Category Archives: CMHC

Everybody wants to help you buy a house

Pointed out by southseacompany: all the major political parties want to help you buy a house and the promises are piling up.

They all love the idea of taking taxpayer money to drive up house prices, the current government even wants to get in on the speculation and help out with a 5-10% shared equity program.

The government also confirmed that, because the program gives it an equity stake in the mortgage, it will share any gains or losses in the value of the home over the life of the loan. Any money the government makes on the program will go back into general revenues.

Read the full article here.

How resilient is CMHC to a US style housing crash?

Kabloona points out this article asking yet again how this country would fare in a US style housing market crash, but particularly how the CMHC would fare:

Canada Mortgage and Housing Corp., which protects financial institutions in the case of consumer default and is 100 per cent backed by Ottawa, said in a release Wednesday that it looked at anti-globalization, earthquakes, a steep oil price fall and a U.S.-style housing correction to see how its insurance portfolio would hold up. It did not look at a combination of any of those scenarios.

The verdict is a U.S.-style correction would be its worst scenario for its insurance program with a cumulative loss of $217 million from 2017 to 2022 which would come on top of a need for the Crown corporation to suspend its dividends to Ottawa. CMHC paid Ottawa a special dividend of $4 billion in June because of excess capital and issued a $240 million dividend in August.

Read the full article here.

CMHC looks to make mortgages easier to get

The CEO of the Canadian Mortgage and Housing Corporation has said that requiring new Canadians and the self employed to prove income is ‘discriminatory’ and they are looking to make mortgages easier to get:

“Right now, under our mortgage insurance policies, you have to be able to document income to get mortgage insurance, to a level of specificity that discriminates against new Canadians, because they can’t do that,” Evan Siddall, the CEO of the Canada Mortgage and Housing Corp., said in a wide-ranging interview with The Canadian Press.

“It discriminates against entrepreneurs, as well, because they can’t prove their income as well, so we’re looking at our own policies to try and make sure that there is more equity in our mortgage insurance programs,” he said.

Read the full article here.

Blame the banks

Southseacompany pointed out this article in Canadian Business about how the banks have become complicit in the housing bubble, which strikes us as a bit unfair since any bank would be foolish to not take part in the low risk high profit business of mortgages.

As long as government is willing to take on the majority of risk and encourage high debt loads, why should a single bank step back from that money?

In a rational world, the banks could be counted on to help contain the housing mania that has put Canada in this perilous situation. Before the early 1950s, Canada’s biggest lenders had little interest in real estate, according to Charles Calomiris and Stephen Haber, the authors of Fragile by Design, a highly praised international history of the interplay between politics and banking.

That changed after William Lyon Mackenzie King created the Canada Mortgage and Housing Corp. at the end of the Second World War to backstop the construction of new homes for returning soldiers. Nothing stirs a banker like risk-free lending. By 1954, the banks had convinced the government to change their charters so they could join the post-War building boom. In 1992, they were cleared to buy the trusts that were the initial beneficiaries of CMHC’s backstop, triggering the consolidation that cemented today’s oligopoly.

In November 2015, the average monthly holdings of mortgages at Canada’s chartered banks exceeded $1 trillion for the first time. The figure continues to climb, reaching $1.07 trillion in December, according to the Bank of Canada’s most recent statistics. That’s more than double what the chartered banks commit to business lending.

Read the full article here.

Banks would rather not take on more risk

southseacompany pointed out this article in the financial post:

Canada’s banks are pushing back against taking on more mortgage risk

“Canada’s financial industry is urging the federal government to consider alternatives to proposals that could require them to take on a greater share of mortgage defaults through a deductible — calling it one of the biggest shakeups to hit housing finance in 50 years.”

Read the full article here.