Canadian housing depends heavily on mortgage backed securities

Banks normally lend their own money and charge interest for mortgages.

What securitizing it dose it put all the mortgages into a MBS that becomes a bond you and I can buy. If you buy a piece of this bond you will get the interest payments from the person who holds the mortgage. This helps the bank raise more money to give out more mortgages.

These bonds are highly desirable because CHMC is the insurance company, if the bond fails CHMC will guarantee dollar for dollar, there is no risk to bond holders even in the event of a housing crash.

What people are worried about, can CHMC cover all of its bets should the entire housing market go bust.

It’s not quite US level because we still have sticker lending policies like 5-20% downpayment and CHMC. I know some mortgages have been fraudulent but majority are not sub prime.

Something to key an eye on.

/r/vancouver Thread Link - vancouversun.com