Monday, October 16, 2006

Ottawa Eyes Privatization of CMHC

The federal government is quietly testing the waters about privatizing the national housing agency, Canada Mortgage and Housing Corp (CMHC). That could bring billions of dollars into Ottawa's coffers but would also upset social-housing advocates and possibly cause upheaval in the bond market.

But Canada finmin denies privatization of housing agency.

A sale is not imminent, and observers believe there is no chance it would take place until after a federal election. Nor is there a cut-and-dried case in favour of privatization. But it's clear that the days of CMHC being a significant source of cash for the federal government are numbered -- with or without privatization.

CMHC, a Crown corporation charged with making housing more affordable and accessible, is making about $1-billion a year in profit and is sitting on a $5-billion reserve of retained profits.

The Crown corporation was created in the 1940s so that the state's access to cheap capital could be leveraged to make mortgages and home ownership affordable for most credit-worthy Canadian residents.

It now has four divisions: affordable housing, aboriginal housing, mortgage insurance and securitization.

About 96 % of the agency's profit comes from mortgage insurance. CMHC controls about 70 % of the country's mortgage insurance market, with the other 30 % held by Genworth Financial, a U.S.-based multinational formerly known as GE Mortgage Insurance Canada.


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