CMHC insurance approaches important ceiling
Canada Mortgage and Housing Corp. expects to be issuing substantially less increase mortgage insurance over the next few years.
The change comes because the federal government has set $600 billion as the upper limit for the amount of mortgage insurance CMHC can have on its books.
CMHC’s insurance portfolio has soared by hundreds of billions of dollars in recent years, and is expected to be well beyond $500-billion in 2012.
What difference does it make to you? Well, Canadian taxpayers are ultimately on the hook for this insurance, which is used to reimburse banks when borrowers default on their mortgages.
Both the International Monetary Fund and the C.D. Howe Institute worry that CMHC has already taken on too much mortgage liability, exposing said taxpayers to undue risk.
More importantly, in the short term it will mean a sharp drop off in insuring rental and self-employed stated income mortgages, according to Canadian Mortgage Trends.
“The government is clearly encouraging CMHC to taper back its volumes, as lofty home prices and debt levels stoke concern about mortgage default risk,” CMT predicts.
Will this make a difference to you when mortgage shopping?
By Gordon Powers, MSN Money
Posted by: Clear & Focused | Mar 28, 2021 9:18:13 AM
Nothing to see here. Move along now. Our economy is doing just great, in fact, we have the best banking system in the world (baaahahaha). That's why the new budget is all about austerity. Now carry on citizen, or you'll get tazered.
Posted by: sjrw11 | Apr 1, 2021 8:09:29 AM
Isn't the Aggregate default rate at .541%? CMHC gets 2% on each mortgage. Where is this bogeyman being generated in the minds of our elected officials? I don't like this Rule by Fear instead of govern with Optimism.
Posted by: Ross | Apr 1, 2021 11:46:56 AM
sjrw11, I agree. The only thing to fear is fear itself. Now who said that? Oh yeah. Just one of the greatest U.S. presidents in history. Lets hope people don't fall for the sky is falling or it will.
Posted by: greg R | Apr 1, 2021 12:39:37 PM
why are my taxes used to back the banking industry when they make the mortgage borrower pay the insurance premium to CMHC for insuring the loan,dosen't get any more one sided than that.I guess gecko was right greed is good as far as the banks are concerned. signed disgusted
Posted by: Blue Star | Apr 1, 2021 12:57:14 PM
Although CMHC may be fully capitalized, and the Auditor General from all previous federal governments rank CMHC among the best managed of all federal corporations, there is a lot of mortgage fraud in Canada. I suspect there are insured loans which should be scrutinized. What exactly is the makeup of their $500+ billion? what is the real risk to the tax payer?
Posted by: jimbo jones | Apr 1, 2021 1:07:12 PM
Isn't it interesting that, banks - which are private institutions are insured by a country's taxpayers? What does this mean? It means that banks can have leverage of threatening our government to do whatever they want them to do, and all they have to do is threaten a collapse, and we have to pay for their insurance to cover their losses. Some evil people invented things to be this way and sheepish governments the world wide don't even have the balls to tell their people the truth of the way things really are.
Pathetic ... and yet we happily follow their system like a bunch of brainwashed tools.It's time to shift the paradigm.
Posted by: Jess | Apr 1, 2021 1:36:23 PM
Greg's quite correct. The banks claim their risks in extending mortgages justify higher interest rates while insisting that applicants with less than 20% downpayment take out CMHC mortgage insurance. This in turn places additional cost on prospective homeowners because in at least some of the cases, that insurance premium is added to their mortgage payment. It's a win-win for the banks. They both reduce their risks and make a little extra cash. The 20% bar might be reasonable in a "normal" market, but with prices at their current levels, even the shrinking middle class is finding it difficult to reach. For those people at $50,000 per year or less, the possibility of coming up with $40,000 cash (before closing costs) on a $200,000 home is very unlikely. So, a lot more people requiring mortgage insurance. It's a cash cow for the banks. A risk for the taxpayer. Can't blame Harper for this one. Our government has been holding hands with the banks for decades.
Posted by: Brett | Apr 1, 2021 2:12:25 PM
Interesting stuff I believe this is profitable to all but the homebuyer
here in alberta a private insurer seems to be taking these rates of return less risk on a booming economy scenario
Posted by: Sick of the Bureaucracy. | Apr 1, 2021 2:15:22 PM
Well, it looks like this is exactly what they have done.
I received what I thought was a pre-approved mortgage, to find out that the final financing was not approved.
