Despite decline, one broker believes we still need CMHC

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While many have called for CMHC to leave mortgage insurance in the hands of private corporations, one industry player believes relying solely on the free market to limit exposure could lead to economic problems.

"Anyone who thinks that a crown corporation should slack off to allow the free market to pick up the slack should think again if they think it limits taxpayers exposure," one anonymous commenter said on MortgageBrokerNews.ca "If a private corporation that insured thousands of Canadian mortgages failed the government would step in.

"Thinking free markets limit exposure to taxpayers is the same thinking that got us into a mess back in 2008," he continued. "More of the banks should have failed in 2008 but governments all around the world stepped in with public money including Canada."

CMHC insurance in force continues to decline after the crown corporation – and Canada’s largest mortgage default insurer – axed a number of its programs earlier this year.

“At the end of the second quarter of 2014, our total insurance-in-force was down $6 billion from December 31, 2013, standing at $551 billion,” CMHC states in its quarterly release. “We expect insurance-in-force to decline to approximately $545 billion by year-end as mortgage repayments continue to offset new insurance written.

“As a result of lower portfolio insurance volumes, our total insured volumes ($) for the first six months of 2014 were approximately 13.3 per cent lower when compared to the same period in 2013.”

Earlier this year the crown corporation announced it would no longer insure the construction of condo developments or homes in excess of $1 million. Additionally, CMHC also announced it would no longer insure second homes and self-employed buyers who do not have third party income validation.

In its quarterly report, released Friday, CMHC also reported $841 million net income for the six month period ending June 30 – a 2.1 per cent increase year-over-year.

“For transactional homeowner loans, the average credit score for loans insured in the six month period ended June 30, 2014, was 745 while the average gross debt service (GDS) ratio for the same period of time was 25.7%,” the release states. “The high average credit score and average GDS ratio demonstrates a strong ability among homebuyers with CMHC-insured mortgages to manage their debts.”
 
  • Cory on 2014-08-29 11:48:42 AM

    Most definitely time for another corporation to enter this market. With CMHC cut backs and strict guidelines elsewhere there are many quality clients going unserviced. With net incomes that high, and clearly not a lot of risk based on low debt service ratios, low ltv, high credit scores and nearly 0% foreclosure this is a market that should be expanding, not contracting.

  • Stephen on 2014-08-29 12:10:38 PM

    Bravo for CMHC with their decision to limit their exposure. There really is no need for the government to be involved with insurance. Hope they step aside and let the free market pick up the slack. An additional benefit is the Canadian taxpayer will limit their exposure to risk and perhaps we can get rid of another Crown Corporation at the government trough.

  • Angela Wong-Liao - Invis Inc on 2014-08-29 12:18:50 PM

    I just hope the other private insurers, Genworth and Canada Guaranty can pick up the difference, if not, some of our future clients may have to consider first and second, using private lenders as second.

  • Kuldip S Panesar Homeland Mortgage Corp. on 2014-08-29 4:34:26 PM

    Now the CMHC is having cap on the mortgage insurance amount . Other private insurance corporations Genworth and Canada Guaranty will get the more market share .New mortgage insurance corporations may also enter in the field.

  • JSydneyH on 2014-08-29 11:44:36 PM

    The original mandate of CMHC is still required, and vital to the ongoing health of our housing market. The government recognizes the role CMHC plays in the market, and its recent actions to limit its exposure - by reducing bulk insurance sales - is prudent. It is still fulfilling its core mandate - low cost default insurance for those Canadians with less than 20% down - which is vital to the long term health and stability of our economy.

    To take CMHC out of our market would be foolhardy.

  • John on 2014-09-01 7:38:07 AM

    Anyone who thinks that a crown corporation should slack off to allow the free market to pick up the slack is a bit should think again if they think it limits taxpayers exposure. If a private corporation that insured thousands of Canadian mortgages failed the government would step in. Thinking free markets limit exposure to taxpayers is the same thinking that got us into a mess back in 2008. More of the banks should have failed in 2008 but governments all around the world stepped in with public money including Canada.

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