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In the meantime, a house cleaning is already underway. CMHC unveiled former Wall Street banker Robert P. Kelly as chairman and will soon announce a replacement for outgoing chief executive Karen Kinsley, who is stepping down after a 25-year career at the country’s dominant mortgage insurer. A source familiar with the internal activities at the housing agency says the structural shakeup is embodied by Mr. Kelly, a Canadian and a veteran financial services executive who was chairman and chief executive officer of the Bank of New York Mellon, and formerly with Toronto Dominion Bank. “Bob Kelly is not a grandpa in a rocking chair, he has a lot of intelligence and energy and market street smarts. You don’t bring him in as chair unless you want him to do something,” said the source who asked not to be named.

“Changes to way the mortgage insurance is administered in Canada are afoot,” said Finn Poschmann, vice-president of research at the C.D. Howe Institute. “There is no question this means tighter oversight and better reporting.”

Amid sharply rising defaults in housing markets in some western European countries, greater scrutiny of CMHC and its operations has assumed a greater urgency. “Housing finance risks emerged in the past half decade as big and important,” said Mr. Poschmann. “They were the proximate cause of a major market meltdown in the U.S., less in other countries, but a major contributor.”

In Canada, the federal government and policy makers are scrambling to engineer a soft landing for the country’s overheated housing market. As the largest provider of mortgage insurance in the country with about 75% of the mortgage default insurance market, CMHC plays a critical role in Canada’s housing market. In fact, the agency has been at the forefront of changes that made it easier to get a loan, much to the chagrin of the Finance minister, who has expressed concerns about the role CMHC has developed from its historical mandate to advance housing in Canada.