CMHC cuts to lead to privatization?

CMHC cuts to lead to privatization?

CMHC cuts to lead to privatization? According to a Financial Post source, the CMHC's decision to cut two of its programs moves it one step closer to potentially privatize the crown corporation.

“The mandate of CMHC is to get smaller,” the source told the Post.

The crown corporation announced last week it would be axing its second home program while also requiring self-employed homebuyers to provide third party income verification. The goal, according to the source, is to offload some its business – and its risk – to the two private insurers, Genworth and Canada Guaranty.

“CMHC helps Canadians meet their housing needs and contributes to the stability of the housing market and finance system” Steven Mennill, Senior Vice-President, Insurance with CMHC says in an official release. “As part of the review of its mortgage loan insurance business, CMHC is evaluating its products and services to ensure they are aligned with these objectives.”

Moreover, effective May 1, each of the three insurers hiked their insurance premium by 15 per cent. The CMHC was the first to announce the increase – a move some brokers believe is necessary to ensure the long-term viability of the corporation.

“A lot of brokers don’t remember that (in 2005) ago the premium with five per cent down (were lowered to) 3.75 per cent so it went down and it’s gone back up again and our CMHC is pretty much guaranteeing as much mortgage debt as our government of Canada has in complete debt,” Tim Brierly of KCR Mortgages told MortgageBrokerNews.ca. “The mortgage premium is such a minimal amount of what you make in your monthly if the premium has to go up to make CMHC a more viable option – and able to cover the obligation it is sitting on – I don’t think it’s a big deal.”
 
 
13 Comments
  • Grazor 2014-05-02 11:14:02 AM
    Not sure how two programs at the margin being cut suddenly becomes the basis for privitisation. Seems a bot of a reach.
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  • Warren Ross 2014-05-02 11:41:00 AM
    I think we're better off having a government backed insurer who has more interests like ensuring stable mortgage and housing markets than purely profit. It would be a huge mistake if CMHC were to privatize.
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  • Ron Butler 2014-05-02 11:58:28 AM
    I am with Warren, CMHC was a very important factor is Canada quickly moving through the 2008 World Financial Crisis. Seriously, very important. The other two insurers were tied to their US parents and we know what a tough spot they were in. CMHC did provide that stability and market presence.

    I am a smaller government guy but when I look at an institution that is profitable (sends money to the Feds year in and year out not the other way around) and provides a crucial backstop to the critical housing market like CMHC does, I say; rationalize it, streamline it, refine it but don't sell it.
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