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Bridge Beat

Sep 18, 2020

CMHC War on Canadian Housing

Those of you who have followed my writings over the last few years know that I am extremely displeased with the housing czar mantel that has been given to CMHC and in particular, their CEO, Evan Siddall, by the Federal government.  His position on the mortgage stress test and pronouncements, both prior to COVID-19 and during the pandemic, have only exacerbated fear mongering of a housing crash and squeezed primarily first time home buyers out of the market or severely extended them when purchasing new or used housing.  Below are a number of more recent pronouncements and statements made by CMHC and their CEO which continue to demonstrate the antipathy that this Crown corporation continues to take:

  1. OSFI earlier this year agreed to soften the mortgage stress test in calculating the applicable posted 5-year rate to one which was more of a market rate.These changes were supposed to come into play in early April 2020.Surprise, surprise, these changes have now been deferred and other changes that might be considerably one on hold (with the blessing of CMHC, I suspect).
  2. On August 10, 2020, Mr. Siddall sent out a letter to the leaders of most major banking and lending institutions to address the loss of CMHC market share.This was as a result of the tightening of some of the criteria that CMHC imposed, during the COVID-19 crisis that raised the income test and the credit score test for applicants.Other competitors providing mortgage insurance, such as Genworth MI Canada Inc. and Canada Guaranty Mortgage Insurance Co. opted not to follow these rule changes and as a result, increased their market share to the detriment of CMHC.Mr. Siddall, in an effort to regain market share and discourage lenders from using private sector competitors such as Genworth MI Canada Inc. and Canada Guaranty Mortgage Insurance Co., implored the nation's lenders to "reconsider" offering mortgages to highly leveraged households using the other private insurers.These are the same households to whom mortgage deferrals may have been given and others who need refinancing and are facing tough times as it is.Essentially, Mr. Siddall wants everyone in the mortgage insurance market to follow his lead.If the other competitors felt from a business and risk perspective that this was not necessary, perhaps Mr. Siddall should reconsider the additional stringent requirements that CMHC has put on their applicants.There are press reports as well that lenders were not pleased with Mr. Siddall's interference, yet again, in the free market of lending and mortgage insurance.
  3. Mr. Siddall, like other major political and government figures, has now taken to using Twitter as one of its forms of communication.On August 31, 2020, Mr. Siddall, through Twitter, accused a Vancouver realtor, Owen Bigland, of offering bad advice when he suggested that "Leverage is how true wealth is built.You need to get your money working."Mr. Siddall responded "You DO realize leverage works just as powerfully when prices go down ………. or were you not alive in 2008-2009?"It appears that Mr. Bigland was a realtor for 30 years and responded that Mr. Siddall's tweet ignored an earlier one where he had said "Real estate leverage was best used as a tool to hold a primary residence for a long period and could go both ways."

    It appears that the CEO of CMHC is now using social media in providing personal opinions on these kinds of matters.  Again, it merely demonstrates his apparent obsession with the real estate Armageddon he has been predicting for over 2 year.  Even more so, it is entirely inappropriate for him to get involved in these types of personal discussions at the Twitter level in his position as the CEO of a Crown corporation.

  4. CMHC in 2019, provided a $250,000 grant to researchers at the University of British Columbia to address housing wealth and inequality, a project considered as part of the Liberal government's National Housing Strategy.There is grave concern that this kind of report will lead to a justification for the Liberal government to start taxing capital gains on principal residences.A clue to the direction of this report comes from Mr. Siddall's suggestion in a speech last December 2019, that "Our dream of home ownership is static and regressive.We need to call out the glorification of home ownership for their regressive canard that it is."

 

If there is to be a fair and equitable housing policy in Canada for both home owners and renters, we need government officials and Crown corporation who are unbiased and open to hearing both sides.  As can be seen by the numerous pronouncements from their CEO, CMHC and most likely the Liberal government itself, is fixated on maintaining a restrictive housing policy to avoid an alleged impending residential and real estate Armageddon.  In the interim, home owners and renters are all suffering in terms of the inability to finance, insure and the resulting restriction on supply.  It is time for a fresh housing policy and a new spokesperson for the Federal government in that regard.

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