To support the rapidly changing residential mortgage funding market in Canada due to recent CMHC and Government of Canada initiatives, TAO Solutions is pleased to announce several forthcoming enhancements to assist our clients in meeting these new challenges.

Specifically, MortgageHub will be enhanced or modified to support the following:

  • IMPP NHA MBS Purchase Operations – The recently announced and quickly implemented IMPP program is significantly different than the prior version of the IMPP used during the 2008 financial crisis and which would still be supported out-of-the-box in MortgageHub.  The new program is effectively structured as a collateralized, amortizing notional interest rate swap with monthly settlements, absent of reinvestment activities.  As such, to best support direct NHA MBS sellers and intermediated swap providers and counterparties, the application will be modified to automate most aspects of the program including swap initiation and settlement, ongoing notional adjustment, pay/receive leg calculations, calculation of the administration fee, monthly ingestion of the transfer/swap settlement advice, and associated accrual-based accounting and cash settlements.  These changes are in the process of being analyzed, architected, and implemented over the coming weeks and will be delivered per the date specified for the 2020R1 Release detailed below.  With that stated, clients should expect to perform the first two months of processing outside of MortgageHub and should plan accordingly.  In advance of the release we recommend creating a separate pool owner entity and selling pools used for IMPP into that entity in order to segregate them from other inventory pools.  In that way it will be possible to encumber the pools within MortgageHub today to ensure correct asset tracking in the interim.

  • Negative Interest Rates and Coupons – Recent fixed-income market and central bank activities have resulted in a situation where negative interest rates are a distinct possibility in the coming months.  With that reality fast approaching, MortgageHub will be modified to accept negative interest rates in various places identified throughout the application as being currently deficient.  In addition, pool creation and monthly accounting (2840 generation) will be modified to floor coupon values to 0% as categorically specified by CMHC.  An additional configuration option will also be implemented to allow pool issuers to select between flooring mortgage rates to 0% or allowing negative mortgage rates during pool remittance processing.  This option will enable issuers to select from the two distinct options that CMHC may impose if negative mortgage rates materialize.  Clients who believe this to be a possibility within their portfolio should contact TAO Solutions for discussions on how their respective servicing system would handle such situations and the resulting data present in the daily data interface files.  

  • Mortgage Payment Deferrals – As announced by the Government of Canada last week, mortgage lenders may elect to make arrangements with borrowers to defer payments on loans for up to six-months. In order to accommodate this new reality, especially for loans already securitized in seasoned pools but also for loans destined to be pooled, issuers will need to ensure that the mortgages in MortgageHub reflect that they are in good standing and not in arrears. This can be handled either by amending the servicing system data or by amending the extracts uploaded to MortgageHub. Alternatively, a once-a-month file upload can be generated as needed that updates the relevant data points within MortgageHub to allow the loans to be reported as up to date.

    Loans that have interest payments capitalized will not trigger liquidations during the remittance process.

    Clients who have already started or intend to extend mortgage payment relief to borrowers should contact TAO Solutions for discussions on how their respective servicing system would handle such situations and the resulting data present in the daily data interface files. Note: CMHC clarified these liquidation and pooling rules and these modifications are subject to change should further direction be provided.

2834 and Advice 7 Changes – Dependent upon further clarifications and information to be provided by CMHC, MortgageHub will be modified to be compliant with the revised 2834 language for coupon floors, and to support the requirements issued under Advice 7 for guarantee fees on affordability-linked pools. 

We know our clients rely on our technology and services to administer funding programs for the majority of the Canadian residential mortgage market and we remain committed to supporting these activities during this extraordinary time.  In an effort to address the needs of the market as quickly as possible, we will be making these changes over the coming weeks and bundling all of the above items into the next generally available release of MortgageHub, known as 2020R1.  This major, singular release approach is being taken in an effort to reduce client testing cycles and deployment efforts.  MortgageHub 2020R1 is scheduled to be made available on or before May 15, 2020 and we ask that clients plan accordingly.

Again, we wish to thank all of our clients for their continued support.  Should you have any questions regarding this release, please do not hesitate to contact your designated account manager for further information.  Despite the fact that our team is now working from home during this unusual time, we can still be reached at our office telephone numbers or by email.