Home Trust's tale of two portfolios

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Mortgage originations at Home Trust fell by nearly 23 per cent in the third quarter compared to the same period last year, at the same time the lender moved to further reduce its presence in the prime sphere.

The total value of mortgages originated in the third quarter of 2011 was $1.30 billion, for a year-to-date total of $3.87 billion. That represents a decline of 22.6 per cent and 22.9, respectively, from last year`s corresponding periods.

It also “reflects the company's strategy to reduce originations of insured mortgage products, which are generally securitized, and increase focus on originations of higher yielding traditional mortgages,” said CEO Gerald Soloway in quarterly statements released this week.

Originations of insured mortgage – what Home Trust calls its "Accelerator" line – fell to $293.5 million in the three months ending Sept. 30, down to less than half of the $716.9 million recorded for the same three months in 2010.

At the same time, the broker lender bolstered its alternative portfolio, originating $941.1 million of Alt A and B mortgages in the third quarter, compared to the $728.6 million added a year earlier.

Home Trust continues to point to accounting rules that require it to bring securitized mortgages on balance sheet in explaining its move away from prime lending. It isn’t, however, ruling out a future move to re-grow that end of the business.

“The regulatory and accounting treatment of insured securitized mortgages upon adoption of IFRS has introduced new capital constraints and effectively increased the cost of capital allocated to Accelerator mortgages,” said Soloway. “Consequently, the company scaled back lending in this segment in favour of higher margin products within the company's risk appetite. The company continues to explore opportunities that may ultimately lead to future growth in this product segment.”

For now, brokers themselves are increasingly turning to alternative borrowers to help lift originations in and fiercely competitive but slowing market. The strategy is working.

“The prime area was just not competitive anymore because the banks were undercutting the rates I could access by so much that it didn’t make sense to stay solely in the A sphere,” Shawn Allen, owner of the independent Matrix Mortgage Global in Toronto, told MortgageBrokerNews.ca. “About a year ago, I decided to deliberately switch my emphasis to growing the number of B deals. They’re now about 65 per cent of my business and growing.”


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