The Canada Mortgage and Housing Corporation (CMHC) provides mortgage insurance to lenders where people want to purchase a home with less than 20% down. Just recently, they reversed their tighter qualifying ratios due to losing a great deal of the mortgage default insurance market share. In the summer of 2020 CMHC decreased the maximum qualifying ratios to 35% for gross debt servicing (GDS) and 42% for total debt servicing (TDS), whereas their competitors in the private sector kept their ratios at 39% for GDS and 44% for TDS.
This prompted lenders to move their loyalty away from the government backed insurance company to the two other leading companies, Sagen & Canada Guaranty. Up until that point CMHC was leading the mortgage insurance market holding a 49% share of the market share in insured mortgages in the second quarter of 2020.
To start 2021, they dropped to a 23% market share on all new underwritings in the first quarter of 2021, with Sagen now holding 44% and Canada Guaranty holding 33% of the market. Many believe too much damage has been done for the CMHC to gain back the market share it has lost even though they have reversed their qualifying back to the 39% GDS and 44% TDS that they once used while at their peak, and that their competitors maintained and used to gain an advantage over them.
It is also believed that now that CMHC has decreased revenues that they will be increasing the fees they charge to manage the Canadian Mortgage Bonds and mortgage-backed securities markets, like they did in January of this year. An additional increase in fees could lead to higher mortgage costs for people purchasing homes because the lenders will have to include this in the costs.
Finally, CMHC announced a possible name change to “Housing Canada” to emphasize their goal of having affordable housing for all people in Canada by 2030. This is viewed as a necessary change by many analysts to bring the CMHC back to what it once was in the Canadian mortgage market.
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