Most Canadian mortgage lenders fund some portion of their mortgage lending using CMHC’s National Housing Act Mortgage Backed Securities (NHA MBS). That is, cash flows from mortgages are aggregated into investment securities and then sold to investors through a process called securitization. Payments from these mortgage backed securities are guaranteed by the CMHC, and therefore backed by the federal government,  which allows banks to fund their mortgage business more cheaply than would be possible through other sources of funds such as deposits or uninsured mortgage securitization.

At the beginning of each year, the Department of Finance and the CMHC set out a maximum volume of mortgages that can be securitized through its NHA MBS. That number for 2013 was $85 billion. It is important to note that the limit on NHA MBS has not changed. However, by the end of July lenders had already issued $66 billion or 78% of this year’s MBS limit. To ensure that the 2013 MBS limit...