Product Offerings
Three Point Capital offers several unique programs that set them apart in the private lending space:
Pathfinder Program
Their flagship one-year term program offers three options, including a rare no-fee option. "We pride ourselves on full transparency to our partners and then through to the consumer," Loren explains. "What you see in our rate sheets is what the client gets."
Elevation Program
A fee-split model that pays brokers competitive compensation while maintaining lending standards. The program offers a 50/50 split on a 3% lender fee, paying brokers 1.5% – "one of the highest comps out there in our industry," according to Loren.
Horizon Program
A new closed-term option responding to market demand for stability, starting at 5.35% up to 60% LTV with a 3% lender fee.
Construction Lending Excellence
Three Point Capital's construction program showcases their attention to detail and risk management. Key features include:
- Maximum $1.5 million single-family construction
- Up to 65% of end value
- Full new home warranty required
- 24-hour draw turnaround after inspection
- Percentage complete basis (not cost to complete)
- Maximum 10% of total fund in construction
"We get an inspection report, that draw is turned in 24 hours or less," Brad emphasizes, highlighting their commitment to builder relationships.
The Art vs. Science of Lending Locations
When it comes to deciding where to lend, Brad emphasizes the importance of balancing data with intuition. "The biggest item I instill on our underwriting team is the art versus the science," he explains.
The team considers marketability, sales activity, and exit strategies when evaluating locations. "You don't want to look up MLS stats and figure out only two houses sold there in the last 8 months, because that's how you get out of properties when you do have trouble."
Working with Brokers: Best Practices and Common Mistakes
Loren emphasizes the importance of complete applications and detailed notes. "First off, I want to see a full application. I don't want to start throwing stones, but there are more and more deals coming in where we're seeing blank applications."
Common mistakes include:
- Incomplete applications
- Vague notes ("80% LTV bro" being a memorable example)
- Weak exit strategies
- Hiding file complications rather than being upfront
"If we're asking questions, that means we're doing our best to try to put this together," Brad notes. "There is no such thing as a slow no. If it's a no, we're going to tell you immediately."
Current Market Trends and Future Outlook
Brad observes that 2024 has brought weaker quality applications, reflecting broader economic challenges. "There's a lot of consumers out there that are in a tough position," he notes, citing job market uncertainty and economic pressures.
Despite challenges, the team sees positive evolution in the private lending space. "Private lending to me used to be seen as a last resort, and I've definitely seen that perception changed. More brokers today are treating private as a legitimate tool, not a fallback."
Key Takeaways
- Transparency and conservative risk management are fundamental to long-term success in private lending
- Multiple product options allow brokers to find the right fit for each client's situation
- Strong broker relationships and education are essential for mutual success
- Complete applications with detailed notes significantly improve approval chances
- The private lending space has evolved into a sophisticated, legitimate financing option
- Focus on 2-3 MICs with different appetites rather than trying to work with 10+
Why You Should Listen
This episode provides invaluable insights into building and maintaining a successful mortgage investment corporation. Whether you're a broker looking to expand into private lending or seeking to improve your deal packaging skills, Brad and Loren's practical advice and industry experience offer actionable strategies for success. Their story of transformation from Paradigm's challenges to Three Point's success demonstrates the importance of transparency, conservative risk management, and strong relationships in building a sustainable lending business.
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