The Canada Mortgage and Housing Corp. has announced that this coverage will no longer be available.
A recent statement from the Canada Mortgage and Housing Corporation (CMHC) has revealed that the organization will no longer be providing mortgage insurance to condo developers in order to assist in financing new building construction.
This doesn’t come as very much of a surprise to many in the insurance industry.
The reason that many are simply shrugging their shoulders at the decision by the Crown corporation is that it hasn’t actually offered any of this controversial form of mortgage insurance since 2011. This announcement simply means that it is removing the product on an official level. The coverage has been controversial for some time now and the CMHC has been opting out of that entire range of potential issues.
The problem with that mortgage insurance was that it was making it too easy for condo developers to finance projects.
When the condo developers could use this part of the insurance industry to finance new building projects, the Bank of Canada and economists, alike, expressed serious concerns that there was a high risk that far too many condos were being constructed in major cities, such as Toronto. The buildings had been flying up, rapidly changing the skylines of the cities as well as their local markets, particularly real estate and their associated industries.
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The CMHC expressed that as of its figures from the close of March, it continued to provide $378 million in this form of condo developers insurance for the construction of new buildings. All of this was still on the books from back when it still offered the product to those customers. The changes will not impact those customers, nor will it alter anything for individual condo buyers.
They will apply to the mortgage insurance that would cover loans to the developers, themselves, on projects that they want to start. This is one of a number of changes that are expected as a result of a review that is being conducted by the Crown corporation in order to make certain that it is not taking too much risk onto itself.