Home Equity Income Trust Subsidiary Arranges Sale of Medium Term Notes

TORONTO, May 6 /CNW/ - Home Equity Income Trust (TSX: HEQ-UN.TO) ("HOMEQ" or the "Trust") today announced that its subsidiary, CHIP Mortgage Trust ("CMT"), has arranged the sale of $165,000,000 of senior medium term notes (the "Notes"). The dealer syndicate for the sale was led by RBC Capital Markets and included Scotia Capital Inc. The 2008-1 Notes have a coupon of 5.764%, are rated AAA by DBRS Limited and have an expected final payment date of May 16, 2011. They are unconditionally guaranteed by Home Equity Income Trust. The sale is expected to close on or about May 15, 2008.

On May 12, 2008, CMT is expected to file with the securities commissions and other similar regulatory authorities in each of the provinces of Canada, a pricing supplement to the short form base shelf prospectus of CMT dated November 23, 2007. Under the prospectus, CMT may issue up to a total of $750 million of medium term notes from time to time over the 25 months following the date of the prospectus.

HOMEQ, through its subsidiaries, finances its portfolio of reverse mortgages through a combination of equity and senior and subordinated debt. The debt is rated by DBRS Limited. The senior debt is rated AAA, which is the highest possible rating, and the subordinated debt is rated BBB.

Proceeds from the issue will be used to retire approximately $70 million outstanding under the Trust's short term funding sources, including commercial paper and bank liquidity lines. Under current capital market conditions, the commercial paper market is expensive and cannot be relied upon and the Trust has chosen to stop using this source of funding. The balance of the proceeds, together with existing cash balances will be used to finance new originations of reverse mortgages. Assuming mortgage repayments at average historic levels, the Trust will have sufficient cash to fund new originations until mid 2009. In the interim the Trust will explore other sources of funding. Concurrent with repayment of the last maturity of commercial paper on May 22, 2008, the Trust will terminate its liquidity facility in order to reduce the associated costs. The Trust may return to the commercial paper market in the future if conditions improve.

"We are very pleased with the level of investor interest in the Notes. This is a very meaningful transaction which, despite particularly uncertain times in the capital markets, will allow us to continue to fund new originations and to focus our full attention on growth in the business," said Gary Krikler, Senior Vice President and Chief Financial Officer of the Trust.

In order to manage interest rate risk, the Trust will match the term of the newly issued debt with the interest resets of its mortgages using interest rate swaps. On a swapped basis, the interest rate of the Notes is approximately 230 over the corresponding Bankers' Acceptance rate.

Taking the new Notes into account, the Trust has a weighted average effective cost on $790 million of senior medium term notes of approximately 90 basis points over the corresponding Bankers' Acceptance rate. Starting in September 2007, management has taken steps to offset the ongoing impact of increases in the Trust's average cost of capital by raising the interest rate charged to its customers for new mortgages.

Forward Looking Statements

HOMEQ from time to time makes written and verbal forward-looking statements about business objectives, operations, performance, and financial condition, including, in particular, the forecast of cash distributions and the likelihood of HOMEQ's success in developing and expanding its business. These may be included in the Annual Reports, regulatory filings, reports to unitholders, press releases, Trust presentations and other communications. These forward-looking statements are based upon a number of assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of HOMEQ. Actual results may differ materially from those expressed or implied by such forward-looking statements. HOMEQ does not undertake to update any forward-looking statement, whether written or verbal, that may be made from time to time.

About Home Equity Income Trust

Home Equity Income Trust provides unitholders with stable monthly cash distributions from a portfolio of reverse mortgages originated by its wholly owned subsidiary Canadian Home Income Plan Corporation ("CHIP"). HOMEQ's units are rated SR-2 by Standard and Poor's, which assigns this rating to funds that have "a very high level of cash distribution stability relative to other rated Canadian income funds." As of December 31, 2007, the portfolio generating cash returns to the Trust comprised approximately 6,700 reverse mortgages with an accrued value of $707 million, secured by residential properties across Canada worth approximately $2.0 billion. CHIP (www.chip.ca), has been the main underwriter of reverse mortgages in Canada since pioneering the concept in 1986.

HOMEQ's units trade on the Toronto Stock Exchange under the symbol HEQ.UN. Additional information on HOMEQ, including annual and quarterly reports and the Trust's distribution reinvestment plan, can be viewed at www.homeq.ca.

Contacts

Gary Krikler
Senior Vice President and Chief Financial Officer
(416) 413-4679
gkrikler@homeq.ca

or Scott Cameron
Vice President
Finance
(416) 413-6605
scameron@homeq.ca