“This growth (in single family balances) reflects not only strong production numbers, but also success with our retention methods,” said president and CEO Andrew Moore during the company’s earnings conference call.
The company says its growth in production reflects “The strength of Equitable’s relationships with its mortgage broker network, strong activity in real estate markets and changes in the competitive environment.”
National Bank Financial (NBF) sees several factors contributing to Equitable’s positive outlook, including:
Modest competition in non-prime lending
Market share gains from financial institutions that have reduced lending to self-employed borrowers due to “more scarce bulk insurance from CMHC and greater scrutiny on mortgage underwriting standards from OSFI”
An improving margin mix as the company focuses on originating higher-margin non-prime residential mortgages. (NBF says spreads on Equitable’s non-securitized loans are “typically 200 bps wider” than for securitized mortgages.)
Equitable is currently underwriting:
“hardly…any condos” in the Toronto region as it sees heightened risk in that market
“5-10%” lower loan-to-values in the Vancouver market as prices are “more susceptible to softness”
“5% less” loan-to-value in Calgary than Ontario due to a “lack of strength in the covenant” (i.e., It’s easier to “walk away from your mortgage.” For this reason, Equitable has always had lower LTVs in Alberta.)
Steve Huebl, CMT
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