Article content continued

Evan Siddall, president of CMHC, has signalled a move to scale back the federal government’s exposure and confirmed in a discussion at the Canadian Club in October that CMHC continues to study the idea of the banks having some sort of deductible in the event of mortgage defaults.

Anyone borrowing from a financial institution regulated by Ottawa must get mortgage default insurance if they have less than a 20% downpayment. Only loans with mortgage default insurance can be put in the NHA MBS program.

The latest fee increases are probably not directly aimed at slowing down the market, despite the concerns raised by the Bank of Canada, said Benjamin Tal, deputy chief economist with CIBC. Bank of Canada governor Stephen Poloz said Wednesday there is risk a shock to the economy could trigger a correction in prices that may be overvalued from 10% to 30%.

“This isn’t part of slowing down the market,” said Mr. Tal, about the latest changes at CMHC. “It would be a nice derivative but it’s an effort to lower the size of CMHC relative to the size of the market. What you are seeing from CMHC is that instead of taking one big step, they are taking baby steps.”

Ottawa has made a number of changes to mortgage rules during the housing boom to cool the market and limit its exposure, one being lowering amortization lengths from 40 years to 25 years.

Peter Routledge, an analyst with National Bank, said it’s not one single change that illustrates the transformation at CMHC.

“They don’t want to do anything dramatic that upsets the housing market, that’s bad for everyone and worse for the government because they hold the credit risk,” said Mr. Routledge, who notes when you look at market over six years you see the changes. “It has prevented a more excessive build-up of household credit.”

twitter.com/dustywallet