HomEquity Shatters Records for Canadian Reverse Mortgages in 2011

Canada’s reverse mortgage lender HomEquity Bank saw a major surge in reverse mortgage originations in the fourth quarter of 2011, in addition to a year with a substantial increase across the board. The reverse mortgage originator saw a 42% volume increase in the fourth quarter of 2011 compared with the fourth quarter of 2010, as well as an annual year-over-year climb of 16%.

The record setting year in Canada compares with a slightly down year in the U.S., with American lenders citing the struggling housing market and large bank exits as causes for the decline.

In Canada, where reverse mortgages fall under HomEquity’s CHIP Home Income Plan, the products appear to be taking off, with HomEquity Bank continuing to set records in reverse mortgage volume. The actual quantity of reverse mortgages, around 2,000 in 2011, is still only a fraction of U.S. volume, however.

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“Since its inception 25 years ago, HOMEQ Corporation has analyzed the demographic wave of Canadian seniors and how our business can address these trends,” said Steven Ranson, President and CEO. “Now, the wave is here and we are meeting seniors’ needs for improved cash flow in retirement. This tremendous market demand is fuelling our strong growth in originations, while our disciplined approach to operating the business is resulting in healthy net income growth.”

The company finished the fourth quarter with $67.2 million in reverse mortgages. On an annual basis, HomeEquity saw $239 million in volume, up 16% over the record-setting 2010.

In 2011, HomeEquity began offering reverse mortgages to borrowers who are aged 55 and up. The change can be attributed in small part to the increase seen in 2011, a HomEquity Bank spokeswoman told RMD.

“The younger eligibility age did provide a lift to mortgage originations of about 5%,” she said in an email. “Our core business remains with seniors in their late sixties and early seventies that have been retired for a few years and would like a little extra money to make life more comfortable.”

Written by Elizabeth Ecker

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  • An interesting comparison.  The younger age limit at 55 dilutes the comparison a bit, but our neighbors appear to be about a decade behind the US in terms of market adoption (US has approx. 10x population, so 2,000 unit volume is more comparable to a 20,000 volume here – last seen in the early 2000’s).

    What’s fascinating is that Canadian real estate prices have not gone down and that probably provides a big part of the difference between their strongly growing reverse mortgage market and our small decline last year.  Not sure if they’ve made any recent changes to their principal limits, but that would be another interesting point if they haven’t.

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