Mr. Speaker, Canada Mortgage and Housing Corporation, CMHC, has been at the forefront of mortgage securitization since 1986, when the corporation introduced National Housing Act mortgage-backed securities.
During the global economic crisis in 2008, it was harder for major financial institutions to secure short- and long-term financing and for Canadian consumers to obtain mortgage financing for property purchases. To help Canadian financial institutions raise longer-term funds and make them available to consumers, home buyers and businesses in Canada, in October 2008 the federal government introduced the insured mortgage purchase program, IMPP. Under this program, CMHC purchased securities consisting of pools of insured residential mortgages from Canadian financial institutions. These were high-quality assets backed not only by the overall strength of Canada’s housing market but also by the government’s own guarantee of the insured mortgages.
The total program envelope, initially $25 billion, was increased to $75 billion in November 2008 and then to $125 billion when budget 2009 was tabled. Thus CMHC, on behalf of the Government of Canada, was authorized to purchase up to $125 billion in National Housing Act mortgage-backed securities from Canadian financial institutions. The National Housing Act allows CMHC to make investments of this nature as part of its commercial activities.
When the IMPP came to an end on March 31, 2010, CMHC had expended $69.4 billion of the up to $125 billion available for purchase of mortgage-backed securities. This program was instrumental in moderating the impact of the global financial crisis on credit conditions in Canada and helping ensure continued access to credit for Canadian consumers and businesses.
All of the National Housing Act mortgage-backed securities purchased by CMHC under the IMPP are backed by high-quality residential mortgages that are insured through CMHC or private insurers, Genworth Financial and Canada Guaranty. As a result, there is no additional risk to taxpayers or to CMHC. This was an efficient, cost-effective and safe way of providing secure and reliable long-term funding to Canada’s financial institutions that benefits Canadian households, businesses and the economy.
To date IMPP has not incurred any losses on its National Housing Act mortgage-backed securities purchased investments from Canadian financial institutions.
In response to (a), there were approximately 662,948 mortgage loans backing the National Housing Act mortgage-backed securities when they were originally issued, which were purchased by CMHC under the IMPP, and there are approximately 332,762 mortgage loans remaining. Of the total number of mortgage loans purchased by CMHC under the IMPP, 2,595 have defaulted. However, mortgages that CMHC purchased under the IMPP are insured against mortgage default, either by CMHC or one of the private mortgage insurers. As such, any losses on defaulted mortgages can be claimed against their mortgage insurance policy. CMHC is compensated by the mortgage insurers and as a result has had no losses under the IMPP program.
CMHC is unable to provide the additional information requested under (i) and (ii) as the data are held, in part, by third-party private insurers.
In response to (b), the percentage of loans in arrears by three or more months under the IMPP is 0.478%, which is comparable to the Canadian Bankers Association arrears rate which, in August 2011, was at 0.40%.