Getting CMHC to approve deals may soon be tougher, with the introduction of a new bill handing ultimate control for government-backed mortgage insurance to an increasingly strict OSFI.
“It is a recognition that CMHC has become a significant financial institution," Finance Minister Jim Flaherty said Thursday. "CMHC was created to assist in social housing (but) it’s become much more than that."
As promised, the Finance head tabled his budget implementation bill – proposed legislation guaranteed to win approval and set to transfer key elements for CMHC oversight to the Office of the Superintendent of Financial Services.
The move will also establish a registry to monitor the use of outstanding covered bonds, or mortgage-backed securities, employed by the banks to free up capital and keep their mortgage divisions churning.
The upshot for brokers is the real threat the government move means a tighter set of reins on what some charge is Canada’s runaway mortgage lending.
As a result, CMHC official guidelines are expected to tighten under OSFI oversight, making it harder to get all but the most standard A deals signed off on.
Still, the legislation may increase the appeal of both Genworth and Canada Guaranty as brokers and their lenders step up their use of those default insurers.
Alternative institutional and private lenders are also expected to see an uptick in the number of applications. That has, in fact, already happened, with Genworth’s director of risk operations pointing to the growing shift toward conventional lending and away from the harder-to-get high ratio mortgage.