This federal housing agency in Canada has made the announcements as added restrictions are made.
Canada’s federal housing authority has now officially announced that it will be underwriting a smaller amount of mortgage insurance, as of this year, as the government has increased the restrictions that apply to the type of coverage that is available.
This move is designed to help to maintain the current healthy level of the Canadian housing market.
The Canada Mortgage and Housing Corporation (CMHC) first made this announcement on Monday. As was already reported by Live Insurance News, last week, the authority had already been indicating that this would e the direction that it intended to take. Now it anticipates that the amount of mortgage insurance that is in force will steadily decrease throughout 2014, to reach US$497.15 billion. This will represent a drop from $508.1 billion, last year, and a drop of 3.9 percent from its high point in 2011, of $517.21 billion, at which time the post-recession housing expansion had peaked.
Reducing the availability of mortgage insurance in Canada is expected to keep this hot market from boiling over.
Since the financial crisis in 2008, there has been a dramatic – while still quite unsteady – rise in the housing market in that country. Should there ever be a collapse in the housing market, it will be up to the CMHC to have to bail out the mortgage lenders as a wave of their borrowers default. This is because that organization is behind the majority of Canadian insurance coverage in that sector.
The CMHC’s critics have expressed that they feel that the agency had been placing taxpayer dollars at risk when it approached the ceiling of C$600 billion on the outstanding loan amount totals in 2011 through 2012. Efforts made by the government to help to rein in the regulations for mortgage lending have assisted in slowing down the pace of the housing market, while decreasing the insurance book of the agency.
Steven Mennill, the senior vice president of the CMHC, has stated that the drop was a natural part of the repayment pattern and it is occurring as that corporation trims back the value of the new mortgage insurance that it is willing to write on the lenders in the country (primarily the country’s largest banks), as buyers try to take hold of their piece of the expanding housing market.