They insure the banks against mortgage default. People pay a small premium on their monthly mortgage payments so that if they default, the bank is insured for the cash difference of the outstanding amount on the mortgage.
As a result, banks in Canada face no risks from mortgage default so there's no reason to deny a mortgage. Over 90% of mortgages made in the past decade are CMHC-insured.
I get what you are saying, but so far things are going very well.
By 2010 CMHC had an annual financial surplus of more than $2 billion.[6] CMHC is the largest Crown Corporation in terms of assets with some $26 billion in holdings as of 2008-2009.
If you think this insurance can cause Canadian banks to be more risky in their lending - I don't think that is currently the case.
So $26B in holdings to insure $1.372T in outstanding mortgages, that seem pretty low but since the taxpayers will cover the rest, I guess it's fine to continue handing out subprime mortgages.
They insure the banks against mortgage default. People pay a small premium on their monthly mortgage payments so that if they default, the bank is insured for the cash difference of the outstanding amount on the mortgage.
As a result, banks in Canada face no risks from mortgage default so there's no reason to deny a mortgage. Over 90% of mortgages made in the past decade are CMHC-insured.