Home Equity Income Trust Announces the Release of its Third Quarter 2008 Financial Results and a Reduction in Monthly Distributions.

    Highlights of Q3 2008 compared to Q3 2007

    -  Originations grew by 10% to a quarterly record of $38 million;
    -  The mortgage portfolio grew by 18% to $798 million;
    -  Normalized income per unit decreased 21% to %0.286;
    -  Monthly distribution per unit reduced from $0.09 to $0.06.

    TORONTO, Nov. 11 /CNW/ - Home Equity Income Trust (TSX: HEQ.UN (HOMEQ or
the Trust)), which pays cash distributions earned from a portfolio of reverse
mortgages originated by Canadian Home Income Plan (CHIP), today announced its
financial results for the quarter ended September 30, 2008.
    Financial and economic uncertainty continued both nationally and
internationally during the quarter and difficult conditions in the capital
markets persist. Under these circumstances, the Trust has displayed resilience
and has continued to produce encouraging results.
    During the quarter, mortgage originations of $38 million grew 10% over Q3
2007, and trailing four quarter originations grew to $139 million in
comparison to $118 million during the period ended Q3 2007. The aggregate of
new mortgage originations and accrued interest is outpacing repayments,
resulting in acceleration in the rate of growth of the mortgage portfolio.
During the trailing four quarters ended September 30, 2008 the portfolio grew
18% or $120 million to $798 million.
    "As a result of conservative underwriting policies, our portfolio
currently has an average loan-to-value of 36%, and less than 1% of the
portfolio has a loan-to-value of over 70%, which would reduce the impact of a
drop in residential real estate, should that occur. Over the last several
years we have refined our underwriting inputs to reduce risk in the event of
future property depreciation, and are constantly assessing residential real
estate trends across the country", said Steven Ranson, President and CEO.
    In order to ensure immediate availability of funds to finance new
originations during this period of volatility, earlier in the year the Trust
increased its cash holdings to higher than historical levels. The increased
level of cash, while important from a risk management perspective, is having a
near term negative impact on normalized income as the interest rate earned on
the investment of the cash balances is less than the cost of the debt. During
Q3 2008, the Trust maintained significant cash holdings for the whole quarter
and thus incurred the related negative impact for the entire period.
    In addition, the difference between the Prime Rate and the rate on
Government of Canada Treasury Bills, on which mortgage rates have historically
been based, and the rate on Bankers' Acceptances, on which the Trust's debt
and hedging instruments are based, have deviated significantly from historical
norms. Both of these situations have resulted in a reduction of spread
percentage to 3.04%. In response, the Trust has increased the interest rate
charged for new mortgages and has changed the interest rate reset methodology.
These changes, however, will take some time to be fully reflected in the
Trust's results until such time as a greater proportion of the Trust's
portfolio is priced using the new methodology. In the interim, the Trust is
actively managing its administration expenses. In the quarter, administration
expenses were 0.63% of the average mortgage balance compared to 0.79% in Q3
2007.
    The Trust's most recent revisions to underwriting assumptions will reduce
the average mortgage amount for new clients by between 5% and 15%. In addition
ongoing financial and economic uncertainty might reduce consumer confidence
among Canadian seniors making them less likely to consider a reverse mortgage.
Despite the strong growth in originations experienced so far this year, the
Trust anticipates that by the end of 2008, year over year origination growth
will moderate to between 0% and 5%. In response to the possibility of lower
originations in Q4, the Trust has taken steps to reduce costs by scaling back
marketing and overhead expenditures and rationalizing its sales territories.
    As a result of current uncertainty in the capital markets we have decided
to reduce the monthly distribution to reflect the approximate current level of
taxable income. We believe that retaining capital is a sensible move to ensure
the stability and predictability of the Trust's performance. Effective
November 30th the monthly distribution will be changed from $0.09 to $0.06 per
unit.
    "It is our responsibility to consider the near and long term financial
health of the Trust and to adopt measures that ensure the ongoing success of
the business, recognizing that access to capital markets may remain difficult
for the foreseeable future. Based on the prudent steps taken to date and our
current levels of cash and cash equivalents, we expect to have sufficient
capital through to the last quarter of 2009. We are well positioned to take
advantage of the eventual stabilization of the financial markets and continue
to profitably build our portfolio," Mr. Ranson concluded.

    Quarterly Financial Statements and Conference Call

    The Q3 2008 interim financial statements are available on the Trust's
website at www.homeq.ca and www.sedar.com.
    HOMEQ will hold a conference call to discuss these financial results on
November 12, 2008 at 10.00 am (Eastern).
    Available on the call to answer questions will be Steven Ranson,
President and Chief Executive Officer, and Gary Krikler, Senior Vice President
and Chief Financial Officer.
    To participate in the conference call, please dial 1-888-892-3255.
    A live audio webcast (listen-only mode) of the conference call will be
available at www.homeq.ca.
    An archived recording of the call will be available at 1-800-937-6305
(conference ID 149305).

    Non-GAAP Measures

    The Trust uses a number of financial measures to assess its performance.
Some measures are calculated in accordance with GAAP, such as operating margin
and net income. Other measures such as distributable cash and net spread are
non-GAAP measures. These measures do not have standardized meanings under GAAP
and may not be comparable to similar measures used by other trusts and
companies.

    Forward Looking Statements

    Home Equity Income Trust from time to time makes written and verbal
forward-looking statements about business objectives, operations, performance,
and financial condition, including, in particular, the forecast of cash
distributions and the likelihood of HOMEQ's success in developing and
expanding its business. These may be included in the Annual Reports,
regulatory filings, reports to unitholders, press releases, Trust
presentations and other communications. These forward-looking statements are
based upon a number of assumptions and estimates that are inherently subject
to significant uncertainties and contingencies, many of which are beyond the
control of HOMEQ. Actual results may differ materially from those expressed or
implied by such forward-looking statements. HOMEQ does not undertake to update
any forward-looking statement, whether written or verbal, that may be made
from time to time.

    About Home Equity Income Trust

    Home Equity Income Trust provides unitholders with monthly cash
distributions from a portfolio of reverse mortgages originated by its wholly
owned subsidiary Canadian Home Income Plan Corporation. As of September 30,
2008, the portfolio generating cash returns to the Trust comprised
approximately 7,000 reverse mortgages with an accrued value of $798 million,
secured by residential properties across Canada worth approximately of $2.2
billion. CHIP (www.chip.ca), has been the main underwriter of reverse
mortgages in Canada since pioneering the concept in 1986.

    %SEDAR: 00018040E

For further information: Steven K. Ranson, President and Chief Executive
Officer, (416) 413-4663, sranson@homeq.ca or Gary Krikler, Senior Vice
President and Chief Financial Officer, (416) 413-4679, gkrikler@homeq.ca