Sunday, April 15, 2012

Just shut down the CMHC

The clamour to clip the horns of the CMHC are getting louder.

The IMF, Bloomberg, Nomura, OFSI, even the Canadian Banks (the recipients of CMHC largesse) and the media have jumped aboard too, never mind those foolish bloggers who have been sounding the alarm for several years now.

I am sorry to have to link the National Post, which IMVHO is only one small step above Macleans but there is an article worth perusing, though it would have been better written...say two years ago than now. It talks about foreign speculative buying (which occurs alongside Canadian speculative buying) but also about the CMHC which seems to insure just about everything and anything.

Why exactly? And why do they insure rental or investment property? Isn't it obvious to even the most feeble brained, that if your mandate is to encourage Canadians to own their own home, by facilitating others to buy more for investment- you are taking homes out of the pool for sale and making it more expensive for first time

It used to be this bad:

They have tightened up the rules but it still exists.

From the CMHC site:

5. Does CMHC Mortgage Loan Insurance only apply to traditional single-family residential properties?

No, CMHC offers mortgage loan insurance products on various property types including duplexes, condominiums, owner-occupied properties, manufactured or mobile homes, properties requiring renovations and much more, including rental and nursing homes. Please check with your lender for more details.

I would have no problem for those building NEW rental stock to get insurance, but not for those just buying what's already built. It would be dumb beyond words.

The article says that a housing bust could hurt us a lot via the CMHC. Duh....We have been saying that in the bear blogs for several years now, ever since this Government doubled their capacity.