CMHC, bulk coverage on Flaherty’s radar

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Finance Minister Jim Flaherty told reporters last week that he had “no plans” to intervene in the nation’s housing market anytime soon – but only yesterday told a Senate committee that he is examining the role of the CMHC “very closely,” including a look at portfolio insurance.
 
“I do have concerns about CMHC and have had them for some time,” Flaherty told a Senate committee Wednesday. “We’re going to continue monitoring CMHC very closely.”
 
This most recent statement is raising questions among pundits given the minister’s comments last week while visiting the Vimy Ridge war memorial in France. There he told reporters that last year’s tightening of mortgage rules was working and he had no plans to again intervene in the housing market anytime soon.
 
The housing market is “unfolding as it should,” he said, pointing to moderated activity in the condo markets of several major cities. The mortgage rules have been tightened four times since 2008 by Flaherty in an effort to curb high debt levels and cool the housing market.
 
But Flaherty’s recent comments to the Senate committee reveal suggest an ongoing concern about the nation’s mortgage insurance protocol, specifically CMHC in regards to portfolio insurance.
 
“They still insure what are called portfolio residential mortgages,” Flaherty said. “We’re looking into that as well.” 
 
Meanwhile, CAAMP is continuing its campaign in Ottawa to convince the finance minister and OSFI to re-instate the 30-year amortization period for conventional mortgages.
 
Murphy and CAAMP have been urging more support for first-time buyers who have been “impacted by the recent regulatory changes,” pointing to a 9 per cent drop in home re-sales nationwide and record-low new home sales in several major cities.
 
“We encourage you to join CAAMP is its efforts to curb further constraints by sending comments to your local member of Parliament,” Murphy urged in a newsletter.
 
  • Past Regulator on 2013-05-24 10:40:46 AM

    This is not the first time that CMHC's portfolio insurance program has been examined. CMHC does not perform any underwriting, but relies on the institution's ability to follow prudential underwriting standards. Before Confederation Life and Confederation Trust collapsed and without due diligence CMHC insured Confed's Limited partnership portfolios. Even after considerable questioning CMHC reps saw nothing wrong with their business practice, after all they were making money. When the companies collapsed and the portfolios reviewed CMHC management belatedly apologized. The damage had been done.

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