(March 27 – 09:40 ET) – Canada Mortgage and Housing Corp. is introducing Canada Mortgage Bonds, CMHC’s newest initiative to improve the supply of low-cost mortgage funds in Canada.

Canada Mortgage Bonds will provide investors with an attractive fixed income investment opportunity featuring: semi-annual interest payments; repayment of principal at maturity and a full timely payment guarantee by CMHC on behalf of the Government of Canada.

The bonds will be issued through a newly created special purpose trust known as the Canada Housing Trust to sell non-amortizing Canada Mortgage Bonds to investors and use the proceeds to purchase mortgages packaged in newly issued NHA MBS from Approved Sellers.

Canada Mortgage Bond investors are then paid interest and principal from the proceeds of the underlying mortgages collected by MBS Sellers on behalf of the trust.

To provide investors with a bond like investment, the Trust transforms the monthly cash flows from NHA MBS pools into non-amortizing bond cash flows with fixed interest payments and principal at maturity.

Canada Mortgage Bonds will be issued in denominations as low as $1,000 and can be issued for any term. Initial issues will likely be for a five-year term. The bonds can be bought through investment dealers, banks, trust companies, and other types of financial institutions.

“Canadian home buyers will benefit because the bonds will provide the mortgage market with an alternative and competitive source of funds which will help lower mortgage financing costs,” said Alfonso Gagliano, Minister responsible for CMHC.

“Canada Mortgage Bonds will provide Canadians with both an attractive and secure investment opportunity, and an important new source of funds to further enhance the efficiency of the secondary mortgage market,” said Peter Smith, CMHC’s chairman.