CDOR Transition in NHA MBS and CMB Programs

In December 2023, we released Advice No. 20 and an update on CDOR CMB to provide details on CDOR Transition in the NHA MBS and CMB Programs and the respective fallback rate calculation methodologies for CDOR applicable to each program.

As the CDOR Cessation Date is fast approaching, we would like to remind participants of both programs that the fallback rate calculation methodologies for CDOR are different between the two programs.

CDOR NHA MBS

Following the recommendations from Mortgage-Backed Securities Issuers Association (MBSIA) and the Bank of Canada’s Canadian Alternative Risk-Free Rate (CARR) working group on CDOR NHA MBS, we have advised NHA MBS issuers of the following when calculating the fallback rate for CDOR NHA MBS outstanding on or after July 1, 2024:

The One-Month Daily Compounded CORRA calculation methodology currently being used in newly issued CORRA NHA MBS is to be used to calculate the CORRA compounded-in-arrears rate.
The one-month CDOR to CORRA spread adjustment of 0.29547% announced by Bloomberg in May 2022, as defined in its IBOR Fallback Rate Adjustments Rule Book, should be added to the One-Month Daily Compounded CORRA.

The folllowing example provides more details on this transition (PDF)

CDOR CMB

From the interest period starting September 15, 2024, 3-month CDOR will be replaced by the Fallback Rate (CORRA) as the first alternative reference rate in the CARR Recommended Fallback used to calculate the coupon.

The following example provides more details on the CMB transition (PDF)