DBRS Rates Canada Housing Trust™ No. 1 Series 38 Notes at AAA

DBRS has today assigned a rating of AAA to the Floating Rate Canada Mortgage Bonds™ Series 38 (the Bonds) issued by Canada Housing Trust™ No. 1 (the Trust). The Bonds have been issued in a minimum principal amount of $1 billion and will mature on March 15, 2016 (the Final Maturity Date). Interest on the Bonds will be paid quarterly in arrears on March 15, June 15, September 15 and December 15 at a rate equal to the three month Canadian Dollar Bankers’ Acceptance Rate (CDOR) plus 12 basis points. As the Bonds are bullet maturity bonds, principal will become due and payable on the Final Maturity Date.

The Bonds are backed by a full guarantee (the CMHC Guarantee) provided by Canada Mortgage and Housing Corporation (CMHC) in its capacity as Agent of Her Majesty in Right of Canada. The Bonds are consequently rated at the same level as CMHC’s senior unsecured debt rating of AAA, which mirrors DBRS’s Canadian sovereign rating of AAA for the Government of Canada’s domestic and foreign currency obligations. As an Agent of Her Majesty in Right of Canada, CMHC’s debt obligations and guarantees are direct obligations of the Government of Canada. The AAA rating is based solely on the CMHC Guarantee, without any review of the underlying collateral as such information is not provided to DBRS.

The proceeds from this issuance of the Bonds will be used by the Trust to acquire insured residential mortgages in the form of pools of mortgage-backed securities that have been created by CMHC-approved lenders (the Approved Lenders) and that meet certain eligibility criteria (the Trust Assets). The Approved Lenders will collect monthly payments from mortgagors and forward them to the Trust, which will then use the cash flows from these high-quality Trust Assets, as well as hedging agreements, to meet its obligations to Bondholders. All hedging counterparties must be approved by CMHC. The CMHC Guarantee will ensure timely payment to Bondholders in the event that the Trust has insufficient funds to meet its expenses. As a result, the Trust has granted CMHC a first priority security interest in the Trust Assets to the extent of any payments made to Bondholders under the CMHC Guarantee.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodologies are Rating Sovereign Governments and Canadian Structured Finance Flow-Through Ratings, which can be found on our website under Methodologies.