Cacruden, yes CMHC mortgages are insured to 100% of their value.
Again, not to be picky, but you made a comment (perhaps inadvertently) that the mortgages transferred off the bank's books to the government were "non-performing". In finance jargon, that would mean that the mortgages were delinquent and not generating a return. But these mortgages actually are generating a return, hence the earlier comment that the government was making a profit on them by collecting mortgage interest.
I have no idea what point afg2001 is trying to make. The government doesn't finance itself by borrowing money from private banks; governments borrow by issuing bonds, which pay a relatively low interest rate because they carry the lowest level of risk. I haven't seen the movie he refers to but I'll take Dilla's word that it is perhaps not the most solid source of information.