The Canada Mortgage Housing Corporation is bumping its head up against the ceiling and may need to apply for renovations to its $600-billion mortgage insurance cap. The Financial Post reports that the CMHC is cutting back on the number of mortgages it insures as the value of its portfolio swells towards the limit of its government-backed mandate.
And by government-backed, I mean tax-payer backed, by which I mean you and me. With debate still not settled over whether the Canadian housing market is a bubble, a balloon, or merely a little bloated, Canadians will be talking about this story today and asking about the risks of a $600-billion portfolio going suddenly bad and what it would mean for them.
Granted, mortgage defaults in Canada sit at a puny 1 percent so the risk to the portfolio is next to nothing, but what happens when the CMHC hits the $600-billion limit? Would the government say "no" to a request to increase it, running the risk of killing a booming housing market? Can the CMHC change its business a bit to stay under the cap, say stop insuring loans with more than 20 percent equity?
Source: BNN Morning Newsletter January 31, 2012: The chase by Marty Cej:
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