Canada Mortgage and Housing Corp. has effectively broken up a 30-year monopoly related to the custody of mortgage records in Canada, a move the new entrant into the market says could open up the multi-billion-dollar securitization business.
CST Trust Company, a Canadian-based entity which provides financial and administration support for the financial industry, has reportedly received certification to act as a third-party to store documents related to the mortgages of millions of Canadians.
For the longest time, that custody was handled by one provider, using a manual process to record some of the data used in connection with Canadian mortgages. Banks do hold onto the loan records but CMHC, which runs the multi-billion-dollar program that securitizes government-backed consumer mortgages, requires a third party to hold onto documentation for risk reasons.
Computer Share Inc., an Australian-based company, has been the only custodian of that information until now but that is about to change and CST says it has already signed up one major Canadian bank, a move that needed the okay from CMHC.
The company wouldn’t say what the rights to the market could be worth but there are almost $500 billion in mortgages outstanding under the National Housing Act Mortgage-Backed Securities program administered by CMHC.
