That’s due in part to the government’s move on March 18, 2011 to limit insured mortgage refinances to a maximum of 85% loan-to-value (instead of 90% previously).
That rule continues to force thousands of Canadians to pay higher interest rates on debt that they used to be able to refinance and consolidate. The government’s hope is that this will encourage homeowners to borrow more responsibly, knowing that they can’t rely on home equity to bail themselves out.
Overall, CMHC says its insured mortgage volumes were down 13% Y/Y. That’s 20% below the volumes it anticipated. It attributes this to:
CMHC is the only insurer serving multi-family residential (5+ units), nursing and retirement, and many rural and smaller markets. These areas comprised 44% of its high ratio business in 2010.
CMHC says it limits risk such that its probability of insolvency is less than 1 in 200 (0.5%). It stress tests its portfolio with risk models that factor in 10,000 economic scenarios. Among other things, those scenarios assume both extreme unemployment and significant home price depreciation lasting “a number of years.”