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THE HERALD Wednesday September 5 1990- Page Mortgagebacked securities guaranteed by government Mortgage backed securities were Introduced to Canadian in vestors in and have become one of the fastest growing segments of the Canadian fixed income marketplace since that time Today there are over billion in outstanding issues The reasons for this popularity are easy MortgageBacked Securities provide a regular source of income excellent liquidity at tractive yields and as they are guaranteed by the federal govern through the Canada tgage and Housing Corporation CMHC they are of the highest credit quality as well This govern guarantee is very important because it covers timely payment of both principal and interest This means that should an issuer or mortgagor for whatever reason not have the full amount due available by the payment date CMHC will step in and make good the obligation This way the vestor is never inconvenienced But how do they work Many in vestors are familiar with the in vestment attributes of Mortgage- Backed Securities but are not sure exactly how they work and how the payments are calculated First lets review what a mortgage- backed security is MBSs are un Dollars and Sense divided interests government insured first residential This means that you as an investor are buying into a pool of mortgages and that on the other side of the pool are people who are making payments on the tgages of their homes just as you have likely done These have borrowed money from banks and trust companies to finance home purchases A bank or trust company therefore has a pool of mortgage debt which it repackages into separate investments to sell to in dividual investors in minimum amounts of The mortgagors make regular equal blended payments of principal and interest Wicor Canada receives grant The Honourable Benoit Bouchard Ministry of In dustry Science and Technology has announced that Wicor Canada Inc of Mississauga will receive in federal assistance under the Advanced Manufacturing Technology Application Program The company will use the sup port under AMTAP to study and evaluate the potential impact that new information technologies can have on their operations how could improve their productivity and enhance their competitiveness in international markets AMTAP is a four year service- oriented program of Industry Science and Technology Canada It has an 8 million fund to sponsor about 90 projects in each of its four years of operation The program provides funding for qualified firms to engage outside con who will assess the com mercial and technical feasibility of comprehensively upgrading their operations The program supports projects from both individual and groups of companies Where one company is involved contributions can be pro vided of up to 75 per cent of the cost of engaging a consultant to a total of Where there is a demonstrated advantage to a joint application covenng a group of companies assistance would be 75 per cent of the consultant s cost with a limit of 20 per firm up to a 200 limit for the joint ap plication Canada leading manufacturers are actively updating technologies and management practices to meet international standards It has been found that a sive assessment of the manufac operations by consultants with relevant prior experience can assist change and enhance the probability of success Senior management s commitment in these companies is seen as critical to successful implementation and this is a prerequisite to financial support under the AMTAP into the pool which are then col lected by the issuer and partially passed through to the individual MBS investors Similar to the payments made by the tgagors the investors receive blended monthly payments of prin cipal and interest All of the principal paid by the mortgagors is passed through to the investors while the interest portion is determined by applying the coupon on the MBS to the re maining principal owing onthe in itial investment In addition to regular principal and interest payments many mortgages allow prepayments A MortgageBacked Security which allows prepayments is called an Open Pool In the case of an open pool MBS these unscheduled prepayments are also passed through to the investor whereas in the case of a Closed Pool no prepayments are allowed Therefore the cash flow of a Clos ed MBS is certain while the cash flow of an Open Pool is not because It is impossible to anticipate when an individual mortgagor is going to repay his or her mortgage However government and households tend to increase their spending and their borrowing With more borrowers competing for loans interest rates rise The effect of the dollar on in rates is also important A lower dollar can mean more infia which in turn causes higher interest rates and viceversa The Bank of Canada monetary policy is another determinant of in terest rates e 90 days or less By varying the amount it reserves it provides to the chartered banks the Bank of Canada controls the growth of the nation s money supp ly And by raising and lowering the interest rate it charges the banks for these reserves it controls the Treasury bill rates and the bank rate The latter is the rate at which the Bank of Canada lends money to the chartered banks Brian Is an Investment Executive with Scotia Questions should be directed towards Brian who can be reached at Call collect If out side Toronto SERVICE OFFICE I I SOFTWARE I I 138C Guelph St George to COME AND SEE OUR SELECTION 416 I 8730641 Hamilton company is facing charges under the EPA Hamilton Fire and Safety Equip ment Ltd and the companys owner Colin Fleet have been charged with operating a ventila tion system without a Certificate of Approval Mr Fleet operates a company which repairs and recharges fire extinguishers It is alleged a ven tilation system namely a fan was installed to vent out airborne par tidies that interfere with produc tion in the shop On August 28 1989 a pound ex tinguisher was being charged with nitrogen when a valve stuck in an open position It is alleged that the extinguisher was then thrown into a small room where the fan was located The fan was on and close to two pounds of chemical powder was discharged into the environ Mr Fleet and Hamilton Fire and Safety Equipment Ltd have been charged jointly with one count under section 8Ua of the En Protection Act EPA which relates to unlawfully constructing a mechanism or ap paratus that may discharge a con taminant into the natural environ ment without holding a Certificate of Approval The defendants have also been charged jointly with two counts under subsection of the EPA which relates to unlawfully permit ting the discharge of a contami via a ventilation fan that is likely to cause an adverse effect The defendants have been charg ed jointly with one count under subsection 141 of the EPA which relates to failing to notify the En vironment Ministry of the discharge of a contaminant into the natural environment that is likely to cause an adverse effect A trial date has been set for December 12 1990 at the Hamilton Provincial Offences Court Nells DRIVING SCHOOL NEXT CLASS SEPT 10thOct 3rd MONDAYS WEDNESDAYS 309 30 M For Information About Courses or Private Lessons phone 8772671 CORPORATE PURCHASING AGENTS Wholesale Prices Full Service FAX and COPIERS New and Used DESKS CABINETS SEATING etc DATA and SYSTEMS FURNITURE and LOTS MORE BuyLease 4167603393 GSS SUPPLIES SECRETARIAL SERVICES IS NOW Our Name Has Changed Our Service To You Has Improved We have changed our name added a second location and in creased our buying power to better serve our valued customers Stop in today and see our new showroom A Change For The Better footnotes office supplies furniture office supplies furniture secretarial services Two locations to serve you better BOLTON GEORGETOWN 348- Guelph Street Georgetown Ontario Healey Road Bolton Ontario