CMHC to Brokers: Don't worry about 'risk fees'

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CMHC has now moved to reassure broker networks that new and controversial "risk fees" pose no threat to mortgage funding -- that despite growing fears.

"We are reviewing the impact on our low-ratio portfolio insurance product provided to lenders," writes Sylvie Crispo, VP of insurance product and business development at CMHC, in an email to broker network heads Wednesday. "These new fees are not anticipated to have an impact on the availability or cost of mortgage funding nor the cost of buying a house."

Effective January 1, 2014, CMHC’s mortgage loan insurance activity will be subject to a risk fee of 3.25 per cent of premiums written and payable to the federal government.

An additional fee of 10 basis points will be payable on new portfolio insurance.

In the email, Crispo notes that since January 1, 2013, private mortgage insurers have already been required to pay a fee of 2.25 per cent of premiums as compensation for "the protection provided by the Government of Canada."

Ostensibly, those fees compensate the government for risks stemming from its guarantee of mortgage insurance.

The new guarantee fee of 3.25 per cent has been developed for CMHC taking into account the 100 per cent backing the fed provides for CMHC liabilities. That contrasts the 90 per cent guarantee afforded private mortgage insurers Canada Guaranty and Genworth.  

Still, some brokers are fearful the move signals the government's increased willingness to tinker with an already slower real estate market in order to discourage buyers.

That could further challenge the industry as it amps up its sales efforts in order to better compete with the banks.


  • Concerned Alberta tax payer on 2013-12-05 5:16:35 PM

    This is a great idea if the funds are reserved in a seperate account to provide for any risk created by CMHC Insured Products (The subject of the Canadian Government Guarantee) and not simply swallowed up into general revenue and then spent on other frivilous political incentives or waste.

    After which, if it is not seperately recorded should there be a loss on a CMHC insured product then the Government would record that loss against a CMHC guarantee and never show any offset from the fees received.

    Another smoke and mirrors transaction.

  • dml on 2013-12-06 7:01:06 AM

    Re; Concerned Alberta Tax Payer- You are so right!

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