CMHC Publishes Canadian Covered Bond Guide

On December 17, 2012, Canada Mortgage and Housing Corporation (CMHC) published the Canadian Registered Covered Bond Programs Guide (the Guide), which sets out the expectations of CMHC in respect of its administration of a framework for the issuance of covered bonds by Canadian financial institutions. Publication of the Guide follows the enactment of federal legislation that establishes a legal framework for covered bond programs in Canada.  The legislation is intended to make the market for Canadian covered bonds more robust and increase financial stability.  Covered bonds are debt obligations issued by financial institutions that, in the Canadian context, are secured by a cover pool of mortgage loans and other substitute assets held in a special purpose vehicle (the guarantor entity) thereby isolating the collateral from the assets of the financial institution issuer to ensure they are available for covered bond holders in the event of the issuer's insolvency.