DBRS Rates CHIP Mortgage Trust Series 2010-1 Medium Term Notes at AAA

DBRS has today assigned a rating of AAA to the $125 million Series 2010-1 Medium Term Notes (the Notes) issued by CHIP Mortgage Trust (the Trust). The Notes have a coupon rate of 4.49% and an expected final payment date of August 4, 2015. All AAA-rated notes issued by the Trust rank pari passu with each other.

The Trust regularly issues notes to assist the funding of reverse mortgages originated by Canadian Home Income Plan Corporation, a predecessor to HomEquity Bank (the Originator), a wholly owned subsidiary of HOMEQ Corporation.

If the Notes are not repaid on the expected final payment date, the Notes will pay the interest of one-month banker’s acceptance (BA) rate plus 3% per annum thereafter until they are successfully refinanced. The transaction document has also been amended to allow for amortization should the Notes not be fully repaid at the expected final payment date. DBRS’s rating addresses timely repayment of principal and interest by the legal maturity date, which is August 3, 2035.

The rating of the Notes is based on the following considerations:

(1) The conservative underwriting standards associated with the origination of the reverse mortgages, including (i) the use of qualified appraisers, (ii) the reduction of appraised values by region, property quality, property type and potential market illiquidity adjustments in specific locations and (iii) the use of conservative actuarial tables in determining the expected occupancy term.

(2) A large diversified portfolio with residential real estate situated in or near major urban centres across Canada, with expected concentration in Ontario.

(3) The level of ongoing review and reappraisal of the properties associated with the reverse mortgages. Reappraisal of properties occurs on a formal basis every five years or more frequently.

(4) The Originator has extensive experience in originating and underwriting reverse mortgages.

(5) A first-ranking charge for noteholders on all the assets and undertakings of the Trust.

Note:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Reverse Mortgage Transactions in Canada, which can be found on our website under Methodologies.

This is a Structured Finance rating.