VANCOUVER – Canada Mortgage & Housing Corporation (CMHC) is currently exploring the future possibility of requiring banks to share more of the risk associated with home mortgages.
During a press conference held in Calgary in March 2016, CMHC said the proposed requirement for lenders to pay the deductible on mortgage insurance claims is heavily being considered.
According to the CHMC website of the federal housing agency, the CMHC is working with Department of Finance along with the Bank of Canada to explore ways of more evenly distributing risk across the financial system.
The idea of is forcing banks pay a deductible on mortgage insurance claimsc was first presented by CMHC to the previous Conservative government. It is not yet clear if the new Liberal government will be interested in pursuing the overall idea, or not.
The Canadian Centre for Policy Alternatives produced the above chart – that makes the case that people in their 20s have the highest debt loads, but people in their 30s and 40s experienced the largest level of increase in debt since 1999.
Those who buy a whole with less than a 20% down-payment are mandated to acquire mortgage default insurance, from either the CMHC – or – one of the private mortgage insurers.
The Canadian Bankers Association (CBA) has warned Harper’s government that shifting more mortgage risk onto the banks would threaten the entire country’s financial stability.
Through an Access to Information request last year. the industry association laid out its position in a letter to CMHC, written in August 2014; and was obtained by The Canadian Press. Subsequently the Department of Finance stated, in November 2015, that it had has performed preliminary research concerning the potential impact of having the banks share mortgage default risk.
In the 2nd week of March 2016, the CMHC defended the organization’s status as a public institution and said that it acted in an important role during the 2008 global financial crisis.
” As a Crown corporation with a public policy mandate, CMHC needs to be present in the market through all economic cycles.”, stated the CHMC. ” This is a fundamental way in which we contribute to Canada’s financial stability. In fact, our role now in Alberta is to support continuous access for Albertans to the housing market, even if private insurers choose to pull back. ”
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