Home Trust Company originates and securitizes insured residential mortgages through the NHA MBS program sponsored by Canada Mortgage and Housing Corporation (CMHC). In November 2012, Home Trust Company sold several of its residual interests in its NHA MBS mortgage pools totaling $662.2 million, thereby removing such mortgage pools and offsetting liabilities from its balance sheet under Canadian generally-accepted accounting principles.
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 capacity.
Home Trust applied for a ruling from the office of the superintendent of financial institutions (OSFI) that the regulatory capital treatment of the transaction, particularly relating to Home Trust's asset to capital multiple, would follow the accounting treatment. On August 6, 2013, OSFI released a favourable ruling conditional upon Home Trust obtaining written confirmation from CMHC that CMHC does not object to the transaction. Home Trust had received the written confirmation from CMHC before OSFI's ruling was released. The sale of residual interests and the potential for similar transactions in the future, together with the OSFI ruling and CMHC confirmation has resulted in a significant increase in Home Trust's lending capacity.
Home Trust was represented by its corporate counsel Chris Ahlvik and by Torys LLP's Michael Feldman, Christine Hunter, Blair Keefe (regulatory) and John Tobin (tax). The purchaser was represented by Davies Ward Phillips & Vineberg LLP's Cam Rusaw, Josh Kuretzky and Elie Roth (tax).