CMHC keeps shrinking business as Ottawa limits housing-market exposure

CMHC keeps shrinking business as Ottawa limits housing-market exposure

Canada Mortgage and Housing Corp. is continuing to shrink its business, as the government seeks to reduce its exposure to the housing market.

The amount of insurance that the Crown corporation had in force ticked down by $3.5-billion, to $562.6-billion, during the first three months of the year. The figure falls as consumers pay down insured mortgages and rises when CMHC sells new insurance.

CMHC wrote only $8.2-billion worth of insurance during the first quarter, compared to nearly $19-billion in the same period a year ago. The number of units of housing that it insured fell 54 per cent, from 114,045 in the first quarter of 2012 to 52,078 in this latest quarter.

The decline comes as the government has forced the Crown corporation to dramatically reduce the amount of bulk, or portfolio, insurance it was selling to banks. Banks can buy bulk insurance to cover large swaths, or portfolios, of mortgages with low loan-to-value ratios (high downpayments) that weren’t previously insured.

Mortgage insurance is mandatory when a consumer has a down payment of less than 20 per cent, and sales of that core product have also fallen since Finance Minister Jim Flaherty tightened the mortgage insurance rules last July. The changes that he made, which included cutting the maximum length of an insured mortgage to 25 years from 30, were designed to take some steam out of what he feared might have been an overheating housing market. His changes also effectively eliminated the ability of consumers to refinance high loan-to-value mortgages.

CMHC said that insurance volumes to cover new mortgages fell by about 23 per cent, while refinance volumes were down by 69 per cent. Bulk or portfolio volumes sunk by about 98 per cent.

Meanwhile, the volume of insurance that CMHC sells to cover multi-unit residential buildings (including nursing homes, retirement homes and apartments) rose 5 per cent.

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