What is MBS?

The NHA Mortgage-Backed Securities Program (NHA MBS) was designed by the Government of Canada to help you, the Investor, take advantage of the opportunities available to make a secure investment in Canadian residential mortgages.

Through NHA MBS, the Government of Canada provides you with the opportunity to invest in housing. This, in turn, will benefit Canadians as well as help secure your own future financial well-being.

[NHA MBS At A Glance | Key Features | Stability & Security | CMHC — Your Partner]

NHA MBS At A Glance

NHA Mortgage-Backed Securities are comprised of pools of amortized residential mortgages insured by Canada Mortgage and Housing Corporation (CMHC) under the National Housing Act (NHA).

NHA MBS Issuers are approved by CMHC and must be either a chartered bank, a trust company, an insurance company, a credit union, a loan company or a caisse populaire.

• There are four different categories of NHA MBS pools available to Investors: "exclusive homeowner"; "multi-family"; "social housing" (such as co-ops and seniors residences) and "mixed" (a combination of any of the above).
• Timely payment to the Investor of principal and interest is guaranteed by CMHC, who also insures the underlying mortgages, The automatic pass-through of the principal paid on the mortgages and interest (based on the coupon rate of the respective NHA MBS pool), is paid to Investors on a monthly basis by the Central Payor and Transfer Agent (CPTA), Montreal Trust.
• A wide range of terms is available - ranging upwards from 6 months to 25 years. Five-year terms have been the most popular.
• NHA MBS are RRSP and RRIF (Registered Retirement Savings Plans and Registered Retirement Income Funds) eligible.
• NHA MBS are exempt from non-resident withholding tax — an important consideration for foreign Investors and Canadian expatriates who would normally pay this tax.

NHA MBS Key Features

NHA Mortgage-Backed Securities are extremely popular, today more so than ever before. Over 45,000 retail and institutional Investors have invested more than $27 billion during the first ten years of the NHA MBS Program.

Maximum security

As investments, NHA MBS are the only mortgage-backed securities fully guaranteed by CMHC on behalf of the Government of Canada.

Attractive rates of return

Investments in NHA MBS earn returns that are comparable to GIC’s and are higher than Government of Canada bonds with equivalent terms.

Liquidity

NHA MBS investments offer investors the liquidity associated with an active secondary marketplace. (The securities can be bought and sold readily through Canada’s financial industry.)

Timely monthly payments

Payments to NHA MBS Investors may be made by cheque or by direct deposit into an account of your choice.

Convenient denominations

Denomination in multiples of $5,000 make NHA MBS investments convenient for all Investors.

NHA MBS Stability, Security, Timely Payment Guaranteed

Deciding on the value of an investment means balancing return on investment on one hand, with security versus risk on the other.

NHA Mortgage-Backed Securities are:

• ideal for individuals seeking a secure source of regular income with attractive returns on the money invested;
• ideal for large Investors, such as pension funds, looking for attractive yields and predetermined cash flows to meet pensioners' obligations.

Like Government of Canada bonds, NHA MBS prices in the secondary market tend to fluctuate with changing interest rates, declining as interest rates rise and rising as interest rates fall. When new issues are created for sale, their prices and respective yields will reflect the current interest rates available in the marketplace.

With today’s low inflation rate, the real rate of return for NHA MBS is very high indeed, making them a sound and secure investment.

NHA Mortgage-Backed Securities are a sound investment that offer maximum safety and attractive returns.

Their unique insurance-guarantee combination makes NHA MBS an unparalleled investment when compared to other low-risk investment options. An investment you can bank on!

And there’s no limit to the Government of Canada backing provided through CMHC. The backing applies to the entire investment, whether it’s $5,000 or $50 million. Unlike savings account balances and GIC’s, security isn’t limited to the $60,000 maximum provided by the Canada Deposit Insurance Corporation.

CMHC — Your Partner

CMHC has been helping house Canadians since the late 1940’s under its vital mandate of encouraging:

The construction of new houses, the repair and modernization of existing houses, and the improvement of housing and living conditions.

Since 1945, CMHC has insured the principal and interest on more than $135 billion of first mortgage loans that have helped finance Canadian residential properties, including single and multiple family housing.

Following extensive consultations with the investment industry, the financial community, home-builders and other interested groups, CMHC launched the NHA MBS program in 1987.

Its goals are to:

• increase the availability of funds from financial institutions for housing finance;
• encourage the return of longer term mortgages;
• impact on the flexibility of prepayment privileges coupled with lower, more favourable interest rates on residential mortgages.

Our objectives are being met with NHA MBS, resulting in a fruitful and growing partnership between Investors and the nation’s housing finance industry. You can become a part of this worthwhile venture by investing in NHA Mortgage-Backed Securities.