DBRS Morningstar Confirms Rating of Canada Housing Trust™ No. 1 at AAA

DBRS Limited (DBRS Morningstar) confirmed the platform rating of AAA on the Canada Mortgage Bonds™ (the Bonds) issued by Canada Housing Trust™ No. 1 (the Trust). The Bonds are issued periodically, paying fixed- or floating-rate interest on a semiannual or quarterly basis, respectively, until their stated final maturity dates when the final interest and repayment of principal will be due.

DBRS Morningstar initially published its outlook on the Coronavirus Disease (COVID-19) pandemic’s impact on key economic indicators for the 2020–22 time frame in April 2020. DBRS Morningstar last updated the macroeconomic scenarios on March 17, 2021, in its “Global Macroeconomic Scenarios: March 2021 Update” at https://www.dbrsmorningstar.com/research/375376. For the confirmation of the rating, DBRS Morningstar’s analysis considered impacts consistent with the moderate scenario in the referenced commentary.

The Bonds are backed by a full guarantee provided by Canada Mortgage and Housing Corporation (CMHC) in its capacity as an agent of Her Majesty in Right of Canada (the CMHC Guarantee). The Bonds are consequently rated at the same level as CMHC’s All Debt Securities, Cdn Currency (bsd on Gov’t Cda) at AAA, which mirrors DBRS Morningstar’s Canadian sovereign rating of AAA for the Government of Canada’s long-term domestic currency obligations. As an agent of Her Majesty in Right of Canada, CMHC’s debt obligations and guarantees are direct obligations of the Government of Canada. The AAA rating is based solely on the CMHC Guarantee without any review of the underlying collateral as such information is not provided to DBRS Morningstar.

The Trust uses the proceeds from the issuance of the Bonds to acquire insured residential mortgages in the form of pools of mortgage-backed securities (MBS) that have been created by CMHC-approved issuers (the Approved Issuers) under the National Housing Act (NHA) and that meet certain eligibility criteria (the Trust Assets). The Approved Issuers deposit the NHA MBS payment amounts into a designated account, from which the NHA MBS central payor and transfer agent then make payments to holders of NHA MBS, including the Trust. The Trust then uses the cash flows received from the Trust Assets, as well as hedging agreements, to meet its obligations to Bondholders. All hedging counterparties must be approved by CMHC. The CMHC Guarantee will ensure timely payment to Bondholders if the Trust has insufficient funds to meet its expenses. As a result, the Trust has granted CMHC a first-priority security interest in the Trust Assets to the extent of any payments made to Bondholders under the CMHC Guarantee.

A list of outstanding Bonds can be found on the DBRS Morningstar website under the Trust.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Notes:
The principal methodologies are Master Canadian Structured Finance Surveillance Methodology (August 31, 2020) and North American Structured Finance Flow-Through Ratings (January 4, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar did not have access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for a list of outstanding Canada Mortgage BondsTM.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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