Ottawa puts CMHC under tighter scrutiny:
Below are some key excerpts from Postmedia's article about the CMHC and its new scrutiny. This is clearly another sign that the federal government is anxious to rein in household debt levels and Canadian home prices.
The federal government is putting Canada's housing agency under tighter scrutiny amid concerns over a red-hot housing market and rising consumer debt.
Finance Minister Jim Flaherty announced Thursday that responsibility for Canada Mortgage and Housing Corp. will be handed over to the country's banking regulator, the Office of the Superintendent of Financial Institutions.
The measure, contained in new legislation tabled Thursday, will ``enhance the oversight framework for CMHC to ensure its commercial activities, particularly its mortgage insurance and securitization programs, play an important role in the housing market and the financial system,'' Flaherty said.
Queen's University finance professor Louis Gagnon said he has also ``been concerned about the CMHC for a long time. ``
``I believe that the federal government's plan to bring CMHC under the direct supervision of the Office of the Superintendent of Financial Institutions is long overdue,'' said Gagnon, who specializes in debt and risk management.
``In fact, the previous oversight arrangement was ill-suited for this important task and I never did understand why the CMHC had been placed under the jurisdiction of the minister responsible for Human Resources and Skills Development. This was a recipe for a disaster.''
Carney said the average home price in Canada is about 4.75 times people's income, while the historic average is closer to 3.5 times. Household debt to disposable income, meanwhile, is running at about 152.9 per cent.
Originally created to aid social housing... Ha! The currently bloated CMHC is not funded for the looming defaults that can potentially occur if mortgage interests rise significantly. The taxpayers would then have to bear the costs of any shortfall. This is definitely time for an overhaul.
ReplyDeleteI agree with you Jo-Anne. The system is bloated and becoming something it was never intended to be in the first place. It is basically now working as a taxpayer mechanism to insure the massive amount of mortgage assets on the balance sheets of Canadian banks.
DeleteThe shortfall that is going to be left will be paid by the taxpayer, and since it is insurance for the banks, it will be a direct transfer of wealth from households to corporations.