(Removes reference to bulk insurance in second paragraph)
By Andrea Hopkins
TORONTO, June 6 Canada's federal housing agency
will no longer offer mortgage insurance for condo construction,
it said on Friday as it made further changes to its programs
with the aim of cutting risks amid the country's housing boom.
Canada Mortgage and Housing Corp (CMHC) also said it will
restrict mortgages insured via low loan-to-value insurance by
limiting their maximum purchase price, mortgage length and debt
The changes are the latest made by the federal government
and its agencies to tighten mortgage lending and mortgage
insurance rules to make it harder for homebuyers, builders and
developers to take on too much housing-related debt.
"The changes are a business decision designed to increase
market discipline in residential lending while reducing
taxpayers' exposure to the housing sector through CMHC," the
agency said in a statement. "They also support the government's
continued efforts to adjust the housing finance framework to
restrain growth of taxpayer-backed mortgage insurance."
The shift is not expected to have a material impact on the
mortgage market, said Geoffrey Kwan, a banking analyst at RBC
CMHC introduced its multi-unit condo construction mortgage
insurance in 2010 to help developers get financing as they built
their projects, but the agency said it has not provided any such
insurance since 2011. Its total outstanding insurance-in-force
for condominium construction was about C$378 million ($347
million) as of March 31, a fraction of the agency's total C$557
billion insurance in force in 2013.
On the second change, CMHC said low-ratio insurance that
falls outside the revised parameters accounted for about 3
percent of its total homeowner business volumes in 2013, and
thus should not have much of an impact on the market. Mortgage
insurance is not required when borrowers have a down payment of
20 percent or more, but lenders often buy insurance on low-ratio
loans anyway as part of the approval process.
Under the changes, the low-ratio insurance product will be
aligned with CMHC's high-ratio product, with the maximum house
purchase price of C$1 million, the amortization period capped at
25 years, and the total debt service ratio limited to 44
percent, effective July 31.
Insurers who compete with CMHC include Genworth MI Canada
and privately owned Canada Guaranty Mortgage Insurance
(Reporting by Andrea Hopkins; Editing by Peter Galloway)