The Canada Mortgage and Housing Corporation (CMHC) has released its 2017 second quarter financial report, as well as supplemental data on its Mortgage Loan Insurance, Securitization, and Covered Bonds business activities.
CMHC provides federal funding in support of housing programs for Canadians in need, including on-reserve. During the quarter, CMHC provided some $550 million for housing programs on behalf of the Government of Canada. So far this year, CMHC has provided more than $2.1 billion to help Canadians in need have access to affordable and suitable housing.
“In the first half of 2017, CMHC has continued to support Canadians in every part of the country access housing,” said Wojo Zielonka, Chief Financial Officer and Senior Vice-President, Capital Markets. “As we prepare for the launch of the National Housing Strategy, CMHC is well positioned to help ensure Canadians have the housing they need and that they can afford.”
During the quarter, CMHC launched the Rental Construction Financing initiative. The initiative will provide $2.5 billion in low-cost loans to municipalities, non-profit organizations and housing developers and is expected to fund the construction of 10,000 new rental housing units across Canada.
Mortgage loan insurance enables Canadians to purchase homes with a down payment starting at five per cent. CMHC is also Canada’s only provider of mortgage loan insurance for multi-unit residential properties, facilitating the creation of rental housing options for Canadians. CMHC continues to see an improvement in the quality of its mortgage loan insurance portfolio, which is reflected in the overall arrears rate of 0.29 per cent.
During the first half of 2017, the typical CHMC-insured homebuyer had, on average, a mortgage of $255,014 with an average credit score of 752. The average gross debt service (GDS) and total debt service (TDS) ratios were 26.7 per cent and 36.5 per cent respectively. At June 30, 2017, CMHC’s total insurance-in-force was $496 billion, below CMHC’s legislated insurance-in-force limit of $600 billion.
New regulations introduced in the fourth quarter of 2016 have decreased the size of the insured mortgage market. During the second quarter, CMHC provided mortgage loan insurance for nearly 79,000 units across the country, while on a year-to-date basis CMHC has provided mortgage loan insurance for more than 125,000 units. Volumes decreased largely as a result of the new regulations announced by the Government in the fourth quarter of 2016.
To expand and preserve the supply of affordable rental housing CMHC introduced enhancements to its multi-unit mortgage loan insurance during the quarter. The enhancements are designed to better support the rental needs of the 30 per cent of Canadians who live in rental housing.
CMHC’s securitization programs facilitate access to funds for residential mortgage lending. These programs allow small lenders to compete more effectively with larger financial institutions, leading to choice for Canadian borrowers. For the first half of 2017, new securities guaranteed totalled $71.9 billion, consisting of $51.2 billion for National Housing Act Mortgage-Backed Securities and $20.8 billion for Canada Mortgage Bonds.
CMHC’s mortgage loan insurance and securitization guarantee programs operate on a commercial basis without the need for funding from the Government. As a result of these activities, CMHC generated net income (after taxes) of $397 million for the second quarter. On the continued strength of its performance, CMHC’s Board has approved a dividend of $240 million for the second quarter, payable to the shareholder, the Government of Canada.
As a responsible risk manager, CMHC holds capital for its commercial activities in line with its risk profile and with regulatory capital requirements. CMHC actual capital holdings are 173 per cent of the minimum capital required for its mortgage loan insurance business, above its internal target of 165 per cent.