Morningstar DBRS Confirms Credit Rating of Canada Housing TrustTM No. 1 at AAA

DBRS Limited (Morningstar DBRS) confirmed the platform credit 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 His 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) credit rating of AAA, which mirrors Morningstar DBRS’ Canadian sovereign credit rating of AAA for the Government of Canada’s Long-Term Local Currency – Issuer Credit Rating obligations. As an agent of His Majesty in Right of Canada, CMHC’s debt obligations and guarantees are direct obligations of the Government of Canada. The AAA credit rating is based solely on the CMHC Guarantee without any review of the underlying collateral as such information is not provided to Morningstar 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 (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 Morningstar DBRS website under the Trust.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (January 23, 2024) https://dbrs.morningstar.com/research/427030.

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

The principal methodologies applicable to the credit rating are
-- Master Canadian Structured Finance Surveillance Methodology (June 7, 2023), https://dbrs.morningstar.com/research/415503
-- North American Structured Finance Flow-Through Ratings (November 13, 2023), https://dbrs.morningstar.com/research/423240

Other methodologies referenced in this transaction are listed at the end of this press release.

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 info-DBRS@morningstar.com.

The credit rating was not initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

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

This is a solicited credit rating.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/410863.

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