Mortgage Backed Securities in Canada:
the size of the market and prospects for the future
Jane Londerville
Marketing and Consumer Studies Department
University of Guelph
Guelph, Ontario
Canada N1G 2W1
519-824-4120 ext 53091
fax: 519-823-1964
jlonderv@uoguelph.ca
Abstract
Mortgage Backed securities (MBS) are relatively new in the Canadian mortgage finance
system. This paper will describe their development and history (along with mortgage
backed bonds) and compare this with other countries through a brief review of mortgage
securitization strategies in various parts of the world (U.K., Korea, Latin America,
Australia, Japan). The primary uses of MBSs in Canada and positive aspects of
securitization will be explored as they have been experienced since the inception of MBS
in the late 1980s and as they relate to the basic structure of the mortgage finance system
in place before MBSs were introduced.
The main focus of the paper will be on the contrast between the MBS markets in the US
and Canada. The proportion of national mortgage debt that is packaged into MBSs in
both countries will be examined and the paper will discuss reasons for the significantly
smaller proportion of debt in Canadian MBS versus the numbers for the United States.
Future prospects for growth in the Canadian MBS market will be explored. The paper
will conclude with implications for other countries of the experience in North America
with mortgage securitization.
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