The Ontario Teachers’ Pension Plan has acquired HomeEquity Bank, Canada’s largest provider of reverse mortgages.
HomeEquity Bank says under its new owners, it will continue with its plan to increase mortgage originations by more than 20 per cent this year to more than $1-billion. Teachers is acquiring HomeEquity Bank from owner Birch Hill Equity Partners Management Inc.; none of the parties disclosed terms of the deal.
“We’re really pleased to have another owner who is committed to the long-term vision for the business,” Steven Ranson, chief executive officer of HomeEquity Bank, said in an interview Wednesday. “Birch Hill was incredibly supportive, and we think Teachers is going to be exactly the same – for employees, management, customers, our referral partners. .... They’re really the best possible purchaser I could think of.”
Reverse mortgages allow homeowners at the age of 55 or older to borrow against their primary home without making payments against the loan until it comes due – usually when the owner moves, sells the home or dies. The loans typically carry higher interest rates than conventional mortgages to compensate the lender for the longer time till repayment, which can average from nine to 12 years.
Mr. Ranson said Canadians have more than $5-billion in reverse mortgages outstanding – and HomeEquity has originated more than 90 per cent of them. Its flagship product is called the CHIP Reverse Mortgage.
In a statement, Karen Frank, senior managing director of equities at Teachers, said HomeEquity Bank fits its portfolio of financial services investments in part because Canada’s aging population – and the increased attractiveness of staying in their own home as they age – gives HomeEquity room to increase its business.
In 2019, HomeEquity sold $75-million of its loans to Concentra Bank, a Saskatoon-based provider of wholesale banking and trust company services to credit unions. It was first time a portfolio of this special category of home loans was sold as a financial product in Canada, and it gave HomeEquity Bank a new source of funding. (It sold another $100-million of its loans to Concentra in late 2020.) HomeEquity Bank will continue to administer the mortgages on Concentra’s behalf.
The Office of the Superintendent of Financial Institutions (OSFI), HomeEquity Bank’s primary regulator, likes to see “diversification in case something goes wrong in one aspect of the market,” Mr. Ranson said.
In 2020, HomeEquity Bank recorded $57.6-million in profits on net interest income – a banking metric comparable to revenue – of $123.5-million, according to financial statements filed with OSFI. In the first six months of 2021, it recorded profits of $31.4-million on net interest income of $70.2-million.
With files from James Bradshaw
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