Oversight Increases on CMHC

Looks like Harper and Flaherty are going to step back and let OSFI handle letting the air out of the bubble. Politically safe move. Ottawa to toughen CMHC oversight

“The issue that pushes them near their lending limit is the desire of some of the financial institutions to purchase portfolio insurance for their low ratio mortgages,” Mr. Flaherty said.

“That’s not the way most people usually think of CMHC.”

Just three years ago, CMHC had $450-billion in loans it was backstopping and had to go to the government to get that increased to $600-billion.

“A legislative framework will support financial stability”

CMHC currently falls under the jurisdiction of the minister responsible for Human Resources and Skills Development Canada. But sources have indicated the Crown corporation could soon fall under direct supervision of the Office of the Superintendent of Financial Institutions — a powerful financial regulator with the power to enforce a broad range of changes at a financial institution.

It's unfortunate that CMHC was not used to manage access to housing credit when interest rates fell (which would have had a net effect of funneling more money to business and encouraging consumers to pay down debt), instead of the opposite (adding more fuel to the household credit fire).