Canada Mortgage and Housing Corporation (CMHC
a Crown corporation
owned by the
Government of Canada
Corporation was founded after World War II to provide housing for
returning soldiers. It later built and/or funded urban renewal
projects in Canada's
Today, its main function is providing mortgage insurance of
residential mortgage loans
home buyers. This insurance protects mortgage lenders against
mortgage defaults on mortgages of less than 20% down.
Since 1954, one in three Canadian home buyers have made use of the
insurance. Besides mortgage insurance, the agency
provides financing to housing projects and renovations, does
housing market analysis and funds research into housing design and
technologies along with the National
Research Council of Canada.
The Corporation reports to the Minister of Labour and Housing
and the board of directors and president are appointed by the
the end of World War II
, the Canadian
government began to worry about the demobilization of thousands of
soldiers in Europe, and their re-entrance to Canadian
With so many people coming back to Canada, a number of problems
would arise, one being that there may not be enough housing
existing to accommodate the soldiers and their desire to have
The agency was created in 1946 in response to housing demands after
the return of World War II veterans
and societal changes after the war included
a policy that every family in Canada have their own home.
CMHC's role was to aid in the management and finance of housing
projects in Canadian cities. It took over the assets of the
Wartime Housing Ltd.
, that had
built thousands of houses during the war. Upon creation, the
Corporation was named the Central Mortgage and Housing
In 1954, the federal government changed the National Housing Act
amendment removed the federal government from the direct finance of
housing projects, instead leaving mortgage financing to the
The banks began to issue mortgage loans with CMHC underwriting. If
the individual receiving the loan went bankrupt then the bank who
gave the loan would not lose money, but instead would be reimbursed
by the government.
As part of the CMHC lending and insurance mechanisms low-risk
borrowers would have to pay insurance premiums if they wanted to
borrow with small down-payments.
In 1979, the Corporation's name was changed from the Central
Mortgage and Housing Corporation to Canada Mortgage and Housing
Importance in Canadian public sector
Public sector importance
- The CMHC is the second largest Crown Corporation after Canada Post in terms of revenue with some $4.6
billion in 2004.
- CMHC is the largest Crown
Corporation in terms of assets with some $26 billion in
holdings as of 2008-2009.
The CMHC has influenced the development of Canadian housing
projects since its post WWII inception.
Furthermore, the federal Government of Canada often uses the CMHC
as a financial agent.
Influence over housing projects
The CMHC provides assistance and guidance to the private sector
in the building, design and
planning of houses. Thus provincial governments have aligned their
housing standards and planning practices along those of the
The CMHC also makes financial loans to cities at lower interest
rates for the development of housing projects.
Thus, both the cities and provinces in Canada rely on the CMHC for
the continuation of housing development in the areas under their
This alignment has had a number of influences on Canadian housing
- Development of the policy of every Canadian family having a
- Development of a national building code
- With the insurance of mortgages and 90%/10% downpayment
standard the suburbanization of Canadian cities was possible
- Building experimental houses for new and improved building
techniques and technology
- Often acts as a developer, but this function is
- Influences the socio-economic differentiation in cities by
approving low-cost housing projects only when placed where they
Examples of CMHC participation
example, the Calgary municipal
government wanted to develop the NE portion of the city as a
high-cost housing market due to the view of the Rocky Mountains.
However, the CMHC,
in loaning money to Calgary, decided that the development should
instead be focused around low-cost housing projects.
In 2001 GE Capital
was permitted to join
CMHC in the Canadian mortgage insurance industry to provide
competition in the marketplace.
GE Capital began insuring Canadian mortgages and issuing NHA-MBS
(Mortgage Backed securities insured by the Government of
In 2002 total outstanding mortgage debt in Canada was still a cool
$467 billion. These mortgages were on the whole issued to
households with good credit, and to people with proper
downpayments. CMHC insured a small portion of this debt.
In 2003 CMHC decided to remove the price ceilings limitations. That
is, it would insure any mortgage regardless of the cost of the
In 2007, after years of lobbying, the now defunct AIG
found new hope with the newly elected Conservative
- AIG was now permitted to insure high risk Canadian
- CMHC was also permitted to issue mortgage backed securities and
exchange these on the open market.
- At the same time, the Conservative government launched a
radical policy that allowed CMHC, AIG & GE to insure 35 year
amortizations that were coupled with 0% down payments. A few
months, but before 2008 -- this was expanded to 40 year
Thanks to Canada economic stimulus package of 2007 the mortgage
market radically changed. Historically high home prices continued
to gain steam. High risk borrowers flooded the real estate
Throughout 2007, the average Canadian home buyer who took out a
mortgage had only 6% equity in their home. The 6% equity is or
equals the national average downpayment for all mortgages including
home buyers who traded up to more expensive homes.
In 2008, Canadian home prices started to dip as affordability
became the worst on record in many cities.
- CMHC publicly admitted that it was ordered to approve as many
high risk borrowers as possible to prop up the housing market and
keep credit flowing.
- In 2008 some 42% of all high risk applications were approved, a
33% increase over 2007.
Between the beginning of 2007 and 2009 Canadian Banks increased
their total mortgage credit outstanding listed on their books by
only 0.01% -- possibly the smallest amount of change in post WWII
Mortgage Securitization has accounted for 90.5% of all growth in
total Canadian mortgage credit outstanding since 2007.
The Canadian mortgage securitizaton market has grown from
- 100 billion in 2006
- 130 billion in 2007
- to 295 billion by mid-June 2009
CHMC plans to expand securitization of debt to 370 billion by the
end of 2009 as per the conservative government request.
All Canadian mortgage securities are traded on an open exchange and
insured by the Government of Canada.
Currently the securities outstanding are as of 2008-2009 roughy
- TD Group : 59 billion
- CIBC : 51 billion
- BNS : 32 billion
- RBC : 45 billion
- BMO : 27 billion
Many individuals in 2009 are being granted 500K CAD - 800K CAD
mortgages for their first home purchase if their household income
ranges from 110K CAD - 170K CAD. Statistically speaking such grants
are problematic during a global recession.
CMHC indicates in its plan that it will insure $813 billion via a
combination of mortgage insurance and mortgage-backed securities
(MBS) by the end of 2009.
According to CHMC figures from 2008 and 2007 it is clear that CMHC
has drastically exceeded their planned figures. It is expected that
812 billion is more than likely to be a minimum target.
At these rates of progression the Government of Canada will in
effect be insuring well over $500 billion in securitized mortgages
and lines of credit by the end of 2010. The Canadian Government
will also have issued over $600 billion in outstanding mortgage
Many economists are unsure if this level of individual mortgage
debt or CMHC mortgage securitization is sustainable. If it turns
out the CMHC's debt levels are not sustainable the Canadian
taxpayer will be negatively affected (by and increased tax burden
relating to CMHC's maintenance and support) for potentially a
decade or more.
early projects was the Regent Park project in Toronto.