Canada Mortgage and Housing Corporation
Canada Mortgage and Housing Corporation (CMHC) is a Crown corporation, of the Government of Canada, founded after World War II to provide housing for returning soldiers. After the war, a serious housing shortage and the return of large numbers of veterans led the government to create CMHC to promote the development of new housing by offering very low cost mortgages with small down payments and easy terms. It later built and/or funded urban renewal projects in Canada's cities.
One of the main functions of CMHC is to manage the federal Mortgage Insurance Fund (MIF), which was introduced in 1954 to provide protection to banks reluctant to enter the mortgage lending market. Today its main function is managing providing insurance for residential mortgage loans to Canadian home buyers. This insurance protects mortgage lenders against mortgage defaults on mortgages for which insurance has been purchased (mandatory on loans with less than 20% down although lenders may require it on loans with more than 20% equity if they perceive additional risk of default). 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. The mandate of CMHC, as Canada's national housing agency, includes facilitating accessibility to a "wide choice of quality, environmentally sustainable, affordable housing solutions."
The portfolio for Canada Mortgage and Housing Corporation is held by the Honourable Jason Kenney, Minister of Human Resources and Skills Development (2012). Previously the portfolio was held by the Minister of Labour and Housing. The board of directors and president are appointed by the Government of Canada.
Near 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 society.
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 families.
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 Central Mortgage and Housing Corporation.
During the war, Ajax, Ontario, was constructed and operated by the Wartime Housing Limited (1941 to 1949) in order to provide much-needed housing for munitions workers and returning veterans. In 1948, CMHC was given responsibility for Ajax. Its biggest challenges in establishing Ajax as a functioning municipality were reimbursing Pickering Township and Ontario County for municipal services provided to Ajax and establishing an official plan for the growing community acceptable to relevant government agencies. After considerable controversy regarding land and water control, CMHC submitted a successful application to the Ontario Municipal Board in May 1950 making Ajax an improvement district. This was the first step toward municipal status and allowed CMHC to the depart.
In 1954, the federal government changed the National Housing Act. The amendment removed the federal government from the direct finance of private housing projects, instead leaving mortgage financing to the banks. 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 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 Central Mortgage and Housing Corporation to Canada Mortgage and Housing Corporation.
In the 1980s, the federal government withdrew from the financing of public housing projects. CMHC no longer directed funds to municipalities for the building of housing projects. Some government housing funds and mortgage guarantees since then have been provided for individual projects.
Importance in Canadian public sector
Public sector importance
- CMHC is the second largest Crown Corporation after Canada Post in terms of revenue with some $4.6 billion in 2004. It has an annual financial surplus of more than $2 billion.
- CMHC is the largest Crown Corporation in terms of assets with some $26 billion in holdings as of 2008-2009.
- As of March 31, 2013, CMHC's insurance-in-force was $562,600,000,000, representing an insurance risk of approximately $17,000 per Canadian
CMHC has influenced the development of Canadian housing projects since its post WWII inception.
Influence over housing projects
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 CMHC.
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 CMHC for the continuation of housing development in the areas under their jurisdiction.
This alignment has had a number of influences on Canadian housing in general:
- Development of the policy of every Canadian family having a home.
- Development of a national building code
- Building experimental houses for new and improved building techniques and technology
Canada's national housing agency, CMHC invested $1.9 billion (2009-2014) for housing and homelessness programs for "homeless people and those at risk of homelessness-low-income Canadians, seniors, people with disabilities, recent immigrants and Aboriginal Canadians"  and $2 billion (2009-2011) more towards the construction and renovation of existing social housing units.
By May 2012, CMHC had approved 272 loans for the full $2 billion available under the Municipal Infrastructure Lending Program (MILP) (2009-2012) which provided low-cost loans to municipalities for housing-related infrastructure projects: "water, wastewater and solid waste services, fire halls and power generation; local transportation infrastructure within or into residential areas, such as roads, bridges and tunnels; and residential sidewalks, lighting, pathways and green space." Directly and indirectly the program responds to the crisis of affordability of housing in Canada but also to the federal government's top priority, which is job creation and economic growth.
- Reduced mortgage insurance premiums by 15 percent and eliminated the homeowner price ceilings..
- Longer amortization periods (from 25 years up to 40 years).
- Higher loan-to-value ratio loans (up to 100 per cent). 0% down payment.
