What does the future hold for CMHC?

by |
The Canada Mortgage and Housing Corporation (CMHC) announced further changes to its insurance offerings Friday, providing even more fodder for brokers to speculate about the future of the crown corporation.

“I think the goal is to eventually have the private insurers take over a larger market share,” Andrew Libby of The Mortgage Makers told MortgageBrokerNews.ca.

CMHC announced it will nix its loan insurance for the financing of multi-unit condo construction and that it will align its low-ratio product with its high-ratio insurance by implementing maximum house prices, amortization periods and debt servicing ratios, effective July 31.

“The changes are a business decision designed to increase market discipline in residential lending while reducing taxpayers’ exposure to the housing sector through CMHC,” an official release from the crown corporation reads. “They also support the government’s continued efforts to adjust the housing finance framework to restrain growth of taxpayer-backed mortgage insurance, as noted in Economic Action Plan 2014.”

It’s a move that will surely allow the two private mortgage default insurers to grab a larger chunk of the market share.

“CMHC helps Canadians meet their housing needs and contributes to the stability of the housing market and finance system,” said Steven Mennill, Senior Vice-President, Insurance. “The changes announced as part of the review ensure that CMHC’s products and services are aligned with these objectives.”

It remains to be seen whether Canada Guaranty and Genworth follow suit but, in a perfect world, Libby thinks the government should back off and allow the two private insurers to decide their own parameters for lending requirements, instead of instituting sweeping government regulation changes.

“The changes from 2010-2012 were made to stop the private insurers from making their own rules,” Libby said. “They made regulation changes that should have only applied to the CMHC.”

  • Russ Cameron on 2014-06-09 12:03:01 PM

    Since July 2012 CMHC has been for the most part non operational. The employees have misunderstood what the feds have directed to them..but maybe that's what the government wanted..Genworth is our savior!

  • tomadamson@msn.com on 2014-06-09 2:12:58 PM

    I have been involved with lending industry since 1973.As a lender and a broker. I have two issues. Firstly, it concerns me that our conservative government seems to be utilizing its moral suasion to limit/control/eliminate CMHC as a major player in our housing industry. A wonderful and exceptional organization (CMHC) that few could argue has not been the backbone to the stability of our Canadian real estate. With what we have seen in the North American market place I give the credit of our stability to CMHC. Knowing they entered into the commercial market (rightly or wrongly, another argument) I cannot find the exposure numbers on the net liability (that make sense to me) that specifically identifies the percentage of the exposures and my feeling is the government is attempting to hide the exposure to the taxpayer for residential historical

  • tomadamson@msn.com on 2014-06-09 2:27:30 PM

    Sorry have had a stroke and obviously hit a wrong key. To continue "residential historical".... numbers vs commercial. And I include all mortgage back securities on the commercial side of the equation. My issue is the liability in a percentage form or what are the true numbers. My fear and belief is that CMHC has grown into its own bureaucracy (and many of us old timers have identified this) that may be out of control. Secondly, I remember the Mortgage Insurance Company of Canada (M.I.C.C.). Utilized them as a Trust Company manager as then, as now, believe the private sector needed to be in the market. Problem is they went broke and created havoc within the industry. Take a guess who bailed them out.

  • Angela Wong-Liao - Invis Inc on 2014-06-09 2:28:40 PM

    I understand that the government has been tightening their rules and regulations for high ratio mortgage, especially through CMHC. Yes, I agree with Tom, CMHC had given some stability to the real estate market during and after the North America financial crisis in 2008-2011. My concern is that even the two private insurers Genworth & Canada Guaranty want to fill the void from CMHC, can they have the strength and sufficient funding to do so?

  • Versico on 2014-06-10 4:26:38 PM

    Many have forgotten why CMHC was created in the first place. I was not there to make $1billion ++ a year in profits or to protect lenders from a a market downturn, or even to insure million dollar homes. It was a social vehicle to help create home ownership. At one time there was a lower rate for the insured product verses the uninsured mortgage to help those struggling with a down payment. There has not been a rate difference in over 30 years.

Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Name (required)
Comment (required)
By submitting, I agree to the Terms & Conditions