The acronym of the day: CLAF. It stands for Canadian Lenders Assurance Facility. It's essentially loan insurance that the government has just created to guarantee credit among federally-regulated deposit-taking institutions.
The goal of the CLAF is to encourage more lending in the midst of Canada's worst credit crisis in memory.
The cost of the insurance isn't cheap, however. It's 1.60%-1.85% of the loan amount. As the government puts it, "it is being made available as a backstop in case conditions in global credit markets disrupt Canadian lenders’ access to the funds they need to keep lending."
Given the price, there's a fair chance it won't have any major uptake, or impact on reducing mortgage funding costs. The CEO from low-cost lender ING was quoted by the Globe as saying, "Of the various options that we have to cost-effectively fund our business, this is not something we would probably be interested in."
The CLAF is totally voluntary and is set to expire next April 30.
Hi,
do you know how much of $75b set aside by the government for this program has been used?
Thanx
Ian
Hi Ian,
You’re referring to the CMHC reverse auction program right? So far, $41 billion of the $75 billion has been utilized.
Here are the remaining auction dates:
February 9, 2009
February 20, 2009
March 11, 2009
March 24, 2009
Here is the NHA MBS Auction Operations link for more info…
Cheers,
Rob
Hi, correct me if I’m wrong but connecting the dots on the IMPP and CLAF is not easy for me. CLAF is insurance for institutions that take addvantage of IMPP.
the department of finance says this about the IMPP –
Under the Insured Mortgage Purchase Program, Canada Mortgage and Housing Corporation (CMHC) purchases securities comprised of pools of insured residential mortgages from Canadian financial institutions. These are high-quality assets that are backed not only by the overall strength of Canada’s housing market, but also by the Government’s own guarantee of the insured mortgages.
a. How can a regular person tell if their mortgage is one that has been packaged up and sold?
b. if your mortgage is packaged up and sold, how can it be enforced? If someone cannot make a mortgage payment how can a bank -which would normally accept the mortgage payment – force foreclosure if they do not own the mortgage?
Thanks
Ian
Hi Ian, there is no way to tell unless you were inside the mortgage’s office, it is seamless.
Your mortgage is enforced as it is only securitized in the pool, the asset stil technically is administered by the lender. Should the loan go into default, past a certain point, the lender has to buy back the mortgage out of the pool until the mortgage is current again.
I hope this helps.
If you miss a payment you will be in default and the lender can come after you for ALL damages. It makes absolutely ZERO difference if your mortgages is securitized or not. This isn’t the U.S. You can’t hide!!