Ian Lee, a professor in the Sprott School of Business at Carleton University, wrote a column today in the Vancouver Sun that the taxpayer-funded CMHC needs to be modernized and more regulated.
Lee wrote that CMHC provides mortgage guarantees to banks and other mortgage lenders of about $500 billion, or one third of Canada’s gross domestic product, representing 70% of the mortgage insurance market.
“As CMHC is a Crown corporation owned completely by the Canadian government, its insurance guarantees are backed by the Government of Canada,” Lee said. “That means Canadian taxpayers are liable for $500 billion to banks and mortgage lending institutions, should Canada experience a housing meltdown similar to the U.S. in 2008.”
He said CMHC should be under the jurisdiction of the Office of the Superintendent of Financial Institutions (OSFI) as other federally incorporated financial institutions in Canada already are.
Earlier this year, other critics such as the C.D. Howe Institute, a University of Guelph professor, and Capital Economics also raised concern about CMHC, also calling for Canada to open up the market to more private insurers.
The criticism was enough at the time to draw a rare response from CMHC. The Crown corporation e-mailed the news media copies of individual letters it sent to its critics, pointing out Canada’s existing policies had led it to withstand the economic downturn much better than U.S.
CMHC also argued that the Canadian model is cost-effective, having provided the Canadian taxpayer with $12 billion over the last decade in profits and income taxes.
But in the latest criticism, Lee said CMHC needs to provide Canadians more choices and be more transparent and efficient, as well as opening up a level playing field with private competitors.
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Another critic has taken a shot at the Canada Mortgage and Housing Corporation (CMHC), claiming the arm's length body needs more regulation.