Claims and policies are down yet profits are up, as CMHC continues to prove that Finance Minister Flaherty’s tinkering may actually be having a positive effect on the Crown corporation’s bottom line.
“Net Income for the three and nine months ended 30 September 2013 was $452 million and $1,276 million respectively, an increase of 20 per cent ($75 million) and 11 per cent ($124 million) when compared to the same periods in 2012,” CMHC’s third-quarter results, which were released Friday, state. “The increase in net income is mainly attributable to lower net claims expense resulting from improving economic conditions.”
The result is obvious, according to CMHC: the increased profits are a direct result of last summer’s mortgage rule changes, which included lowering the ceiling on refinance loan to values.
“For the nine months ended 30 September 2013, total insured volumes ($) were 14 per cent lower than the same period in 2012,” the report states. “The year-to-date decline is attributed to the reduced size of the high-ratio homeowner mortgage loan insurance market as a result of the new mortgage insurance parameters that took effect in July 2012 and to lower portfolio insurance volumes compared to the same period in 2012.”
As a result, fewer people are qualifying for CMHC-backed mortgages, which is evidenced in the average credit score increase, year-over-year, of those taking out such insurance.
“The average credit score for high-ratio homeowner approved loans in the first nine months of 2013 was 741, up from 737 during the same period in 2012,” the report stated. “The high average credit score demonstrates a strong ability among homebuyers with CMHC-insured mortgages to manage their debts.”
At the end of the third quarter, CMHC’s insurance in-force was $6 billion lower year-over-year; coming in at $560 billion.