Stricter mortgage rules on CMHC insured mortgages have had a profound impact on the housing market as well as the insurer itself. CMHC reports that in the first quarter of this year the number of housing units insured dropped to 52,078 from 114,045 over the same period last year. This translates to a drop of underwritten insurance to $8.2 billion down by 56.8% from $19 billion last year.
The good news is that this represents a lower liability that ultimately rests with taxpayers. The bad news is that the risk to the taxpayer is almost nil and the trade-off means significant revenue losses to the same taxpayers.
CMHC routinely contributes over a billion dollars annually to federal coffers but with tighter mortgage rules we are on track to lose $500 million in revenue. That money has to come from somewhere and the only options are higher taxes, spending cuts or larger deficits.
Personally, if it was my money (and it is) I’d rather take on the insurance risk in the Canadian housing market and maintain my billion dollars of income. There isn’t a better investment out there than Canadian residential first mortgages and it makes no sense to cut the business in half.