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Canadian Mortgage and Housing Corporation Pushing Banks to Take on More Risk


With the average home value in Canada now sitting at more than $500k and in the areas such as the GTA at $1M, economists, CMHC and the banks alike have been left scrambling to protect Canada from what some have speculated to be an emerging housing bubble.

It is no secret that the Canadian Mortgage and Housing Corporation (CMHC) has been doing as much as possible over recent years to adjust rules on what types of high ratio deals they will and will not insure and under what terms. Why? To protect us from experiencing a housing bubble the likes of which the US experienced in 2008.

Now, according to CBC, CMHC is directing their energy towards you – the banks and lenders – only the current idea being proposed isn’t exactly a new one. It was presented to the previous conservative government and now with a new Liberal Government at the federal level, the topic is being revisited.

According to the article, CMHC has been looking at “the possibility of forcing banks to shoulder more of the risk associated with mortgage loans.”

CHMC’s EO Evan Siddall is quoted in the article as proposing an option that would require lenders to pay a deductible on mortgage insurance claims. Of course, a measure like this could not be brought into place without consultation and CMHC is reportedly consulting the Department of Finance and the BOC about the idea and also better ways to distribute risk across the financial system.

There are conflicting options as to whether this is a good idea or not. In the article, CBC noted that the Canadian Bankers Association warned the Conservatives that shifting more risk to the banks could threaten the country’s financial stability.

It’s clear that a great deal of thought will go into this before it is finally decided. The article reports that the Department of Finance is undergoing research to assess the impacts of the idea of shifting more risk to lenders. So the question is – what does this mean to you? Join the conversation…

No matter the end result, Purview For Lenders can help with your due diligence, avoiding the pitfalls that might come from a decision placing more risk in your hands.

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