Canada’s housing agency said its mortgage insurance business may never return to normal levels after it made the costly decision to temporarily harden the rating. requirements during the first months of the pandemic.
Canada Mortgage and Housing Corp. returned to easier standards in July last year after losing substantial market share to private-sector competitors, which never followed the federal insurer’s lead when it introduced new rules in July. 2020.
Now, CMHC isn’t sure if it will make up lost ground.
“We’ve been making a concerted effort to do what we can to get some of our business back,” CMHC Executive Director Romy Bowers said at the agency’s annual meeting on Wednesday. “It’s really hard to know if we’ll reach pre-pandemic levels of market share.”
Before the pandemic, CMHC had a 47 percent market share. After the agency implemented its stricter rules, which required a higher credit score and more income to qualify, CMHC lost business to two private mortgage insurers, Canada Guaranty Mortgage Insurance Co. and Sagen MI Canada Inc.
CMHC had thought that the stricter rules would reduce risk for taxpayers and curb the frenetic demand that was driving up home prices. But they continued to rise, with lenders and their borrowers relying on private sector insurers.
Major lenders require mortgage insurance if a borrower makes less than a 20 percent down payment on a home purchase priced less than $1 million. There is no insurance for homes priced above that level.
CMHC’s market share fell to the mid-20s percentage range after the 2020 rule change and is now around 35 percent, according to Ms. Bowers, who took over as CEO a year ago and reversed politics a few months into his term. In announcing the reversal, the agency called the decision costly and not as effective as expected.
Agency figures from the past two years show a steady decline in the number of insured homeowners. In the first quarter of 2020, CMHC provided insurance to 1.12 million homeowners with $224 billion in mortgages. In the fourth quarter of last year, the agency provided insurance to 951,651 homeowners with $193 billion in mortgages.
At the same time, insurance for owners of apartment buildings increased. In the first three months of 2020, CMHC provided insurance to 24,703 apartment buildings with $88 billion in mortgages. In the fourth quarter of last year, there were 26,427 multi-residential buildings with $114 billion in mortgages.
“It certainly has cost them and their taxpaying homeowners millions in profits,” said mortgage strategist Robert McLister.
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