Flaherty throws CMHC future in doubt

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Finance Minister Jim Flaherty is hinting – like none of his predecessors before him – that the government could and, perhaps, should get out of the mortgage insurance business.

"I think there is a role to regulate but whether we, the Canadian people, have to be the owners and shareholders of a financial institution to do this is a question,” he told the National Post late last week. “Over time, I don't think it's essential that a government financial institution provide mortgage insurance in Canada.”

The argument echoes those offered by economists at the right-leaning CD Howe Institute and others advocating for the government’s withdrawal from its role as CMHC back-stop.

That kind of step back would end the Crown corp’s six-decades-long history in that position at the same time, charge some brokers, threatens the ability of qualified Canadians – especially first-time buyers -- to get into their own homes.

Flaherty also used the weekend discussion to confirm he will not move to increase the CMHC’s $600 insurance fund.

Last week, he set brokers talking by introducing a new bill handing ultimate control for government-backed mortgage insurance to an increasingly strict OSFI.

“It is a recognition that CMHC has become a significant financial institution," Flaherty said Thursday. "CMHC was created to assist in social housing (but) it’s become much more than that."

As promised, the Finance head tabled his budget implementation bill – proposed legislation guaranteed to win approval and set to transfer key elements for CMHC oversight to the Office of the Superintendent of Financial Services.

The move will also establish a registry to monitor the use of outstanding covered bonds, or mortgage-backed securities, employed by the banks to free up capital and keep their mortgage divisions churning.

The upshot for brokers is the real threat the government move means a tighter set of reins on what some charge is Canada’s runaway mortgage lending.

  • Mtge Man on 2012-05-01 3:16:19 AM

    Seems appropriate seeing many lenders were using/abusing the system by insuring borderline deals thus taking available funds from worthy clients buying homes under normal guidelines. Banks used this avenue so they could sell off their mortgages.

  • Donald Wilson on 2012-05-01 4:15:49 AM

    The federal government receives hundreds of millions of dollars in profits derived from the mortgage insurance business. They are as likely to give them up as a heroin addict is likely to quit heroin.

    Whether or not the government should be in the business of providing mortgage insurance or not is really somewhat irrelevant. As long as they provide the government guarantees back both CMHC insurance and private mortgage insurance the risk to the tax payer will continue to exist.

    All that owning the insurer does is make sure that the taxpayer is rewarded for that risk.

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