The Ontario Teachers’ Pension Plan has acquired HomeEquity Bank, the largest provider of reverse mortgages in Canada.
HomeEquity Bank has said that under its new owners it will continue its plan to increase mortgage origination by more than 20% this year to more than $ 1 billion. Teachers acquires HomeEquity Bank from owner Birch Hill Equity Partners Management Inc .; neither party disclosed the terms of the agreement.
“We are truly delighted to have another owner who is committed to the long term vision of the business,” Steven Ranson, CEO of HomeEquity Bank said Wednesday. “Birch Hill has been incredibly supportive and we believe Teachers will be exactly the same – for employees, management, customers, our referral partners. …. They really are the best buyer I can think of.
Reverse mortgages allow homeowners 55 years of age or older to borrow against their primary home without making repayments on the loan until it matures, typically when the homeowner moves, sells the home, or dies. The loans generally carry higher interest rates than conventional mortgages to compensate the lender for the longer term until repayment, which can average from nine to 12 years.
Mr Ranson said Canadians have over $ 5 billion in reverse mortgages outstanding – and HomeEquity has underwritten over 90 percent of them. Its flagship product is called the CHIP reverse mortgage.
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In a statement, Karen Frank, senior managing director of equities at Teachers, said HomeEquity Bank is adjusting its portfolio of financial services investments in part because of Canada’s aging population – and the increased attractiveness of staying in their own home as they age – gives HomeEquity the opportunity to grow its business.
In 2019, HomeEquity sold $ 75 million of its loans to Concentra Bank, a Saskatoon-based wholesale banking and trust company provider to credit unions. It was the first time that a portfolio of this special category of home loans had been sold as a financial product in Canada, and it gave HomeEquity Bank a new source of funding. (It sold an additional $ 100 million of its loans to Concentra at the end of 2020.) HomeEquity Bank will continue to administer the mortgages on behalf of Concentra.
The Office of the Superintendent of Financial Institutions (OSFI), HomeEquity Bank’s main regulator, likes to see “diversification if something goes wrong in one aspect of the market,” Ranson said.
In 2020, HomeEquity Bank recorded $ 57.6 million in profit on net interest income – a banking measure comparable to income – of $ 123.5 million, according to financial statements filed with OSFI. In the first six months of 2021, it recorded profits of $ 31.4 million on net interest income of $ 70.2 million.
With files from James Bradshaw
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