Fraser Institute endorses Australian model of mortgage insurance

Fraser Institute endorses Australian model of mortgage insurance

The CMHC should be privatized to minimize taxpayer risk if a housing crisis occurs, conservative think-tank The Fraser Institute argued in a report released earlier this week.

"The Canadian government should reduce taxpayer exposure by allowing the private sector to take responsibility for insuring and securitizing Canadian residential mortgages," said Brett J. Skinner, the Institute's director of insurance policy research, adding Canadian taxpayers could face a future liability similar to the U.S. bailout situation because of the federal government's involvement in the CMHC.

The report compared Canada's mortgage insurance market with Australia's, where the federal government exited the mortgage insurance market and privatized its mortgage insurer more than a decade ago. Skinner said the Australian experience, where homeownership did not drop after privatization, "shows that a market for mortgage insurance can operate effectively without any form of government guarantee."

The report comes during a week when talks of a housing bubble are heating up and there is speculation that the federal government will tighten mortgage qualification rules to cool down the market.

4 Comments
  • John Heath - Broker 2010-02-12 4:49:18 AM
    I am not going to speak one way or the other on a housing bubble, or Fraser's argument. What I will point out is CMHC has "made" taxpayers $7 Billion in the last 10 years. 7 Billion in profit....
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  • Ted Jones 2010-02-18 5:26:54 AM
    You know it is typical for the Fraser Institute and their comments. They are the "first" to come out and suggest that the Provincial and Federal Governments to "sell off" profitable areas of the government. I can recall when "BC Hydro" should be sold off and run by private enterprise. CMHC? Give your head a shake. We already have several "private" insurers who quite frankly have no ability to function as efficiently and consistantly in Canada. I do not want to see another crown corporation sold off to the fine financial wizards south of the 49th parallel only to have Canadians once again "paying the price" for stupidity or should I say self interest in Provincial and Federal governments.
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  • mortgage needs 2010-06-22 6:17:37 AM
    If the Aussie govt. mortgage default insurer was only privatized within the last 10 years, then the question is whether it has been time-tested enough, and their risk models robust enough to withstand any sort of substantial price correction similar to that in the U.S.
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