Canadian Home Income Plan Corporation is now HomEquity Bank
TORONTO, Oct. 13 /CNW/ - HOMEQ Corporation (TSX: HEQ) (HOMEQ) today announced that its operating subsidiary, Canadian Home Income Plan Corporation, has received its Letters Patent and Order to Commence as a federally regulated Schedule I bank from the Minister of Finance, effective immediately.
Canada's newest chartered bank is called HomEquity Bank (Banque HomEquity). As a chartered bank, HomEquity Bank will have immediate access to retail deposits sourced through deposit brokers.
HomEquity Bank's predecessor, Canadian Home Income Plan Corporation, has been the main underwriter of reverse mortgages in Canada for more than 20 years. HomEquity Bank will continue to provide reverse mortgages to Canadian homeowners aged 60 or older under the CHIP Home Income Plan brand.
"The continuance as a bank is part of a strategic initiative that allows access to additional cost-effective and reliable sources of funding, which will directly enhance our ability to offer competitively positioned products and services to meet client needs and grow our business overall," said Steven Ranson, President and CEO.
"We have demonstrated that a company with a trusted brand, high-demand products and strong customer and partner relationships can forge ahead and achieve significant milestones," added Ranson. "Our established corporate culture, well-defined business philosophy and innovative, capable team have all played a major role in our success in the past and through the bank application process. Undoubtedly, they will continue to play a vital role in our future growth."
Canadian seniors will benefit from lower interest rates on reverse mortgages through HomEquity Bank's ability to access retail deposits, diversifying the bank's sources of funding and lowering its cost of borrowing. With reverse mortgage interest rates already at an all-time low, in anticipation of becoming a bank, rates were recently further reduced by up to one per cent to as low as 4.95 per cent.
"Reverse mortgages have no income, credit or health qualifications. Unlike traditional loans, borrowers don't have to service the interest or repay the principal for as long as they own their home and are living in it. This makes reverse mortgages appealing to seniors who have a large portion of their equity tied up in their homes," said Greg Bandler, Senior Vice President.
HomEquity Bank will continue to evaluate additional features, options and products with the objective of providing Canada's seniors with an ever greater number of home equity borrowing options.
"The seniors market is the fastest growing segment of the population and we will use our accumulated experience and understanding of Canadian seniors and their financial needs to provide even more flexible solutions," added Bandler.
HomEquity Bank will continue to partner with Canada's national chartered banks, mortgage brokers and financial planning organizations to offer its reverse mortgage solution to Canadians aged 60 and over.
By obtaining chartered bank status, significant benefits are anticipated in the following areas:
- Retail deposits represent a stable and cost-effective source of funds
that will diversify the wholesale funding strategy previously used;
- Access to additional cost-effective and reliable sources of funding
will enable HomEquity Bank to meet the growing financial needs of
Canadian seniors, allowing it to increase annual originations and the
resulting value of its portfolio of reverse mortgages;
- Access to cost-effective sources of funding will improve margins and
enable HomEquity Bank to offer lower consumer pricing;
- HomEquity Bank will benefit from the efficiency of being federally
regulated. This will elevate reverse mortgage supervision to a
consistent national standard, and in so doing will raise awareness and
greater understanding of a solution that meets the specific financial
needs of a growing segment of the population.
In the quarter ended September 30, 2009, HomEquity Bank will increase its portfolio reserves by $1.7 million following which the total of its non accrued interest and portfolio reserves will be $2.1 million, equivalent to 0.25% of the total value of the mortgage portfolio. The increase follows a comprehensive assessment of statistical and qualitative analyses of the underwriting performance of each mortgage as well as changes in the characteristics of the portfolio. The assessment included a review of general real estate conditions and trends and their potential impact on the portfolio. In determining its level of portfolio reserves, HomEquity Bank also considered OSFI's Guideline C-5 General Allowances for Credit Risk. The increase in reserves will result in HOMEQ taking a non cash, after-tax charge of $0.08 per share in the quarter ended September 30, 2009.
HOMEQ estimates that the pro-forma Total Capital Ratio of HomEquity Bank at June 30, 2009, including the impact of the above noted increase in reserves, would have been in excess of 16%.
Forward Looking Statements
From time to time, HOMEQ Corporation makes written and verbal forward-looking statements about business objectives, operations, performance, and financial condition, including the likelihood of HOMEQ's success in developing and expanding its business. These may be included in HOMEQ's or its predecessor's Annual Reports, regulatory filings, reports to shareholders, press releases, 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 HomEquity Bank and HOMEQ Corporation
HomEquity Bank is a Schedule I Canadian Bank and a wholly-owned subsidiary of HOMEQ Corporation. HOMEQ's shares trade on the Toronto Stock Exchange under the symbol HEQ.
HomEquity Bank is the only national provider of reverse mortgages to homeowners aged 60 and over, Canada's fastest growing demographic segment. HomEquity Bank originates and administers Canada's largest portfolio of reverse mortgages under the CHIP Home Income Plan brand. As of June 30, 2009, the mortgage portfolio comprised approximately 7,000 reverse mortgages with an accrued value of $833 million, secured by residential properties across Canada worth approximately $2.3 billion. HomEquity Bank's predecessor, Canadian Home Income Plan Corporation, has been the main underwriter of reverse mortgages in Canada since pioneering the concept in 1986.
HomEquity Bank has an effective direct-to-consumer distribution model as well as a well-established referral network. This extensive referral network includes all major Canadian banks, credit unions, mortgage brokers, investment and financial planning firms.
HomEquity Bank also offers competitive Guaranteed Investment Certificates (GICs) to investors across Canada through independent deposit brokers and major Canadian banks. For more information about HomEquity Bank, please visit www.homequitybank.ca. Additional information on HOMEQ, including annual and quarterly reports can be viewed at www.homeq.ca.
SOURCE HomEquity Bank
For further information: For further information: Arthur Krzycki, Director, Public Relations, HomEquity Bank, (416) 413-5182, email@example.com; Buket Oktem, MAVERICK Public Relations, (416) 640-5525 ext. 223, firstname.lastname@example.org