Home Capital Group Inc. has announced plans of offering residential mortgage-backed securities on a regular basis.
On Monday, CFO Brad Kotush said that the lender is mulling the issuance of two RMBS deals a year. This is after Home Trust successfully raised $425 million in non-prime loans.
In mid-2019, the Bank of Canada indicated that it is considering boosting the market for RMBS, especially since only around 0.1% of the nation’s mortgage debt is in RMBS deals.
“By starting this sustainable program of RMBS issuance we may, with the support of other industry participants, help to establish a private RMBS market in Canada,” Kotush stated, as quoted by Bloomberg.
Earlier this year, a long-term markets observer argued that RMBS might be the key to fending off a major crisis similar to that which plagued the US market a decade ago.
“While lenders are very well equipped to manage normal market risks, I suspect they are rather unwilling to take on the additional risk of future government intervention in the housing markets,” according to Andrey Pavlov, a professor of finance at the Simon Fraser University’s Beedie School of Business.
“Therefore, lenders are likely more interested today than they have ever been in hedging their residential real estate exposure, and mortgage backed securities would be a good way to do so,” he stated in a June interview with the Financial Post.