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What is the CMB Program, and How does it Help Borrowers and Brokers?

Most Canadians have heard of CMHC, the Canada Mortgage and Housing Corporation that provides mortgage insurance for thousands of homeowners. Chances are, you either think they’re a great organization doing great things, or you think they need to have their insurance ceiling squashed, not extended. But whatever your thoughts are about CMHC as the Crown corporation, CMHC also provides the Canada Mortgage Bond (CMB) program. This program is little talked about, but CMT recently brought them up on their website, and it was a good reminder that these are bonds that deserve a little more spotlight time.

The CMB program works very simply. Bonds are issued to small lenders, which helps them with things such as capital and operating costs. Because they are given access to more funding, they don’t have to pass as many costs onto their customers, and so they can offer lower rates. This in turn, benefits just about everyone.

It’s not hard to see how it benefits smaller lenders – and explains why so many of them can keep their head above water when they’re competing with the Big Six. But, this boost brought to those smaller lenders also means that those big banks have to work that much harder to get your business. Because a smaller bank that you may already be using, or that has a more personal touch, may be able to offer those same low rates, through the CMB program.

This also benefits brokers, giving them a wider network to reach out to when searching for the best rate to get their customers, and to also bring competition to this industry. Brokers who know about these smaller lenders and banks will be able to offer their customers more than those who don’t.

And, it’s only going to get better. More and more lenders are starting to rely on these bonds, which means that the market is getting more competitive and that it’s only going to get more so. CMHC states that the amount of five-year fixed rate CMB transactions has multiplied four times in the years between 2006 and 2012.

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