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Maybe CMHC doesn’t need Privatization After All

Last week the International Monetary Fund made headlines when they came out saying that Ottawa should scale back on the amount of insured mortgages through CMHC. But now the Crown organization, the Canada Mortgage and Housing Corporation, have released some of their own stats that show taxpayers’ money is not at risk.

In order for taxpayer money to be at risk, the amount of defaulted mortgages that CMHC is backing has to increase dramatically. And the numbers they’ve just released have proven that’s not likely to happen any time soon. Those numbers state that provisions for claims had dropped by $19 million to $895 million during the third quarter of this year, and were down $101 million overall for the first nine months. The reasoning for that drop in provisions claims is due to the fact that expectations for bad loans are falling.

“We have seen improvement in the economic indicators that underlie all of that, so for example, unemployment has improved and home price inflation, which obviously influences the severity of claims, has improved as well,” says Brian Naish, chief financial officer at CMHC.

And because the organization was able to reserve fewer funds for defaulted mortgages, they were able to boost their profit by 20 per cent during the third quarter to $452 million. Total insurance in force during that same time also dropped to $559.8 billion – close to the $600 billion cap the organization has imposed on them, but not as close as it was a year ago at this time.

The agency also stated the average outstanding loan amount during the quarter was $141,175, which is up slightly from the end of last year. However, the equity in the average homeowner’s portfolio was 45 per cent.

Those numbers have certainly brought to light all the good CMHC does for the Canadian economy, rather than the focus always being on privatizing it and limiting the little risk that there is to Canadians. In fact, while some economists have been calling for a privatization of the system, others have been touting it as one of the main reasons why Canada’s economy didn’t collapse during the recession.

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