Supporting Canada’s Housing Finance System
Prudent risk management, strong corporate governance and transparency are cornerstones of our operations. CMHC contributes to a stable, well functioning and competitive housing finance system in Canada by helping ensure that financial institutions have access to an adequate supply of funds for mortgage lending. These programs also provide investors with opportunities to hold high quality, secure investments that support the Canadian residential mortgage market.
Securitization Guarantee Programs
CMHC’s securitization guarantee programs enable approved financial institutions to pool eligible mortgages and transform them into marketable securities that can be sold to investors, thereby generating funds that can be loaned to residential homeowners. The timely payment of interest and principal on these securities — National Housing Act Mortgage-Backed Securities issued by financial institutions and Canada Mortgage Bonds issued by the Canada Housing Trust — is fully guaranteed by the Government of Canada, through CMHC.
These programs benefit both large and small lenders. In the case of small lenders, the reliability and volume of funding that CMHC’s securitization programs provide allows them to compete more effectively with larger financial institutions. This contributes to lower funding costs for mortgages and leads to more choice and price competition for Canadian borrowers.
CMHC has a range of policies and oversight processes for its securitization programs that reflect CMHC’s commitment to prudent risk management and that serve to minimize risk to taxpayers. These programs operate on a commercial basis, at no cost to taxpayers. CMHC’s commercial operations contribute to improving the Government of Canada’s fiscal position through its net income and income taxes paid.
Canadian Covered Bonds
Separate from its securitization guarantee programs, CMHC administers the legal framework for Canadian covered bonds on behalf of the Government of Canada. Introduced in 2012, the framework supports financial stability by helping lenders to further diversify their sources of funding and by attracting more international investors, thus making the market for covered bonds more robust.
Government-backed insured mortgages are not permitted to be used as collateral for covered bonds and covered bond issues are not guaranteed by CMHC or the Government of Canada. CMHC administers the framework on a cost recovery basis.
For More Information
For more information about CMHC and how it makes a difference in the lives of Canadians, call 1-800-668-2642.