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.