EquityLine Mortgage Investment Corporation (EquityLine MIC) for the six-month period ending June 30, 2022 added 95 residential mortgages and two commercial mortgages, with assets under management totalling CA$38,322,172, up 162 per cent over June 30, 2021.

A Canadian mortgage investment company, EquityLine’s Series A preferred shares trade on the Jamaica Stock Exchange. EquityLine MIC is described as a traditionally structured, provincially regulated MIC that provides eligible investors the opportunity to participate in a pool of private mortgages and distribute all net income by the end of each year. The primary focus of the investments is prime first and second residential mortgages in the Greater Toronto Area (GTA) and the urban Southern Ontario region of Canada.

The corporation provides financing to borrowers that are deemed ineligible by the commercial banks for short-term mortgages secured by real estate assets (primarily residential homes). Borrowers use these mortgages to finance short-term financing needs. EquityLine MIC is qualified as a mortgage investment corporation as defined under Section 130.1(6) of the Income Tax Act (Canada).

Sergiy Shchavyelyev, president and CEO, commented in the company’s latest financials, “The nature of our business positions us well in an environment marked by global tightening with higher interest rates to combat inflation and conventional banks becoming more conservative with respect to mortgage financing,” and said he remained highly optimistic.

Management noted in the company’s latest financials that regulatory changes, including the B20 guidelines in Canada, have resulted in most residential lenders tightening income qualification standards, thereby forcing borrowers to engage with private lenders, such as Equityline, because of their difficulty of qualifying for institutional loans.

The result has been a large increase in demand for more private mortgage products, nationwide. All of Equityline’s portfolio is invested in Ontario urban markets that management states generally experience better real estate liquidity in periods of uncertainty and can offer a better risk profile.

During the three-month period ended June 30, 2022, EquityLine funded 50 mortgages totalling CA$24,221,600. This represents growth of 121 per cent over last year when EquityLine MIC funded 37 new mortgages totalling $10,928,500.

EquityLine’s management asserts that the company funds only those borrowers who qualify through a rigorous underwriting process.

“The company has never experienced a foreclosure nor default in its mortgage portfolio. The company has never missed or reduced a distribution payment, even during the COVID-19 pandemic,” management outlines in the company’s most recent financials, which are for the period ended June 30, 2022

EquityLine MIC has discrete classes of preferred shares. Series A preferred shareholders receive an 8 per cent fixed annual return, paid monthly, while Series B and Series F preferred shareholders receive a return that is targeted between 8 per cent to 9 per cent annually, paid monthly.

Management said, in the latest financials, “Most importantly, the company was able to extend its perfect track record of dividend payments and stable, predictable returns to our public shareholders of Series A preferred shares and our private Series B and F preferred shares while incurring zero defaults or foreclosures in the mortgage portfolio since inception.”

For the second quarter, assets under administration (AUA) increased 231 per cent year-over-year (June 30 , 2021 to June 30, 2022) from CA$17.0 million to CA$56.2 million.

Meanwhile, AUM of registered mortgages grew to CA$17.6 million as of June 30, 2022, compared with $11.3 million on June 30, 2021 — year-over-year growth of 55 per cent.

During the second quarter, the company earned CA$638,990 (2021- $327,232) of interest income on net mortgage investments representing an increase of 14 per cent on a quarter-over-quarter basis. The weighted average interest rate on net mortgage investments for the three months ended June 30, 2022 was 10 per cent compared to 11.21 per cent in Q2 2021. This decrease in yield was largely attributable to a higher mix of first mortgages in the portfolio of 52 per cent.

Management noted that EquityLine Capital (Delaware) LP, an affiliate, received Financial Industry Regulatory Authority (FINRA) approval for a US$50-million private funding round to US investors via a Regulation A offering. The group is awaiting approval for the Securities Exchange Commission (SEC) and has tentatively scheduled a raise in Q4 2022.

The company ended its second quarter of 2022 with a net income and comprehensive loss of CA$162,504 (2021 – net income of $1,957). Management commented, “As the company expands it needs to position itself to capitalise on its growth prospects in its unique market niche. As such it has been necessary to increase selling, general and administrative expenses, as well as consulting and professional fees to build its infrastructure through product distribution and funding initiatives. Furthermore, as the company expands its mortgage portfolio it will be able to cover its fixed costs more effectively and efficiently.”