Canada: the government insurer of mortgages will be monitored more closely
The Canadian government said Thursday it increased his supervision over the activities of his government insurer of mortgages, the finance minister is saying such “concern” of overheating in the property market in major cities.
Finance Minister Jim Flaherty presented a bill that will increase the Canada Mortgage and Housing Corporation (CMHC) under the responsibility of the main financial regulator in Canada.
This change aims to “recognize that CMHC has become a significant financial institution in Canada, like our largest banks. CMHC was originally created to support social housing. She became much more than that” , the minister said to the press.
CMHC controls about two-thirds of the mortgage insurance market in Canada and also guarantees securities issued by large banks that are backed by real estate assets.
Currently the responsibility of the Department of Human Resources, CMHC will pass under the supervision of the Superintendent of Financial Institutions, cruise under the Ministry of Finance, which supervises banks, insurers and pension funds.
“Changes (…) strengthen the supervisory framework of the CMHC and will ensure that commercial activities are managed to promote financial system stability,” the ministry said in a statement.
In Canada, under the law, a home buyer must obtain mortgage insurance if it is unable to make a down payment equal to 20% of the purchase price of the home.
This insurance allows borrowers to purchase a home with a minimum downpayment of 5%, a situation that has brought tens of thousands of Canadians into debt in recent years to take advantage of low interest rates in force to buy homes.
Flaherty himself mentioned the overheating in the housing market in Toronto, Montreal and Vancouver, the three largest cities.