DBRS Confirms Rating of Canada Housing Trust™ No. 1 at AAA

DBRS Limited (DBRS) confirmed the platform rating of AAA on the Canada Mortgage Bonds™ (the Bonds) issued by Canada Housing Trust™ No. 1 (the Trust). The Bonds are issued periodically, paying fixed- or floating-rate interest on a semi-annual or quarterly basis, respectively, until their stated final maturity dates when the final interest and repayment of principal will be due.

The confirmation is part of DBRS’s continued effort to provide timely credit rating opinions and increased transparency to market participants.

The Bonds are backed by a full guarantee (the CMHC Guarantee) provided by the Canada Mortgage and Housing Corporation (CMHC) in its capacity as an agent of Her Majesty in Right of Canada. The Bonds are consequently rated at the same level as CMHC’s All Debt Securities, Cdn Currency (based on Gov’t Cda) at 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 Trust uses the proceeds from the issuance of the Bonds to acquire insured residential mortgages in the form of pools of mortgage-backed securities that have been created by CMHC-approved issuers (the Approved Issuers) under the National Housing Act (NHA) and that meet certain eligibility criteria (the Trust Assets). The Approved Issuers deposit the NHA mortgage-backed securities (MBS) payment amounts into a designated account, from which the NHA MBS central payor and transfer agent then make payments to holders of NHA MBS, including the Trust. The Trust then uses the cash flows received from the 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 if 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.

A list of outstanding Canada Mortgage Bonds™ can be found on the DBRS website under Canada Housing Trust™ No. 1.

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

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The principal methodologies are Master Canadian Structured Finance Surveillance Methodology (December 2017) and Structured Finance Flow-Through Ratings (January 2018), which can be found on dbrs.com under Methodologies.

The rated entity or its related entities did participate in the rating process. DBRS did not have access to the accounts and other relevant internal documents of the rated entity or its related entities.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.