Ottawa puts CMHC on shorter leash

Flaherty says move will add to stability of housing market and be beneficial to all

OTTAWA – The federal government is putting Canada’s housing agency under tighter scrutiny amid concerns over a red-hot housing market and rising consumer debt.

Finance Minister Jim Flaherty announced Thursday that responsibility for Canada Mortgage and Housing Corp. will be handed over to the country’s banking regulator, the Office of the Superintendent of Financial Institutions.

The measure, contained in new legislation tabled Thurs- day, will “enhance the oversight framework for CMHC to ensure its commercial activities, particularly its mortgage insurance and securitization programs, play an important role in the housing market and the financial system,” Flaherty said.

“These proposed changes are part of the government’s continuous efforts to strengthen the housing finance system,” he told reporters. “They will contribute to the stability of the housing market and benefit all Canadians.”

Flaherty said OSFI would be responsible for reviewing and monitoring CMHC’S commercial activities. Until now, the agency was overseen by Human Resources Minister Diane Finley.

“I’ve been concerned about the CMHC for some time in the sense that it’s become an important financial institution in Canada, and it was not subject to the same supervision by the Office of the Superintendent of Financial Institutions,” he said. “So I think this is an important step forward.”

The government has tightened mortgage-lending rules three times in the past four years as the housing market heated up, and Flaherty said Thursday he will again “take action as necessary.”

“We watch the market closely, and I particularly watch the condo market in Vancouver, Toronto and to some extent in Montreal as well.”

CMHC’S function is to insure consumer mortgages and guarantee mortgagebacked securities issued by banks.

Queen’s University finance professor Louis Gagnon said he has also “been concerned about the CMHC for a long time” and believes the oversight plan is long overdue.

“In fact, the previous oversight arrangement was illsuited for this important task and I never did understand why the CMHC had been placed under the jurisdiction of the minister responsible for Human Resources and Skills Development.

“This was a recipe for a disaster.”