The latest round of mortgage rule tightening brings Canada Mortgage and Housing Corporation’s (CMHC’s) mortgage rules back in line with its original mandate. Helping Canadians buy their first home. CMHC was established in 1946 as a government-owned corporation to address Canada’s post-war housing shortage. Over the years scope creep entered the picture and the government insurer began meeting market needs by allowing borrowers to refinance their homes to 95% of its value, buy rental properties with little downpayment and allowed move up buyers to buy multi-million dollar homes with little downpayment.
The burden on the Canadian taxpayer was only exacerbated when private insurers entered the market. Although not crown corporations these rival insurers receive a similar government guarantee on their mortgage insurance in order to level the playing field and make them viable competitors. Although the mortgage insurance business has been extremely profitable for the Canadian taxpayer, one has to question their involvement. Any business has its risks. Mortgage insurance is no difference and the US housing crisis highlighted this fact.
This is the time to separate the mandates. A conservative government insurance program built to help house Canadians. This is essentially what we have today. And a private insurance program designed to support the Canadian housing market where the risk is priced into the program. If it works for the life insurance industry it will certainly work for mortgage insurance.