According to Financial Post Sources, OSFI and CMHC are in discussions about the potential policy change, though the Canadian Bankers Association, unsurprisingly, opposes the move.
“The CBA has ongoing discussions with CMHC about a variety of issues in the mortgage and housing markets,” Maura Drew-Lytle, a spokesperson for the CBA, told the Post. “The International Monetary Fund made a really vague reference to the notion of a mortgage insurance deductible in its Financial Sector Assessment report on Canada, but you would have to speak to CMHC about whether or not it is an idea that they are considering,”
OSFI could not be reached for comment and a spokesperson for CMHC refused to comment, according to the Post.
CMHC has been implementing measures to limit its risk all year, through various measures that have included axing certain insurance programs.
The Crown Corporation announced it will nix its loan insurance for the financing of multi-unit condo construction and that it will align its low-ratio product with its high-ratio insurance by implementing maximum house prices, amortization periods and debt servicing ratios. Those changes went into effective July 31 of this year.
“The changes are a business decision designed to increase market discipline in residential lending while reducing taxpayers’ exposure to the housing sector through CMHC,” an official release from the crown corporation reads. “They also support the government’s continued efforts to adjust the housing finance framework to restrain growth of taxpayer-backed mortgage insurance, as noted in Economic Action Plan 2014.”
The Canada Mortgage and Housing Corporation is considering offloading some of its burden onto the banks by forcing them to pay a deductible on insured mortgages before claims will be paid out.