Despite decline, one broker believes we still need CMHC

Despite decline, one broker believes we still need CMHC

Despite decline, one broker believes we still need CMHC 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 "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.”