Home Capital Group Inc. comments on confirmation of regulatory capital
treatment for Home Trust's mortgage securitization transactions
TORONTO, Aug. 6, 2013 /CNW/ - Home Trust Company, a wholly owned subsidiary of
Home Capital Group Inc. (TSX: HCG) learned today that Home Trust's regulator,
the Office of the Superintendent of Financial Institutions Canada (OSFI), has
confirmed the regulatory asset-to-capital multiple (leverage ratio) treatment
associated with the sale of certain residual interests arising from
transactions related to mortgage securitizations.
Home Trust originates and securitizes insured residential mortgages through
the CMHC-sponsored mortgage-backed security program. Home Trust administers
the securitized mortgages and retains certain interests in the prepayment
risks associated with the underlying mortgages. Prior to the adoption of
International Financial Reporting Standards (IFRS), the underlying mortgages
were removed from Home Trust's balance sheet (both for financial reporting
purposes and for the regulatory leverage measure). However, on adoption of
IFRS in January 2011, these securitized mortgage pools were brought back on to
Home Trust's balance sheet (both from a financial reporting and regulatory
leverage perspective), effectively reducing Home Trust's total lending
Home Trust has sold the benefit of the retained interests in some securitized
mortgage pools. The result of these transactions under IFRS is the removal
of the related mortgage pools from Home Trust's balance sheet and recognition
of gains and losses on the related overall securitization transactions. Home
Trust received confirmation from OSFI that the regulatory asset-to-capital
multiple or leverage treatment of these transactions will follow the
accounting treatment subject to specific conditions being met. When this
accounting is applied to the measurement of regulatory assets and capital, the
ratio of regulatory assets to capital is generally reduced, which is
favourable to the lending capacity of Home Trust. This is similar to the
regulatory leverage (capital) treatment for these assets prior to the adoption
"With this confirmation, but subject to additional limits that CMHC may impose
on the issuance of NHA MBS in future, 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, Home Capital. "This is expected to result in increased
penetration of the mortgage broker channel and will reinforce Home Trust's
one-stop mortgage provider strategy."
About Home Capital and Home Trust
Home Capital Group Inc. is a public company, traded on the Toronto Stock
Exchange (HCG) operating through its principal subsidiary, Home Trust Company.
Home Trust is a federally regulated trust company offering deposit,
residential and non-residential mortgage lending, securitization of insured
residential first mortgage products, consumer lending, Visa and payment card
services. Licensed to conduct business across Canada, Home Trust has offices
in Ontario, Alberta, British Columbia, Nova Scotia, Quebec and Manitoba.
Gerald M. Soloway, CEO, or Martin Reid, President 416-360-4663
SOURCE: Home Capital Group Inc.
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-0- Aug/06/2013 21:00 GMT
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