Brookfield's Strategic Expansion in the Mortgage Lending Sector: Assessing the Long-Term Value Creation Potential of Dual Canadian and U.S. Acquisitions

Brookfield Asset Management has long been a master of capital allocation, leveraging its global reach and deep sector expertise to build a diversified portfolio of alternative assets. In recent years, the firm has turned its attention to the mortgage lending sector, making strategic acquisitions in both Canada and the U.S. to solidify its position in a market undergoing significant structural shifts. This article evaluates the long-term value creation potential of Brookfield's dual Canadian and U.S. mortgage acquisitions, analyzing their alignment with industry trends, operational synergies, and the risks inherent in its unconventional business model.

Strategic Fit: Filling the Gap in a Post-Bank Era

The U.S. and Canadian mortgage markets are experiencing a seismic shift as traditional banks retreat from the sector due to regulatory pressures, capital constraints, and low-margin lending environments. This vacuum has created fertile ground for non-bank lenders and private credit platforms, which Brookfield has aggressively targeted.

In Canada, Brookfield's acquisition of First National Financial in July 2025 for $2.9 billion marked a pivotal move. First National, a dominant non-bank mortgage originator with $155 billion in managed mortgages, complements Brookfield's 2021 purchase of Sagen MI Canada (formerly Genworth MI Canada), the country's largest mortgage insurer. Together, these assets form a vertically integrated mortgage ecosystem, enabling Brookfield to control risk assessment, insurance, and origination. This integration reduces intermediation costs and enhances margins, particularly in a low-interest-rate environment where insurance premiums and origination fees become more valuable.

In the U.S., Brookfield's partnership with Angel Oak Companies in April 2025 further expanded its footprint. Angel Oak, a leader in non-agency residential mortgage lending and asset management with $18 billion in AUM, brings a vertically integrated platform that includes wholesale lending and credit strategies. By acquiring a majority stake, Brookfield gains access to the non-QM (qualified mortgage) segment, a niche market with growing demand as borrowers seek alternatives to traditional bank products. This aligns with broader trends: U.S. commercial real estate debt is set to mature $4.5 trillion between 2025 and 2028, creating a refinancing boom that non-bank lenders are uniquely positioned to service.

Market Dynamics: Leveraging Megatrends

Brookfield's mortgage strategy is underpinned by three macroeconomic megatrends:
1. Private Credit's Rise: The U.S. private real estate credit market has grown from $8 billion in annual fundraising (2009–2011) to $31 billion annually by 2024. Brookfield's credit segment, which includes mortgage-related assets, raised $14 billion in Q1 2025 alone, signaling strong investor appetite for alternative lending.
2. Refinancing Tailwinds: With $4.5 trillion in U.S. commercial real estate debt maturing over the next four years, Brookfield's Angel Oak platform is well-positioned to capture refinancing demand, particularly in the non-QM space where banks are less active.
3. Energy Transition and AI Infrastructure: While not directly tied to mortgages, Brookfield's $8.2 billion acquisition of Westinghouse Electric Company in 2023 reinforces its role in energy infrastructure, a sector that indirectly supports housing demand through long-term economic stability and job creation.

Risks and Criticisms: The Brookfield Model Under Scrutiny

Despite these strengths, Brookfield's business model has drawn skepticism. Critics, including Veritas' Dimitry Khmelnitsky, argue that the firm's reliance on related-party transactions and opaque valuations creates conflicts of interest. For instance, Brookfield's property valuation assumptions have remained largely unchanged since 2019, despite higher borrowing costs and the rise of remote work, which have depressed real estate values. This raises questions about the fair valuation of mortgage collateral and the resilience of its insurance-linked assets.

Additionally, Brookfield's insurance expansion—targeting $300 billion in assets by 2029—relies heavily on less-liquid assets such as infrastructure and private debt, many of which are tied to other Brookfield entities. While this creates a “closed-loop” ecosystem, it also increases regulatory and liquidity risks, particularly if underlying assets underperform.

Long-Term Value Creation: A Calculated Bet

Brookfield's mortgage acquisitions represent a calculated bet on the future of credit markets. The firm's ability to generate long-term value hinges on three factors:
1. Operational Efficiency: By integrating First National and Sagen MI Canada, Brookfield can reduce costs and capture cross-selling opportunities. For example, Sagen's mortgage insurance could be bundled with First National's loans, creating a one-stop solution for borrowers.
2. Regulatory Navigation: Brookfield must navigate evolving regulations in both Canada and the U.S. For instance, the FRTB (Fundamental Review of Trading Book) rules under Basel III could further pressure liquidity in the U.S. mortgage market. However, its expertise in alternative assets may insulate it from some of these risks.
3. Diversification: Brookfield's mortgage portfolios are part of a broader $317 billion credit business, which includes infrastructure, private equity, and energy. This diversification reduces sector-specific risks and provides stable cash flows even if one segment faces headwinds.

Investment Thesis and Recommendations

For investors, Brookfield's mortgage strategy offers a compelling mix of growth and stability. The firm's acquisitions in Canada and the U.S. align with secular trends in private credit and refinancing demand, while its diversified credit platform mitigates risks. However, the opaque nature of its valuations and related-party transactions warrant caution.

Key recommendations:
- Long-term investors should consider Brookfield's mortgage assets as a core holding, given their alignment with the secular shift toward non-bank lending.
- Short-term traders may benefit from volatility around regulatory updates (e.g., FRTB implementation) and refinancing activity in 2025–2026.
- Due diligence is critical: Monitor Brookfield's property valuations, liquidity metrics, and regulatory filings to assess the health of its mortgage portfolios.

In conclusion, Brookfield's dual Canadian and U.S. mortgage acquisitions represent a bold but defensible strategy in a fragmented market. While risks exist, the firm's operational expertise, capital flexibility, and alignment with macroeconomic trends position it to create enduring value—provided it can navigate the challenges of transparency and regulatory scrutiny.