Canada’s Budget 2010 aims to take advantage of  Canada’s economic recovery and prepare it for the future.
The budget plan has three main broad aims.

1. It confirms $19 billion in new federal stimulus under Year 2 of Canada’s Economic Action Plan, to create and maintain jobs complemented by $6 billion from provinces, territories, municipalities and other partners.
2. It invests in a limited number of new, targeted initiatives to build jobs and growth for the economy of tomorrow, strengthen Canadian innovation, and make Canada a destination of choice for new business investment.
3. Budget 2010 charts a course to bring Canada’s finances back to balance over the medium term and well before any other Group of Seven (G7) country.

The Canadian brand will be based on competitive taxes, renewed infrastructure and skills, a strong head start in clean energy, a tariff advantage, less red tape, and a more prominent voice as a global financial sector leader.

All of these measures will contribute to maintain and sustain Canada’s fiscal health, which according to the Department of Finance is the envy of the world.

As far as the mortgage industry us concerned the 2010 federal budget includes new regulations to standardize mortgage prepayment disclosure and the elimination of the Insured Mortgage Purchase Program (IMPP).

Under the Insured Mortgage Purchase Program, Canada Mortgage and Housing Corporation (CMHC) purchased securities comprised of pools of insured residential mortgages from Canadian financial institutions to provide long-term stable funding to lenders and help them continue lending to Canadian consumers and businesses.

Of the $125 billion available, as of September 21, 2009, $64.2 billion had been disbursed through 16 reverse auctions: $43.3 billion through 10 fixed-rate reverse auctions and $20.9 billion through six floating-rate reverse auctions. 19 different financial institutions participated directly in the program, including banks, non-bank deposit-taking institutions, and life insurance companies.

Some bankers argue that the program should remain in place as a safeguard. However, recent figures suggested that bank interest had dwindled with just $65.9 billion worth of mortgages having been disbursed. Just a few weeks ago the government offered to buy up to $4-billion of mortgages, but banks only sold it $1.4-billion worth. One last purchase is scheduled for March 24.

The government also says that it will introduce legislation setting out a framework for covered bonds, a type of bond that remains on a banks’ balance sheet and can be backed by assets such as mortgages. They are similar to Canada Mortgage Bonds, except for the fact that they remain on the banks’ balance sheets and that they do not carry the government’s guarantee. A number of Canadian banks have already begun issuing covered bonds during the last two years, and have been successful in selling them to investors.

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Sources:

• http://www.budget.gc.ca/2010/plan/chap1-eng.html
• http://canada-money-affairs.blogspot.com/2010/03/canadas-federal-budget-2010.html

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