The debate surrounding CMHC – and what the government should do with the Crown Corporation’s mortgage insurance arm – is nothing new. For more than a decade – maybe even two – the mortgage industry, and others, have discussed the special treatment CMHC receives – particularly with its 100% government guarantee. This article B in the Financial Post – authored by Neil Mohindra at the Fraser InstituteB -B does a great job of outlining the case for privatizing CMHC’s mortgage insurance arm.
While the Federal government hasn’t quite gone that far, many are pleased with its recent proposal to place the Office of the Superintendant of Finances (OSFI) in charge of governing CMHC.
Previously, CMHC didn’t seem to have to follow the same reporting rules as the private sector mortgage insurers. This will change, according to this article in the National Post:
“The new legislation would place the responsible deputy minister (the HRSDC deputy, for the moment) directly on the CMHC board, and the deputy minister of finance, too. If the DMs are engaged and responsive, this will change the dynamic of the agency’s board oversight – probably not a bad thing, given the risk exposure the agency takes on, with sovereign backing.”
The new legislation would also allow OSFI to inspect CMHC at least once a year, and formalize the reporting processes. Many believe this could drastically increase CMHC's accountability and protect the taxpayers’ money a little better.
From a mortgage standpoint, no one is really sure what to think – or how these proposed changes might affect mortgage consumers or the mortgage market as a whole. Benjamin Tal told the Toronto Star that the change is nothing more than “changing reporting lines”? and will have little effect on the mortgage market (as a side note, it should be mentioned that the Toronto Star only used the term “apocalyptic” twice when describing the potential fall-out of this legislation).
Rob McLister, of Canadian Mortgage Trends , is guessing that higher risk mortgages – like self-employed stated income – might become harder to get as they’re placed under higher scrutiny. Others believe that this is the moment the private insurers – Canada Mortgage Guaranty and Genworth – have been waiting for, assuming CMHC will have to tighten up its practices.
As usual, however, it appears everyone is just guessing at this point. The bill still has to pass, and after that it will likely take a while to see the effects of it.