And this is from a bank that I have been with for over 20 years.
I have jumped through hoops,done backflips and started looking for a lower priced mortgage, and I still can not get approved.
I even have a vacant land that is worth more than the new amount I am seeking. My husband and I have excellent credit and income as a couple. Since I have only been self employed since Dec., 2010 we are not qualified??? As I have only been self-employed for 1 year and a bit?
We have even informed people of our intention to sell.
WORD OF ADVISE IF YOU ARE GOING TO PURCHASE A HOUSE.
MAKE - 100 % -- SURE YOU ARE WALKING INTO THE OFFER WITH A
do not let them just pre-qualify you as they did me, without prior knowledge
ALSO BE 100% SURE YOU CAN BUY A HOUSE MAKE SURE YOU HAVE MORE THAN 5% DOWN.
Frustrated by Bureaucracy.
Posted by: JO | Apr 1, 2021 3:13:11 PM
CMHC is but one of several critical mechanisms of financialization of the housing markets that your government and banks as well the RE industry have used to run their junk neo liberal economic scheme. Essentially, it boils down to subsidizing the creation and acceptance of debt as much as possible so as to load the economy down with unpayable debt.
CMHC is, in effect, a massive subisdy for senior RE and bank executives as well as a taxation enabler for your friendly gov't. As long as the banks find enough people to take on the ever growing mountain of debt, the system works wonders for the elite and public sector. Tax revenues soar as construction booms and "rising" home prices permit rapidly escalating property taxes. Senior bank and RE execs pull in filthy bonuses and the illusion of wealth is created.
In effect, the fake prosperity results in homebuyers paying inflated rent for the chance to gamble on rising home prices while being subsidized by savers and pensioners as well as renters. The middle class who get into the housing game are essentially pledging more and more of the home's rent value to the banks as interest over time. The system is a fantastic wealth transfer mechanism.
In the long run, it results in a decline in our standard of living and, if the inevitable credit contraction/stall, gets bad enough, a depression or serious recession a la US or Spain/Ireland etc results. Then it becomes foreclosure time. The massive debt load overwhelmes the economy's ability to pay even at zero rates and gov'ts collapse along with the economy. Gov't assets are then sold to banks or top bank clients for pennies on the dollar and unemployment surges.
Time to end CMHC and negative rate policy - homes are not investments, they are shelter. Many Canadians will come to find that out over the next 10-15 years and it will be a harsh reality for most recent participants in the great Canadian residential housing debt bubble and housing swap game.
Posted by: bruce a | Apr 1, 2021 4:29:54 PM
does this include all the native band mortgages. how delinquent are those loans alone i wonder?
Posted by: Anne Heyes | Apr 1, 2021 7:32:25 PM
To Sick of the Bureaucracy ----- It is best to find a good mortgage broker and let him/her research a good mortgage for you and let them explain it
The banks do not explain anything. And the front line people at the bank do not know their jobs - I know this from personal experience. When they say they cant do what is actually in the contract well then you have to call the head office....
Posted by: Ron | Apr 1, 2021 9:13:13 PM
How is it,taxpayers are on the hook for defaults in mortgages to lenders, when all they do, is create money out of nothing, get our governments to print it, then have the nerve to charge us interest! What a great gig these guys have! Laughing all the way to the bank!
Posted by: Clear & Focused | Apr 2, 2021 7:30:21 AM
Well said! Perfectly articulated.
We are fucking DOOMED! I can't wait until all the sleepwalkers get the rude awakening that is coming!
Posted by: Mr. Negative | Apr 2, 2021 11:00:07 AM
What can we do about this? Nothing? When selling an existing home and buying another you lose regardless. The banks, lawyers, real estate agents, inspectors, tax man etc.. take a lot of your equity which in turn can't be put down on your mortgage.
Talk about having hands in your pockets - if you can't meet CMHC - you pay a premium, land transfer taxes, real estate fees etc. We have just sold and bought (bad time to buy) and we have lost 20,000. in equity for real estate and closing costs (does not include CMHC)
The new thing the banks are trying to sell other than CMHC is life insurance when yuo sign up for your mortgage. I hear your best bet is to look elsewhere if you really think you need it. They try to take advantage of you when you are vulnerable.
On a 368,000. home you need approx 73,000.00 down. Not including your closing costs etc. I don't know about you guys, but to save that kind of money would be along time before you move anywhere.