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.”