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Tighter Rules Mean More Good Mortgage News

Who could forget the uproar hear round the country last year when Finance Minister Jim Flaherty announced tighter mortgage rules? And we practically had to cover our ears just last month, when CMHC announced they too would be introducing tighter lending rules to lower the amount of mortgage insurance that was being given out. But while we were all moaning and groaning about the numerous restrictions, we may not have stopped and considered the benefits that were to come. Now, CMHC has released stats on just what some of those advantages are.

In a recent release, CMHC has announced that since the tighter lending rules have been in place defaults have been on the decline, and CMHC’s profits are up to boot! And while Canadians aren’t typically that interested in the profits of a major corporation, those that have been worried about the fact that it’s taxpayer’s money on the line will be very happy to hear the news.

“For the six months ended June 30, 2013, CMHC’s net income (after taxes) was $824 million, an increase of 6 per cent (or $49 million) when compared to the same period in 2012,” the agency said in their release. “This increase was mainly attributable to lower net claims.”

And those lower claims can be attributed to the fact that losses, or mortgage defaults, have been lower as well, when comparing year-over-year stats.

“Losses on claims in the second quarter were $117 million, $51 million (30 per cent) lower than the same quarter in 2012 and $72 million (22 per cent) lower on a year-to-date basis,” CMHC said. “The lower losses are the result of declining claim volumes (15 per cent lower than those received during the first six months of 2012,)” the agency continued in their release.

Those lower defaults can be explained too, by the fact that borrowers have had higher credit scores lately.

“The average credit score in CMHC’s high-ratio insured homeowner portfolio is 727,” CMHC stated. “The high average credit score demonstrates a strong ability among home buyers with CMHC-insured mortgages to manage their debts.”

But it’s not just strong stable borrowers CMHC wanted to talk about in this latest release, or even the amount of their profit that’s increased. They also wanted Canadians to realize just how much they’ve contributed to the economy over the past ten years.

“Over the last decade, CMHC has contributed more than $17 billion towards improving the Government of Canada’s fiscal position through both its income taxes and net income,” the statement read. “Of the $17 billion, CMHC’s insurance business has contributed more than $15 billion.”

Do you think this news will be enough for those that have been doubting the place of CMHC in the Canadian economy? And if you’ve been one of those that’s worried, does this news change your opinion any on CMHC?

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