- Niche products for near-prime3 borrowers.
- Streamlined loan documentation requirements with respect to borrowers' income and employment.
- Require that all borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. This initiative will help Canadians prepare for higher interest rates in the future.
- Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per cent from 95 per cent of the value of their homes. This will help ensure home ownership is a more effective way to save.
- Require a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation.
In January 2011, the Government of Canada announced changes to CMHC mortgage insurance guidelines:
- Reduce the maximum amortization period to 30 years from 35 years for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent. This will significantly reduce the total interest payments Canadian families make on their mortgages, allow Canadian families to build up equity in their homes more quickly, and help Canadians pay off their mortgages before they retire.
- Lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes. This will promote saving through home ownership and limit the repackaging of consumer debt into mortgages guaranteed by taxpayers.
- Withdraw government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs. This will ensure that risks associated with consumer debt products used to borrow funds unrelated to house purchases are managed by the financial institutions and not borne by taxpayers.
In June 2012, the Government of Canada announced further tightening of the criteria necessary to qualify for government-backed insurance on new home mortgages with less than a 20 per cent down payment:
- Reduce the maximum amortization period to 25 years from 30 years. This will reduce the total interest payments Canadian families make on their mortgages, helping them build up equity in their homes more quickly and pay off their mortgages sooner. The maximum amortization period was set at 35 years in 2008 and further reduced to 30 years in 2011.
- Lower the maximum amount Canadians can borrow when refinancing to 80 per cent from 85 per cent of the value of their homes. This will promote saving through home ownership and encourage homeowners to prudently manage borrowings against their homes.
- Fix the maximum gross debt service ratio at 39 per cent and the maximum total debt service ratio at 44 per cent. This will better protect Canadian households that may be vulnerable to economic shocks or an increase in interest rates.
- Limit the availability of government-backed insured mortgages to homes with a purchase price of less than $1 million.
These most recent changes to the criteria for CMHC-backed mortgage insurance largely return the qualifications for low loan-to-value ratio mortgages back to where they were in 2006, when CMHC and its private sector competitors started insuring mortgages with no down payments and amortization periods of up to 40 years.
Subsequently, Minister of Finance Jim Flaherty stated that he would like to see CMHC privatized in the next five to 10 years, arguing CMHC has greatly exceeded its original mandate to provide housing to veterans of the Second World War and that taxpayer exposure to the housing market should be reduced.
All Canadian mortgage securities are traded on an open exchange and insured by the Government of Canada.
- Granville Island - managed by CMHC
- J. M. Bumsted, "Home sweet suburb," Beaver, Oct/Nov 1992, Vol. 72 Issue 5, pp 26-34
- J. David Hulchanski (May 9–10, 2003). "What Factors Shape Canadian Housing Policy? The Intergovernmental Role in Canada’s Housing System" (PDF). Conference on Municipal-Federal-Provincial Relations in Canada. Queen’s University, Kingston.
- CMHC (May 23, 2012). "Announcement — Municipal Infrastructure Lending Program". Québec City, Québec. Retrieved June 5, 2012.
- Robert. McGeachy, "CMHC in Ajax, Ontario: 1948-1950," Ontario History, Autumn 2006, Vol. 98 Issue 2, pp 209-224
- Member of Parliament Denise Savoie (17 June 2010). "Hansard". openparliament.ca. Retrieved 21 June 2010.
- "Minister Finley delivers keynote address at conference on housing and homelessness". 2009.
- Department of Finance news release, Economic Analysis of the Statutory Requirement for Insurance on High-Ratio Mortgage Loans, May 26, 2005
- Department of Finance news release, Backgrounder Residential Mortgage Insurance, 2008
- Department of Finance news release, GOVERNMENT OF CANADA TAKES ACTION TO STRENGTHEN HOUSING FINANCING, February 16, 2010
- Department of Finance news release, THE HARPER GOVERNMENT TAKES PRUDENT ACTION TO SUPPORT THE LONG-TERM STABILITY OF CANADA’S HOUSING MARKET, January 17, 2011
- Department of Finance news release,, Harper Government Takes Further Action to Strengthen Canada’s Housing Market], June 21, 2012
- National Post, , CMHC adds 40-year term, 100% funds as products, November 20, 2006
- The Globe and Mail, , Flaherty eyes privatization of CMHC, October 22, 2012