Home Equity Income Trust intends to apply to the Minister of Finance for its operating subsidiary, Canadian Home Income Plan Corp. (CHIP) to become a federally regulated Schedule I bank, the company announced Tuesday.

The new bank will be called HomEquity Bank in English and Banque HomEquity in French. Subject to the review and approval of its application by the Office of the Superintendent of Financial Institutions (OSFI) and the Minister of Finance, the company hopes to be operating HomEquity Bank commencing in the third quarter of 2009.

The objective of obtaining a bank charter is to enable HomEquity Bank to access retail deposits sourced through deposit brokers and directly hold reverse mortgages so as to grow Home Equity’s consolidated reverse mortgage portfolio and increase its spread income. Home Equity says retail deposits represent a stable and cost effective source of funds that will be used to supplement the wholesale funding strategy it has followed since its IPO in 2002.

“Access to retail deposits is a prudent and sensible step at this stage of our evolution and will enable us to meet the growing demand for our product experienced in recent years,” says Steven Ranson, president and CEO of Home Equity Income Trust.

Subject to unitholder approval, Home Equity will convert its business structure from an income trust to a taxable corporation prior to HomEquity Bank being continued as a Schedule I bank by the Minister of Finance. Until such time, Home Equity says it expects that it will continue to pay monthly distributions of 6¢ per unit.

Home Equity plans to call a meeting of unitholders for the last week of April to approve this conversion.

IE