Until recently, filing and maintaining mortgage securities documentation was an outdated and slow process managed only by the CMHC. CST Trust Company is a new Canada-based member entering the scene. A week ago, the company received certification from the CMHC to store millions of government backed mortgage holders’ documents. CST is the first Canadian company to qualify for this role and will create a digital registry of Canadian mortgages.
What is a mortgage-backed security?
Mortgage-backed securities are a fixed-income and low-risk investment that allows its owners to pool together financing for many mortgages. Money collected from mortgage-backed securities is normally lent and used to help homebuyers who require government-backed insurance to access mortgage financing.
In Canada, mortgage securities are issued by banks or other financial institutions and insured by the CMHC.
Who’s involved in the mortgage securities process?
Even though the CMHC insures mortgage securities, the following groups actually finance, sell and manage mortgage securities.
- Investors (The people who finance the securities – this can be an individual or more commonly, a company)
- Issuers (The seller who develops, issues and sells securities to the investing public to finance its own operations. Issuers are banks, corporations or domestic and foreign trust companies)
- Originators (Those who work with a mortgage borrower to manage mortgage transactions. Originators are mortgage brokers, financial institutions and mortgage companies)
Who normally manages mortgage security records?
While banks, trust companies and other financial institutions hold on to copies of mortgage securities information, the CMHC also retains a copy of this data. The CMHC exclusively outsourced documentation management services to a third-party Australian company called Computershare. Computershare hosts backup copies of Canadians’ mortgage securities information due to investor risk.
Why is digitizing access to mortgage securities important?
Providing on-demand digital access to asset information outside of a financial institution grants investors, issuers and originators an easier and less-risky way to manage and monitor their investments.
Having a digital channel to ease managing consumer files could result in increased mortgage securities investments for the CMHC. Securities owners who have invested several hundreds of thousands of dollars would be keener to inject more money into the market. In a $440 billion-dollar market that’s prone to cooling thanks to new CMHC mortgage rules, the Crown Corporation could use more positive engagement.
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