Move over A lenders: Home Trust is poised to expand its presence in that sphere after winning the green light for a new -- OSFI-approved -- securitization model.
“This will allow us to fulfill that promise of being a one-stop shop for brokers,” President Martin Reid told MortgageBrokerNews.ca, following Tuesday’s announcement. “It will certainly make us more competitive in terms of price on insured product.”
On Tuesday, Home Trust learned OSFI had confirmed the regulatory asset-to-capital multiple treatment it will apply to the sale of “certain residual interests arising from transactions related to mortgage securitizations.”
In short, it means Home Trust will be able to free up the kind of space on its balance sheet for insured residential mortgages that was lost with the implementation of International Financial Reporting Standards (IFRS) in 2011.
Prior to the adoption of IFRS, those mortgages were removed from Home Trust's balance sheet. However, on adoption of IFRS, those securitized mortgage pools were brought back on to Home Trust's balance sheet, effectively reducing its total lending capacity.
With the OSFI-sanctioned treatment now being applied to assets and capital, the ratio of regulatory assets to capital is generally reduced, which is favourable to the lending capacity of Home Trust.
“Home Trust expects to gradually increase its origination and securitization of insured residential mortgages and sales of retained interests in the securitized mortgage pools," said Gerald M. Soloway, CEO of the lender’s parent company Home Capital. "This is expected to result in increased penetration of the mortgage broker channel."
That good news for brokers was not been eclipsed by a CMHC’s own announcement Tuesday. The Crown corporation says it will now limit each lender enrolled in its mortgage-backed securities program to $350 million in guarantees for August.
But Home Trust has plenty of room to grow its insured residential book and remain below any CMHC-imposed ceiling, said Reid.