National Housing Act

How to wind back CMHC's dominance

The legislation, which forms part of the budget implementation bill before Parliament today, codifies the contractual arrangements, between the government and individual mortgage insurance companies, that now govern the terms for backstopping private mortgage insurers.

As it stands, private mortgage insurers compete for the edge of the market, against Canada Mortgage and Housing Corp., an agent Crown corporation whose liabilities are backed by the full faith and credit of federal taxpayers.

Because CMHC can borrow on terms similar to the federal government, and private insurers cannot, the private insurers’ cost of capital is higher. They would have difficulty staying in business, were it not for existing contractual agreements, which provide that 90% of the insurers’ liabilities are covered by the federal government. The insurers are required to set aside a fixed portion of their premiums booked, to help manage liabilities in case of meltdown. The existing arrangements enabled a form of managed competition in the mortgage insurance marketplace.

This is, or was, all right, if seen as a stepping stone to a more competitive marketplace. After all, there is no particular reason for the federal government to sell mortgage insurance, and certainly no reason for it to dominate the business, as CMHC’s typical 70% market share indicates it does.

And that’s what makes the current legislative design a deft move, even though it does little more than formalize existing arrangements. The legislation says that the private insurers must set aside adequate capital, and to do so as specified by the Superintendent of Financial Institutions. In other words, sound, prudential oversight remains a requirement, and we will have transparency and risk disclosure that is as good as we can manage.

Better yet, the budget bill provides that the private insurers be charged a fee commensurate with the risks that the government of Canada effectively reinsures. If priced correctly, this arrangement, which amounts to reinsurance, can limit and manage risks well.

So far so good, but what of the elephant in the insurance market?

The budget bill also amends the National Housing Act, which governs CMHC’s activities. On its face, again, the bill would codify existing arrangements governing the agency’s reporting requirements — but it also jumps one stepping stone toward a properly competitive market.

The Most Important Chart for Gold Investors | Robert Thorell

BIG GOLD editor Jeff Clark presents a brief but important look at gold's recent performance in an historical context. Also in today's issue: the Casey Research energy team examines the prospects for shale gas production worldwide, and finds reason for hope and concern; and Vedran Vuk identifies a real scandal in Congressman Weiner's behavior.

Dear Reader,

With the press going crazy about the Anthony Weiner scandal, I’m reminded of our confused moral compass when it comes to politics. In my opinion, Anthony Weiner should resign, but not because of his sex scandal. Yes, Weiner acted in a morally reprehensible way, and yes, he lied to the American public. But if we made a list of the morally questionable actions of any Congressman, where would one place a sex scandal?

Congressmen are bribed on a regular basis by special interests with promises of revolving-door jobs and campaign finances. Furthermore, they lie to the American public election after election. On a rank ordering of immoral decisions of the average Congressman, Anthony Weiner’s sex scandal is way down the list. While the American public is captivated by the details of racy sex scandals, Congressmen regularly race into the public’s pockets.

Let’s take a look at Weiner himself (pun intended). Over the last decade, Weiner has received $487,365 from the real-estate industry – his top industry supporter. Not surprisingly, Weiner has sponsored legislation such as H.R. 3527, the FHA Multifamily Loan Limit Adjustment Act of 2009 . Let’s have a look at the bill’s summary:

Amends the National Housing Act to revise the maximum mortgage loan principal amounts the Secretary of Housing and Urban Development (HUD) may insure for elevator-type multifamily structures for: (1) rental housing; (2) cooperative housing; (3) rehabilitation and neighborhood conservation housing; (4) housing for moderate income and displaced families; (5) housing for elderly persons; and (6) condominiums. Replaces the current specific dollar amount limitations per family unit by which the insurable mortgage principal obligation for elevator-type multifamily structures may be increased. Prescribes instead an increase limitation per family unit of up to 50% higher than the corresponding limitations for non-elevator-type multifamily structures.

Authorizes the Secretary to prescribe a higher maximum (up to 50%) for the principal obligation of mortgages insured for multifamily projects located in an extremely high-cost area (similar to that for mortgage insurance for property in Alaska, Guam, Hawaii, and the Virgin Islands).

National housing act, hearings before the Committee on Banking and Currency, United States Senate, Seventy-third Congress, second session, on S. 3603, a bill to improve nation-wide housing standards, provide employment and stimulate industry; to improve conditions with respect to home mortgage investment, and to eliminate the necessity for costly second-mortgage financing, by creating a system of mutual mortgage insurance and by making provision for the organization of additional institutions to handle home financing; to promote thrift and protect savings; to amend the Federal home loan bank act; to amend the Federal reserve act; and for other purposes. May 16-24, 1934

National Housing Act, Hearings before the Committee on Banking and Currency, House of Representatives, Seventy-third Congress, second session, H. R. 9620, a bill to improve nation-wide housing standards, provide employment, and stimulate industry; to improve conditions with respect to home-mortgage financing, to prevent speculative excesses in new-mortgage investment, and to eliminate the necessity for costly second-mortgage financing

National Housing Act

National Housing Act, explaining how you may profit by helping the Better Housing Program sponsored by the United States Government

National Housing Act, Memorandum specifications covering materials and construction...