Mortgage, Money and Dream – Our thoughts on Canadian Mortgage Market
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According to CBC – Finance Minister Jim Flaherty said – CMHC was created to assist in social housing [but] it’s become much more than that. CMHC is now governed by the Department of Human Resources and Skills Development Canada but it will soon fall under direct supervision of Office of the Superintendent of Financial Institutions.

According to Globe and Mail report - The legislation expands the objectives of CMHC to ensure its commercial activities promote and contribute to stability of the financial system, including the housing market. So, it is clear that we are worried about a housing market disaster.

A recent RBC report pointed out that –

Signs of cooling have emerged in the Vancouver-area market in the past year. Since reaching their peaks in the early months of 2011, both home resales and prices declined quite noticeably.

With increasing inflation, weak economy, any housing problem has the potential to spell disaster.


Mortgage Backed security (MBS) management.

Government also proposed a registry to watch the outstanding covered bonds (MBS) Canadian lenders have.

This may sound like a regular financial change but may morph into stricter regulation in future.

Banks use MBS to raise fund for the next mortgage. While they write the risk off their books – by selling those covered bonds – CMHC in stuck with all the risk of those insured mortgages. This system has been questioned by many economists recently and this change may be a result of those criticism.

Financial Post reported that –

The bill prohibits the issue of covered bonds except within the government’s framework. It says CMHC can only guarantee covered bonds with the approval of the finance minister.

Reuters also reportedThe main change proposed by Flaherty is one that prohibits banks from using mortgages insured by CMHC as collateral in their covered bond programs.


It looks like things will go worst before they become better. With Ontario credit rating being downgraded by Moody’s and Standard and Poor’s – it seems that a tough time is ahead of us.


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