Brokers, they’re back.
Well, if Home Trust’s plans come off, it could soon be back in the business of aggressively re-growing its A book.
"We are cautiously hopeful that we can clear all regulatory and financial hurdles that would allow us to do them (insured single-family prime mortgages) in a way that we can hopefully not have them on our books,” CEO Gerald Soloway said this week during a conference call to discuss Q4 financials. They are “innovations that will allow us to originate and sell some insured.”
If Home Trust is successful – and that continues to be a big if, warns Soloway – the lender could return as early as this fall to actively growing the A business it began to wean itself off of last year.
While Soloway isn’t offering details quite yet, the lender is focused on finding a way to securitize its default-insured A mortgages going forward and still get them off of its books, along with the increased reserve demands attached to them.
That is, in fact, what the lender used to do before Canada’s move to adopt International Financial Reporting Standards (IFRS) last year.
Coming into effect starting Jan. 2011, IFRS required federally regulated lenders to bring securitized mortgages onto their balance sheets and to spread out interest gains from those mortgages instead taking that profit upfront. With those securitized mortgages moving onto the balance sheet, lenders like Home Trust had to then allocate additional capital to cover them.
That had the potential to significantly increase a lender’s capital costs depending on just how much of its book is in securitized mortgages.
In Home Trust’s case, it moved to adjust its priorities, effectively minimizing its A lending to concentrate on Alt A loans.
That strategy continues to work, although the company wants to get back into its A game as well, said Soloway, pointing to the initial success Home Trust has had in using the new protocol.to grow its insured multifamily book.
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