The Canada Mortgage and Housing Corporation (CMHC) rebuked the C.D. Howe Institute’s claims this week that the government should scale back its role in the mortgage industry due to growing risk.
The C.D. Howe Institute report, released on Jan. 31, said the government’s role in mortgage markets, through CMHC, may “encourage excessive lending risks in the consumer marketplace, potentially creating unmanageably large risks in financial markets."
Its solution is for the government to scale back CMHC’s role in the provision of mortgage insurance and turn over much of the industry to private insurers.
Without directly addressing the report, CMHC responded today through Media Relations Officer Kate Munroe by providing a statement to CRE Online that dismissed concerns of growing risk, while declining further comments through an interview.
“The Canadian market is stable,” said the statement. “Prudent lending and mortgage insurance practices, and strong banking regulations, have helped Canada’s banking system remain healthy.”
The statement goes on to say CMHC follows the guidelines set forth for capital reserves by the Office of the Superintendent of Financial Institutions, and maintains reserves at close to double the minimum amount required.
At the end of 2009, CMHC’s capital level for its insurance business was $8.2 billion. There’s also an additional $6.7 billion in unearned premiums reserved for potential future claims.
“The quality of CMHC’s insured loan portfolio is strong,” the statement read. “On average, homeowners with outstanding CMHC insured mortgages had equity of 45% of the value of their home at the end of 2009.”