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Canadians with less than a 20 per cent downpayment on a home must get mortgage default insurance which is designed to protect financial institutions for any shortfall in the event a consumer defaults on their loan. CMHC is the largest mortgage default provider in the country and is ultimately 100 per cent backed by the federal government should it fail.

There are two private mortgage default providers in Canada, Canada Guaranty and Genworth Financial, both of which are 90 per cent backed by the federal government.

Rob McLister, the founder of ratespy.com, said CMHC has been “hoarding” capital. “The government is requiring CMHC to not keep that excess capital on its balance sheet. Instead, Ottawa wants it explicitly paid out to taxpayers,” said McLister, adding the Crown corporation’s earnings were already consolidated in the government’s books so they say this won’t impact the deficit.

The move comes has CMHC has been hiking premiums for consumers. It has generally led the way in the marketplace and Canada Guaranty and Genworth have usually followed. In January, the Crown corporation hiked premiums across the board and consumers with a loan-to-value up to and including 95 per cent now pay a fee of four per cent of their total loan which was up from 3.6 per cent. It was the third premium hike in three years.

“As a Crown corporation, CMHC is the only mortgage insurer whose proceeds benefit all Canadians. The special dividend returns excess capital to the Government of Canada while ensuring enough capital is retained for the risks we’ve assumed, said Wojo Zielonka, chief financial officer and senior vice-president of capital markets for CMHC, in a statement.