Ontario Teachers’ Pension Plan buys alternative mortgage lender

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Ontario Teachers Pension Plan has acquired HomeEquity Bank, Canada’s largest reverse mortgage provider.

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HomeEquity Bank says that under its new owners, it will continue its plan to increase mortgage principal by more than 20 percent to more than $1 billion this year. Teacher HomeEquity Bank is owned by Birch Hill Equity Partners Management Inc. are received from; Neither party disclosed the terms of the deal.

“We are truly delighted to have another owner who is committed to the long-term vision for the business,” HomeEquity Bank Chief Executive Officer Steven Ranson said in an interview on Wednesday. “Birch Hill was incredibly helpful, and we think teachers are going to be exactly that – to the employees, the management, the customers, our referral partners. …. They really are the best potential buyers to talk about. I could think.”

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Reverse mortgages allow homeowners age 55 or older to borrow against their primary home without paying against the loan — usually when the owner moves, sells the home or dies. Loans typically take longer to repay to the lender to pay off higher interest rates than traditional mortgages, which can range from nine to 12 years on average.

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Mr Ranson said Canadians owe more than $5 billion in reverse mortgages – and homeequity originated more than 90 percent of them. Its flagship product is called a CHIP reverse mortgage.

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In a statement, Karen Frank, senior managing director of equities at Teachers, said HomeEquity Bank fits into its portfolio of financial services investments because of Canada’s aging population – and the increasing attractiveness of living in their home as they age. – Gives room to home equity to grow your business.

In 2019, HomeEquity sold its $75 million loan to credit unions to Concentra Bank, a provider of Saskatoon-based wholesale banking and trust company services. This was the first time a portfolio of this particular 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 at the end of 2020.) HomeEquity Bank will continue to pledge on Concentra’s behalf.

HomeEquity Bank’s primary regulator, the Office of the Superintendent of Financial Institutions (OSFI), likes to see “diversification in case something goes wrong in one aspect of the market”, Mr. Ranson said.

In 2020, HomeEquity Bank reported a profit of $57.6 million on net interest income — a banking metric equivalent to revenue — of $123.5-million, according to financial statements filed with OSFI. In the first six months of 2021, it reported a profit of $31.4 million on net interest income of $70.2 million.

With files from James Bradshaw

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