“CMHC’s insured loan volumes are influenced by the economy, housing markets, competitive pressures and the regulatory environment,” the CMHC’s 2013 annual report states. “Successive changes by the Government of Canada to the guarantee parameters specifying the types of mortgages that can be insured have reduced the size of the high ratio transactional homeowner mortgage loan insurance market while effectively eliminating the high ratio refinance market.”
The death knell of high ratio refinancing should come as no surprise, with the CMHC’s third quarter 2013 report quietly indicating a whopping 81 per cent drop in refinance business.
“Purchase volumes increased approximately 11 per cent while refinance volumes were approximately 81 per cent lower compared to the same period in 2012,” according to the report published in early December. “The latest mortgage insurance parameter changes that took effect in July 2012 effectively eliminated refinancing at loan-to-value over 80 per cent.”
And it’s a trend that has been taking place for some time, with market share between originations and refinances steadily shrinking: As recently as 2011 the limit was 90 per cent; it was reduced that year to 85 per cent and in 2012 was reduced five more percentage points to 80 per cent.
Overall the crown corporation insured 343,773 units last year, which was within the planned target range. Operating expense ratios were also one per cent better than planned.
“In 2013, CMHC’s mortgage loan insurance achieved an operating expense ratio of 12.8 per cent, one per cent better than plan due to lower OSFI, credit bureau and investment management fees, and up slightly from 11.7% in 2012,” the report states.
Over the past decade CMHC insurance has contributed over $15 million to the Canadian economy, according to the report.
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The Canadian Mortgage and Housing Corporation (CMHC) appears to be conceding the death of its high-ratio refinancing.