Canada's CMHC to Cap Its Guarantees to Issuers of NHA MBS to C$350 Million for the Remainder of 2013
| Date Published | 8/6/2013 |
| Author | Marja Hoek Smit |
| Theme | |
| Country | Canada |
Canada’s CMHC to Cap
its Guarantees to Issuers of NHA MBS to C$350 million for the remainder of 2013
August 6, 2013
The Canada Mortgage and Housing Corporation announced that
it would restrict guarantees it offers to banks and other lenders under its
National Housing Act Mortgage-backed Securities (NHA-MBS) program to a maximum
of C$350-milion per issuer for the remainder of the year.
This follows the announcement early this year by the Federal
Finance Minister, Mr. Jim Flaherty, that CMHC would be limited to guarantee a
maximum of C$85-billion worth of NHA MBS this year. By the end of July, lenders
had already issued C$66-billion of the securities, hence the cap imposed by
CMHC. CMHC guarantees timely payment of interest and principle to investors in
NHA MBS at a fee. CMHC also controls approximately 75 percent of the country’s
mortgage insurance market.
These restrictions are part of a series of moves to tighten
control and oversight over CMHC and reduce taxpayer’s exposure to housing market
losses by curbing CMHC’s growth (statutorily it cannot guarantee or insure more
the C$600-billion in mortgage debt and it is close to that limit) and tightening
its underwriting standards. CMHC was placed under a different regulator, the
Office of the Superintendent of Financial Institutions (OFSI).
In a separate but
related measure, the new legal framework for covered bonds that was put in
place last year (see
Hofinet: CMHC Announces Covered Bond Framework) stipulates that banks cannot use insured mortgages in the
cover pools.