Alternative lender boosts securitization and broker options

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Equitable Trust says it aims to ramp up mortgage securitization in 2013 using “a new tool” that could ultimately expand options for brokers and their clients across the sector.

“Current developments have allowed us to increase activity in this space and bring in $164 million in new dollars for this quarter through higher securitization,” said Andrew Moor, president and CEO of Equity Trust, during release of the lender’s Q3 report last week. “We now have a new tool at our disposal to enable these mortgages to qualify for balance sheet de-recognition.”

The securitization process allows mortgage originators to effectively sell and transfer mortgage loans from their books and use the money to make more loans. Although IFRS accounting changes as of last year require lenders to keep securitized mortgages on their balance sheets, alternative lender Equitable has now developed a plan that will allow it to take single-family insured mortgages off book, and not just multi-family mortgages.

“We are now almost 50-50 between core lending and securitization,” said Moor. “And we are looking to greater activity in this space in 2013.”

Equitable has been using three variations of securitization strategies, according to CFO Tim Wilson.

  • Selling non-pre-payable  mortgage-backed securities to Canada Housing Trust, but not selling the interest only strips related to the mortgages, to allow de-recognition in the balance sheets
  • Selling pre-payable multi-unit and single-family MBS to the Canada Housing Trust along with their related interest strip, allowing de-recognition on the balance sheets
  • Use of securitization models that keeps assets on balance sheets

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