News interview: Home Trust president Martin Reid
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21/03/2010 9:00:00 AM
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After serving as Home Trust's treasurer for more than two years, Martin Reid assumed his new role as the company's president in December and says - very optimistically, we might add - that he "couldn't have asked for a better situation to come into." CMP caught up with Reid to talk about Home Trust's recent push in the B lending market and its plans for 2010.
CMP: Home Trust recently launched its Classic Program of B lending products. What has been the response so far?
It's been very good. If you look back a year ago, there was a lot of uncertainty in the financial markets and, at this stage of the game, we have a better sense of where things are and we're pretty comfortable with the real estate market. Business is still pretty brisk both in the A product and the B product, so the response to the Classic Program has been very favourable.
CMP: With both the Accelerator program and the Classic program now in place, do you find a lot of the B or alt-A clients Home Trust takes on are able to eventually renew as A clients?
Yes. We're getting clients who, when we didn't have our Accelerator program, may have been lost to the big banks on renewal but now we're keeping that client because we're able to offer products to keep them when they've improved their credit. That's worked out really well for us. Also, if a broker is coming to us with a deal that's on the border, we're able to offer both A and B alternatives and that's getting a very favourable response.
CMP: How has the fluctuation in house prices over the past few months affected Home Trust?
A year ago, there was a lot more uncertainty and that's when we were a little more conservative. We're feeling a lot better about the real estate market now - there's not a lot of inventory so there's pretty good demand - and we're very comfortable about where things are in Ontario and east at this point. Alberta saw a bit more of a downtick in housing values, but it's showing signs of stabilizing. We're still a little bit cautious in B.C. and there's still some question marks surrounding what happens after the Olympics. But most of Canada is in pretty good shape.
CMP: The media has recently covered the situation of subprime borrowers who took out mortgages with lenders who have since left Canada or changed their business. The concern is about where these homeowners will go when they need to get their mortgages renewed. If these types of borrowers approach Home Trust, how will they be addressed?
At the end of the day, it comes down to the underwriting and we need to be comfortable with the risk, but we're always trying to come up with a solution. Our core business has always been about the stuff that the big banks won't look at, so we're used to that type of client where the credit history is not very long or damaged, and we analyze that and underwrite that and understand what the risks are. That's the type of business we're very comfortable with.
CMP: With the expansion of the B product line, has the company's underwriting department expanded?
We have expanded and continue to expand. We increased our organization by 20 per cent in 2009 and through 2010 we see really strong growth. January was a fantastic month - it was well over our expectations.
CMP: Is Home Trust planning to continue its involvement in the Canadian Mortgage Bond program this year?
We've been involved in both the CMHC-sponsored securitization programs - the NHA-MBS (Mortgage-Backed Securities) program as well as the Canada Mortgage Bonds program. Both have proven very strong throughout the financial crisis and so we see our participation continuing. We are largely an on-balance sheet lender, but we are also very active in securitization through both MBS and the CMB program.
CMP: Do you see the company growing more on the securitization side?
Over the last year with the market uncertainty, we were more conservative in our core lending, which is on-balance sheet. We're much more comfortable with the real estate markets today, so we see growth in both areas. We'll continue growing the securitized portion of the business, but we see a lot of good growth in the on-balance sheet in 2010. Also, we're much more comfortable now with our core product than we were a year ago.
CMP: Being one of the largest alternative lenders in Canada, how do you plan to keep Home Trust ahead of the game?
Our strength has been servicing the underserved part of the market, so wherever we see that we can add value, we'll look to take advantage of those opportunities.