OECD calls for CMHC cuts

OECD calls for CMHC cuts

OECD calls for CMHC cuts The Organisation for Economic Co-operation and Develeopment (OECD) has joined the list of groups calling for cuts to government-backed mortgage insurance in Canada.

“To reduce housing-related risks to financial stability and improve lender incentives, mortgage insurance coverage should be limited to only part of lenders’ losses,” the OECD states in its report.  

The global think tank – whose mandate is to “promote policies that will improve the economic and social well-being of people around the world” – recommends that Canadian mortgage lenders should shoulder some of the risk inherent in insured mortgages.

It’s a sentiment first stated by the International Monetary Fund in late November of last year.

“The government’s recent initiatives to impose limits on government-backed mortgage insurance have been appropriate,” the IMF’s report on the Canadian economy, published in November stated. “Looking ahead, further measures should be considered to encourage appropriate risk retention by the private sector and increase the market share of private mortgage insurers.”

The IMF’s argument was that allocating too many government resources to mortgage insurance takes away from “more productive uses of capital.”

“The current system has its advantages, including as a macro-prudential tool,” it stated. “However, it exposes the fiscal budget to financial system risks and might distort the allocation of resources in favor of mortgages and away from more productive uses of capital.”

And it seems that the CMHC has listened.

The crown corporation announced Monday that it expects to cut its total of insurance in force for 2014 to $545 billion.
  • Daniel McKay 2014-05-07 2:17:05 PM
    Let's get something straight here. CMHC and our government made the changes on their own accord. Fiscal policy, our finance ministers past and present, the Bank of Canada are much more competent than the finance hacks that belong the IMF and the OECD. The only good advice that ever comes from either of those 2 organizations is generally commentary on policies that have already been put in place.
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