Canadians will continue to take on mortgage debt in 2003 to the tune of more than C$517 billion in mortgage credit. This will keep the Canadian mortgage market strong for another year, a pattern that is expected to favor mortgage-backed securities as well.

"A combination of continued economic growth and job creation, positive demographic factors and low mortgage rates will sustain demand for home ownership in new and resale housing markets," says Ali Manoucherhi, a senior economist with our federal housing agency, Canada Mortgage and Housing Corporation (CMHC). "This will lead to a six to eight per cent annual growth in residential mortgage credit in 2003."

CMHC is no slouch when it comes to acquiring debt either. One of Canada's largest borrowers, it annually borrows $2.0 to $2.5 billion. CMHC uses this money to provide mortgage loan financing to social housing project sponsors.

Forecasts of continued strength in construction and housing finance, also make National Housing Act Mortgage-Backed Securities according to CMHC. In the first 9 months of 2002, more than C$16.4 billion in NHA MBS was issued – more than three times the amount issued during the comparable period in 2001 – and uncertain stock market conditions continue to make these securities an attractive option in 2003.

These securities, as investments, combine the investment qualities inherent in both real estate mortgages and Canadian Government bonds. The NHA MBS represents an undivided interest in a pool of NHA-insured residential mortgages. As mortgages, these financial instruments are secured by the value of the underlying real estate. CMHC provides Mortgage Loan Insurance on all pooled mortgages and an unconditional guarantee under the National Housing Act (NHA) of timely payment to NHA MBS investors.

CMHC guarantees, on behalf of the Government of Canada, "the timely payment of principal and interest on securities." This is the key innovation in the NHA MBS. Regular monthly payments are made to the NHA MBS investors whether or not payments from mortgagors are actually received by the issuing financial institution. Although there are other investments based on a pooling of mortgages, NHA MBS issues are the only such investments that CMHC guarantees on behalf of the Government of Canada.

CMHC provides these details on how NHA MBS work:

Published: February 4, 2003

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Futurist and Strategist PJ Wade is "The Catalyst" -- intent on "Challenging The Best Become Even Better." PJ earned this title by translating the dynamic impact of Boomers and their multi-generation families into relevant insights that start people thinking and taking action—in business and in life. Author of 7 books and more than 1600 published articles, PJ encourages individuals to become their own futurist. PJ writes and speaks about the insight, knowledge and solid decision-making skills that professionals and their clients need to live and work in this vortex of change. For instance, since PJ knows that home is headquarters for the new decades-long "unretirement," she wrote the popular book "Reverse Mortgages: Best Friend, Worst Enemy... Your Choice! (CatapultPublishing.com), which is filled with suggestions and insight on protecting and using home equity. Her new business book, "What's Your Point?," which identifies 7 common mistakes professionals unknowingly repeat to their detriment, will be published in 2009. As The Catalyst, PJ provides strategic communication, client appreciation and advanced education services to the financial, tourism, lifestyle and service sectors -- and the clients they serve. A frequently-quoted financial and business commentator, PJ is a thought-provoking strategic speaker who offers practical, real-life suggestions on leaving "the box" behind and embracing Forward Thinking -- a talent she regularly demonstrates in this column. For more on blogs, books and topics, visit TheCatalyst.com.