The C.D. Howe Institute report, released on Jan. 31, said the governmentâ€™s role in mortgage markets, through CMHC, may â€œencourage excessive lending risks in the consumer marketplace, potentially creating unmanageably large risks in financial markets."
Its solution is for the government to scale back CMHCâ€™s role in the provision of mortgage insurance and turn over much of the industry to private insurers.
Without directly addressing the report, CMHC responded today through Media Relations Officer Kate Munroe by providing a statement to CRE Online that dismissed concerns of growing risk, while declining further comments through an interview.
â€œThe Canadian market is stable,â€ said the statement. â€œPrudent lending and mortgage insurance practices, and strong banking regulations, have helped Canadaâ€™s banking system remain healthy.â€
The statement goes on to say CMHC follows the guidelines set forth for capital reserves by the Office of the Superintendent of Financial Institutions, and maintains reserves at close to double the minimum amount required.
At the end of 2009, CMHCâ€™s capital level for its insurance business was $8.2 billion. Thereâ€™s also an additional $6.7 billion in unearned premiums reserved for potential future claims.
â€œThe quality of CMHCâ€™s insured loan portfolio is strong,â€ the statement read. â€œOn average, homeowners with outstanding CMHC insured mortgages had equity of 45% of the value of their home at the end of 2009.â€
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The Canada Mortgage and Housing Corporation (CMHC) rebuked the C.D. Howe Instituteâ€™s claims this week that the government should scale back its role in the mortgage industry due to growing risk.