CMHC gives Equity Financial Trust the nod

“We went for the CMHC approval now because it’s a long process to get it, and we wanted to be in a position to seize an opportunity in CMHC-insured mortgages if it should arise,” Nick Kyprianou, the lender’s top executive, told MortgageBrokerNews.ca. “But our business is and will always be Alt-A and B, so this doesn’t mean that we’ve changed course.”

On April 19, the Canadian Mortgage and Housing Corporation officially conferred Equity with the title of “NHA Approved Lender for Underwriting and Administration.”

The probationary seal of approval allows the lender to make and service CMHC-insured mortgages for residential properties of no more than 4 units. Another key requirement is Equity submit to an onsite review of its underwriting after the first year or aafter it advances 500 insured loans – whichever comes first.

Make no mistake, said Kyprianou, that review won’t likely come until after the first 12 months given the company’s business model. Meeting revenue projections remains pegged to servicing B and Alt-A clients, and not migrating to the prime market CMHC deals with.

Other lenders are, in fact, looking to Alt-A and B business to shore up their bottom lines as spreads tighten and new federal mortgage rules make it harder for many Canadians to win prime rates.

Still, the vagaries of past markets suggest an opportunity for Equity Financial to aggressively explore the A market could crop up as the economy lurches forward.

“After 2007, bond rates drop and created a big spread on CMHC-approved loans, making them very profitable for lenders,” he told MortgageBrokerNews.ca. “That spread doesn’t exist now, and we expect to do a small portion, maybe 5 to 10 per cent max, in prime lending. But there is that possibility of spreads widening and allowing us to explore opportunities with prime mortgages. We do feel that there is an opportunity in 2012 to do some CMHC-insured lending.”

Moving to obtaining the crown corporation’s approval now also extends Equity the wiggle room acquire another lender’s portfolio, if that opportunity reveals itself.

Still, the company, long established as a transfer agent, has already begun to carve out its own mortgage-sector opportunities.

“April was a successful month for us and we hit our target,” said Kyprianou, pointing to a book split between refinances and new purchases. Some 60 per cent of business falls into that first category.

The ratio will likely change come June, he said.

What may be more fixed is the industry’s geographical constraints.

In the short- to mid-term, the lender will stay focused on the Ontario market, Kyprianou told MortgageBrokerNews.ca.


Mortgagebrokernews.ca is a division KMI Media.

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