CMHC reveals confidential memo to finance ministry

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The Canada Mortgage and Housing Corp (CMHC) has admitted that it told the finance ministry in 2014 its concerns about increasing high household debt levels and rising prices in a number of urban property markets.
CMHC’s comments were initially confidential, sent in May 2014 through a memorandum.
"We are, however, concerned about reduced household flexibility resulting from elevated debt levels as well as diversion of capital into residential housing investments," the memo last year stated. "Likewise, elevated prices in some urban markets further compound affordability concerns."
This week, CMHC furnished Reuters a copy after the Blacklock's Reporter online website first reported it.
The memo also stated CMHC would “look at options for loan-level risk sharing with lenders to reduce risk, increase market discipline and further optimize taxpayer exposure.”
However, details of its proposals were censored.
From 2008 to 2012, Canada exerted efforts to tighten the rules around government-backed mortgages four times in a bid to cool the property market.
  • David Skinner on 2015-03-05 2:32:15 PM

    If the government & CMHC are so very concerned about debt load of Canadians, can anyone answer why they've put so many restrictions on mortgage lending(cheap borrowing costs) and no costs on unsecured lending. Dollar for dollar, the Banks earn far more on credit cards, loans, & PLC's than they earn on mortgages.

  • Joel Sida Mortgage Broker on 2015-03-05 2:38:08 PM

    Good point David, when mortgage rates dropped, unsecured debt rates went up and the consumer has no saying at all.

  • Mike on 2015-03-05 2:38:09 PM

    Ironic, government is concerned with consumer debt load. As a taxpayer I am very concerned with government debt loads. Time to put some restrictions on government spending, especially bankrupt Ontario. If you do the math I pay more in interest on the government debt than I do on my own debt.

  • Susan Zanders on 2015-03-05 2:39:42 PM

    I agree David. Why hasn't that area been addressed by the government? Some restrictions in that area would go a long ways, rather than penalizing clients who want the clean up their financial picture by consolidating and closing credit.

  • Nancy on 2015-03-05 2:39:45 PM

    I'm with David. It makes me shake my head every time I think about it. It's a no brainer. Can someone please wake up the politicians. They are in bed with the credit card loan sharks.

  • Derek on 2015-03-05 2:45:29 PM

    They also reduced the interest rate , how does that reduce debt, they only place that can really take advantage of lower rates is Ontario as there economy is the only one that gets stronger with a low dollar at this time . Nothing that they have done since 2006 or further back has made sense .

  • Alain Payette on 2015-03-05 2:53:34 PM

    And do not go to a bank and ask for a credit line at 8% to pay off your cards at 19%, this is not acceptable for most lenders....

  • Sherry on 2015-03-05 3:01:44 PM

    David, you summed it up. If they were genuinely concerned, restricting the amount of unsecured debt and lowering the costs of borrowing for a typical consumer might actually get results. Unfortunately, debt, like illness is big business. They just keep growing.

  • Patricia on 2015-03-05 3:02:49 PM

    Absolutely agreed. If they are so worried about debt levels, go after the credit companies charging 25% and more! Also, put a halt to the "do not pay for 12 months" plans etc., Totally wrong!

  • Darren Rossi on 2015-03-05 3:08:50 PM

    I agree with Mr. Skinner's comments. I find it astonishing that the accessibility to unsecured credit never seems to be addressed by the powers that be whenever this topic is brought up. Until this is addressed, I just don't see a major turn around with this situation. I had a client confide in me yesterday that they went into their branch a short while ago to withdraw some savings to use for an overseas trip. Their banker actually tried to discourage them from withdrawing from their savings account, instead trying to set them up with an unsecured credit line to draw the required funds from. Thankfully, my clients declined as they had no use for another credit line. But to be honest, I believe many customers would take the bankers advice in this type of situation and just take on another credit line. I did inquire if the savings funds were secured in any type of GIC, term deposit, TFSA, etc., but that was not the case. In my opinion, just another example of institutions pushing unnecessary, unsecured credit.

  • Mike on 2015-03-05 3:16:25 PM

    Slow down Patricia, I own alot of bank stock and that is my retirement, don't have any debt. Always saved for what I wanted and paid off my mortgage as fast as I could. If people are stupid enough to carry balances on their credit cards why should we not benefit. Remember banks don't want people wealthy. What concerns me is the government debt and how that is going to effect my future.

  • Ron Butler on 2015-03-05 4:48:29 PM

    This is such a repetitive topic, mortgage debt represents about 80% of national household debt. Consumer debt has no government backing, mortgage debt often has government backing. That's the source of the worry. Very simple folks: if 20% of the credit cards in this country went into default tomorrow it would be a problem for the banks but a manageable one. If 5% of all the mortgages in this country went into full default it would be a massive problem for the banks, the mortgage insurers, the government and all of us.

  • bub slug on 2015-03-06 7:56:00 AM

    if the govmnt didnt allow cmhc to change the rules back in 2008 to get the ball rolling we would not be in this spot. Look at germany,no cash ,no buy.

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