[skylan_q]

Canadian Mortgage and Housing Corporation.

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.

[mrtron]

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.

[49para]

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.

[acveilleux]

They don't insure the value of the mortgage, they insure the shortfall between what the lender recoup in foreclosure vs. the outstanding loan balance.

[mrtron]

I havent looked in detail lately - but I believe they issue bonds and the bond holders would be covering the impact of a market crash.

You would prefer if there was not such an insurance system required for home owners putting less than 20% down?

[skylan_q]

You would prefer if there was not such an insurance system required for home owners putting less than 20% down?

I know I would. It would be like the 90's again where banks had to only loan out to people who they thought wouldn't default.

[skylan_q]

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.

This is 100% exactly how the US crash happened through Fannie Mae and Freddie Mac.