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The agency said it’s the first set of changes resulting from the review of its operation. The Financial Post reported this month that Evan Siddall, a former investment banker brought in as CEO, has been asked about the possibility of a risk-based method of assessing mortgage default insurance. Sources say the new CEO has told people he doesn’t disagree with the principal of risk-based insurance.

The changes announced Friday affect a small portion of the market. CMHC said its second home and self-employed without third party income validation business account for less than 3% of CMHC’s insured business volumes in units.

“Given the limited use of these products, their discontinuation is not expected to have a material impact on the housing market,” the agency said in a release.

CMHC first introduced the program for self employed people in 2007 in response to “industry competition” which at its peak saw some U.S. players enter the market and encourage changes that created amortization lengths as long as 40 years. The government has since restricted loans to 25-year amortizations.

The second home product was introduced in 2005 and applied when purchasing an owner-occupied second home anywhere in Canada.

CMHC said it will limit the availability of homeowner mortgage loan insurance to only one property (one to four units) per borrower/co-borrower at any given time.

Benjamin Tal, deputy chief economist with CIBC, said the announcement was not “a big surprise given the mandate of providing more stability. That might not be the end of it. We might see more coming from CMHC.”

Finn Poschmann, vice-president of research at the C.D. Howe Institute, said the requirement for validation seems reasonable.

“What is interesting is the question of whether the change will tend to shift risk away from CMHC and toward the private insurers. Whether that is the outcome will be determined by the private insurers’ responses,” he said, in an email.

gmarr@nationalpost.com

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