The Characteristics of Uninsured Mortgages and their Securitization Potential

Adi Mordel and Maria teNyenhuis

No 2018-24, Staff Analytical Notes from Bank of Canada

Abstract: Following changes to housing finance policies that target insured mortgages, uninsured mortgage credit has been growing. This robust growth creates a larger pool of mortgages that may be suitable for private-label residential mortgage-backed securities (RMBS). The development and viability of the Canadian private-label RMBS market would depend on the characteristics of the underlying collateral. We address this data gap by documenting the key features of uninsured mortgages originated since 2014, comparing them across two groups of federally regulated financial institutions, i.e., domestic systemically important banks (DSIBs) and non-DSIBs. We find that on average, non-DSIB mortgages exhibit riskier characteristics, including lower credit scores, and higher debt-service and loan-to-income ratios. When compared with the prime quality collateral backing domestically issued RMBS to date, we estimate that the non-DSIBs’ securitization potential since 2014 has been about $17 billion. Growing that issuance further would require approaches to broaden the pool of acceptable mortgages.

Keywords: Financial Institutions; Financial system regulation and policies; Wholesale funding (search for similar items in EconPapers)
JEL-codes: G G2 G21 G28 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2018
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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