DBRS Assigns AAA (sf) Rating to CHIP Mortgage Trust Series 2011-1 Medium Term Notes

DBRS has today assigned a AAA (sf) rating to the $175 million, Series 2011-1 Medium Term Notes (the Notes) issued by CHIP Mortgage Trust (the Trust). The Notes have a coupon rate of 3.973% and an expected final payment date of February 1, 2016. All AAA (sf)-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 3.0% per annum thereafter until they are either successfully refinanced or amortized down over time. DBRS’s rating addresses the risk of default by the legal maturity date, which is February 1, 2036.

The rating 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 at least every five years.

(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 methodologies are Rating Reverse Mortgage Transactions in Canada, Legal Criteria for Canadian Structured Finance and Swap Criteria for Canadian Structured Finance Transactions, which can be found on our website under Methodologies.