Home Capital a ‘ discrete issue’ so far
REAL ESTATE
The problems at Home Capital Group Inc. have not led to any noticeable uptick in default rates tracked by the Canada Mortgage and Housing Corporation.
According to emails that have come to light since Home Capital’s current liquidity crisis began, CMHC has been aware of potential documentation fraud at the alternative mortgage lender since at least 2015.
Yet the CMHC insists that mortgage fraud in Canada is rare, and that Home Capital’s problems haven’t hit its own portfolio.
Meeting with reporters Thursday, Evan Siddall, chief executive of CMHC, said that while the Crown corporation, which is the largest provider of mort- gage insurance in the Canadian market, constantly looks for patterns and associations that might indicate improper lending activity, there is no evidence that mortgage fraud is a widespread problem in the country.
“We don’t think this is a pervasive problem in Canada,” Siddall said. “It is a discrete issue.”
According to CHMC’s report for the March 31 first quarter, about 8,000 or 0.32 per cent of the almost 2.5 million loans in its portfolio of insured loans were in arrears.
That rate is unchanged from last year’s third and fourth quarters.
Steven Mennill, the senior vice- president with CMHC who is responsible for the insurance portfolio, said the national trend for arrears has remained steady.
Default rates have recently declined in Ontario and British Columbia, perhaps due to an increase in underwriting standards. Rates have risen in Newfoundland and Labrador and Saskatchewan, but that trend was expected due to the impact of the oil price downturn.
“We’ve seen no unusual level of defaults associated with Home Capital,” Mennill said. “The quality of the portfolio remains quite high. There is no specific concerns really in that portfolio or any part of our business. We have a robust fraud mitigation system in place and it’s working.”
Genworth MI Canada Inc., the country’s second- largest provider of mortgage insurance, has previously said that as of March 31, mortgages originated with Home Capital made up about one per cent of its business, and that as of Dec. 31, 2016, the delinquency rate associated with those loans is less than its overall business delinquency rate of 0.21 per cent.
Siddall was in Toronto to deliver a lunch- hour speech on the federal government’s national housing strategy. The federal government is concerned that rising housing prices are exacerbating a gap between the rich and poor, Siddall said. “Our own research has found a very strong relationship here in Toronto between wealth and income inequality and house prices.”
Si ddall s ai d housing prices result from market conditions, and CMHC is not a “politburo” that can manage the market. “That’s not our job and we don’t want it to be our job.”
Yet CMHC thinks it can at least help by adding some supply to the marketplace, he said. Under the national housing strategy, the federal government has mandated CMHC to build 80,000 rental housing units and fix up another 250,000 units over the next 11 years.
The housing boom in Vancouver and Ontario has led both the British Columbia and Ontario provincial governments to introduce transfer taxes aimed at foreign in- vestors.
April real estate data for Toronto is expected to be available on Monday, and CMHC is expecting to see a “single-digit” rise in the average home price. That might be down from some of the double-digit increases registered in Toronto earlier this year, but CMHC’s forecast is not based on the province’s new tax.
Dana Senagama, a housi ng market analyst with CMHC, said that since the Ontario government introduced the new 15- per- cent tax on foreign buyers only on April 20, it likely won’t have much of an impact on the full-month average price data. Even so, she said, history shows that similar policy measures tend to change market behaviour for only short periods.