TORONTO, Feb. 3 /CNW/ - Home Equity Income Trust (TSX: HEQ.UN) ("HOMEQ")
today announced that it intends to apply to the Minister of Finance for its
operating subsidiary, Canadian Home Income Plan Corporation (CHIP) to become a
federally regulated Schedule I bank. The new bank will be called HomEquity
Bank in English and Banque HomEquity in French. Subject to the review and
approval of its application by the Office of the Superintendent of Financial
Institutions (OSFI) and the Minister of Finance, HOMEQ hopes to be operating
HomEquity Bank commencing in the third quarter of 2009.
HOMEQ's consolidated income is derived from the spread between the
interest earned on reverse mortgages and the interest paid on debt used to
fund these mortgages. The objective of obtaining a bank charter is to enable
HomEquity Bank to access retail deposits sourced through deposit brokers and
directly hold reverse mortgages so as to grow HOMEQ's consolidated reverse
mortgage portfolio and increase its spread income. Retail deposits represent a
stable and cost effective source of funds that will be used to supplement the
wholesale funding strategy HOMEQ has followed since its IPO in 2002.
"It is imperative for our organization to have access to reliable and
effectively priced sources of funding in order to continue to service the
financial needs of Canadians 60 and over," said Steven Ranson, President and
CEO of Home Equity Income Trust. "Access to retail deposits is a prudent and
sensible step at this stage of our evolution and will enable us to meet the
growing demand for our product experienced in recent years." he continued.
Subject to unitholder approval, HOMEQ will convert its business structure
from an income trust to a taxable corporation prior to HomEquity Bank being
continued as a Schedule I bank by the Minister of Finance. Until such time,
HOMEQ expects that it will continue to pay monthly distributions of $0.06 per
unit. Prior to conversion, the Trust will determine an appropriate dividend
policy to be adopted after conversion. HOMEQ plans to call a meeting of
unitholders for the last week of April to approve this conversion. A circular
providing information about the conversion, including the anticipated dividend
policy, will be distributed to unitholders in advance of the meeting.
HOMEQ expects that conversion of CHIP to a bank will not affect the
outstanding notes of CHIP Mortgage Trust, although access to retail deposits
will likely result in future financing being conducted through HomEquity Bank.
"Reverse mortgages are a critical component in retirement planning and
seniors are turning to our product in increasing numbers. We are committed to
constantly enhance our offering and to deliver the best value to our clients,"
said Pierre Lebel, Chariman of the Board of Home Equity Income Trust. "We will
continue to partner with Canada's national chartered banks, mortgage brokers,
and financial planning organizations to offer our product to Canadians 60 and
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 $2.2
billion. CHIP (www.chip.ca), has been the main underwriter of reverse
mortgages in Canada since pioneering the concept in 1986.
The Trust's units trade on the Toronto Stock Exchange under the symbol
HEQ.UN. Additional information on HOMEQ, including annual and quarterly
reports can be viewed at www.homeq.ca.
For further information:
For further information: Gary Krikler, Senior Vice President and Chief
Financial Officer, (416) 413-4679, email@example.com