BMO Plans C$2 Billion MBS That Could Pioneer a New Market

BMO plans to sell bonds backed by $2 billion of uninsured mortgages, potentially creating a new financing market. This move is compared to the US housing crisis, but with key differences. BMO's proposal involves bundling uninsured mortgages, with 95% rated AAA. While there are risks, this could impact the hot housing market in Toronto. The government encourages banks to take more risks, and a mature RMBS market could benefit investors. Other banks may follow BMO's lead if successful.

What is BMO planning to sell that could start a new financing market in Canada?

• Collateralized debt obligations

• Corporate bonds

• Prime uninsured mortgage-backed securities

• Government-backed bonds

How does BMO's proposal differ from the US housing crisis?

• It involves government-backed securities

• It includes a high percentage of AAA-rated mortgages

• It uses collateralized debt obligations

• It is based on subprime mortgages

What is a potential concern when bundling mortgages together?

• Government intervention

• Higher interest rates

• Increased transparency

• Obscuring the fundamentals of the package

What effect could BMO's plan have on the Canadian housing market?

• Decrease in housing prices

• Increased access to mortgage financing

• Reduction in mortgage availability

• Stabilization of housing prices

Why might the government welcome BMO's mortgage-backed securities plan?

• It limits mortgage financing

• It reduces bank accountability

• It encourages banks to take more risks

• It increases government control