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18.05.12

REGINA, SASKATCHEWAN, May 11, 2012 (MARKETWIRE via COMTEX) -- Today, Canada Mortgage and Housing Corporation (CMHC) presented Habitat for Humanity Edmonton with the CMHC Award for Outstanding Contribution to Habitat for Humanity Aboriginal Housing.

The award was presented at Habitat for Humanity Canada's National Conference Awards Gala. Habitat affiliates from across Canada are in Regina this weekend for their annual general meeting and national conference.

Source: MarketWatch (press release) 18.05.12 During April 2012, down marginally from 1,898 housing starts in April 2011. Multiple-family housing starts increased, while single-detached housing starts decreased compared to April 2011 levels.

"Residential construction in British Columbia is about ten per cent ahead of 2011 levels due to a pick-up in multiple-family construction," said Carol Frketich, CMHC's BC Regional Economist. The number of single-detached homes started during the January to April period was steady with the number recorded during the first four months of 2011.

Source: Marketwire (press release) 18.05.12

May 10 - Fitch believes Canada's exclusion of insured mortgages from regulated covered bonds is likely to increase the cost of future issuance via higher credit enhancement levels. This measure may also cause a contraction in credit availability, which has the potential to negatively affect home prices. The provision is one of several that form part of a regulatory framework for covered bonds introduced by the Minister of Finance to the Parliament on April 26. The legislation permits financial institutions and cooperatives to become registered issuers provided, among other prerequisites, they pledge not to issue covered bonds outside the framework; the bill appears to expressly prohibit registered issuers from issuing contractual covered bonds. Fitch expects that existing programs will be wound down once the registry is in effect. Because mortgage insurance will remain in effect for existing programs, ratings on existing covered bonds will not be affected. As Fitch has previously commented, overcollateralization (OC) levels for uninsured mortgage cover pools are expected to be higher than for insured loans/pools to offset the increased credit risk and refinancing cost of the underlying assets. While uninsured loans generally exhibit lower default risk than insured mortgages, on account of significant amounts of home equity (at least 20%), the pools would incur higher losses in a stressed market given their exposure to declines in house prices due to the lack of Canada Mortgage & Housing Corp (CMHC) insurance. In addition, the cost of bridging maturity mismatches for programs backed by uninsured assets is likely to be higher than for their insured counterparts, the assets of which are eligible for Canada Mortgage Bonds, which benefit from strong market bid. Positively, the new bill does not contain an OC limit for protection against credit and liquidity risks associated with the underlying collateral in a post-issuer default scenario. While this concept was part of the initial consultation paper published by the Dept. of Finance Canada in May 2011, Fitch confirmed with Canadian authorities that there is no OC cap imposed by the legislation. Rather, as part of their application for their registration with CMHC, Canadian issuers of regulated covered bonds will need to declare the minimum and maximum ratio (Asset Percentage or AP) of total covered bonds vs total cover pool as set under their program documents. Thus, OC caps under registered programs only need to be reported to CMHC. From the covered bond issuer perspective, wider spreads and/or increased enhancement levels translate into a higher cost of funding for Canadian banks for this source of financing. Fitch will monitor the impact on Canadian banks but does not expect to it be material given their diversity of funding sources (most notably including strong and stable depositor bases) and widespread market access relative to global peers. Fitch will continue to monitor the market for additional information as further details of the framework are announced. We are also completing an updated analysis of Canadian house prices and plan to report the details of our findings this summer as part of our Canadian residential mortgage loss model rating criteria. Additional information is available on www.fitchratings.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. Applicable Criteria and We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

Source: Reuters

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