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.

In what ways could the development of a residential mortgage-backed securities market impact the housing market in Canada?

What stance has the government taken regarding banks and their risk in the mortgage market?