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

DBRS Limited (DBRS Morningstar) 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 semiannual or quarterly basis, respectively, until their stated final maturity dates when the final interest and repayment of principal will be due.

The Bonds are backed by a full guarantee provided by Canada Mortgage and Housing Corporation (CMHC) in its capacity as an agent of Her Majesty in Right of Canada (the CMHC Guarantee). The Bonds are consequently rated at the same level as CMHC’s All Debt Securities, Cdn Currency (bsd on Gov’t Cda) at AAA, which mirrors DBRS Morningstar’s Canadian sovereign rating of AAA for the Government of Canada’s Long-Term Local Currency - Issuer Rating 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 Morningstar.

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 (MBS) 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 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 Bonds can be found on the DBRS Morningstar website under the Trust.

There were no environmental, social, or governance (ESG) factors or considerations with a significant or relevant impact on the credit rating.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Notes:
The principal methodology is the Master Canadian Structured Finance Surveillance Methodology (June 7, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

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 under Related Documents or by contacting us at [email protected].

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

Please see the related appendix for a list of outstanding Canada Mortgage BondsTM.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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