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What is the "CMHC"?
by hifumi 10y ago
What is the "CMHC"?
- skylan_q 10y agoCanadian Mortgage and Housing Corporation. They insure the banks against mortgage default. People pay a small premium on their monthly mortgage payments so that if they default, the bank is insured for the cash difference of the outstanding amount on the mortgage. As a result, banks in Canada face no risks from mortgage default so there's no reason to deny a mortgage. Over 90% of mortgages made in the past decade are CMHC-insured.
- mrtron 10y agoI get what you are saying, but so far things are going very well. By 2010 CMHC had an annual financial surplus of more than $2 billion.[6] CMHC is the largest Crown Corporation in terms of assets with some $26 billion in holdings as of 2008-2009. If you think this insurance can cause Canadian banks to be more risky in their lending - I don't think that is currently the case.
- 49para 10y agoSo $26B in holdings to insure $1.372T in outstanding mortgages, that seem pretty low but since the taxpayers will cover the rest, I guess it's fine to continue handing out subprime mortgages.
- acveilleux 10y agoThey don't insure the value of the mortgage, they insure the shortfall between what the lender recoup in foreclosure vs. the outstanding loan balance.
- mrtron 10y agoI havent looked in detail lately - but I believe they issue bonds and the bond holders would be covering the impact of a market crash. You would prefer if there was not such an insurance system required for home owners putting less than 20% down?
- skylan_q 10y agoYou would prefer if there was not such an insurance system required for home owners putting less than 20% down? I know I would. It would be like the 90's again where banks had to only loan out to people who they thought wouldn't default.
- skylan_q 10y agoIf you think this insurance can cause Canadian banks to be more risky in their lending - I don't think that is currently the case. This is 100% exactly how the US crash happened through Fannie Mae and Freddie Mac.