Canada Mortgage & Housing Corp. said it is rationing mortgage insurance for lenders as the country’s housing agency approaches the legal limit of its ability to backstop the loans.
“CMHC has recently received an unexpected level of requests for large amounts of CMHC portfolio insurance,” Charles Sauriol, a spokesman for the Ottawa-based agency, said in an e-mailed statement. “To ensure equitable access to portfolio insurance within CMHC’s annual limits, an allocation process is being established which has caused some delays.”
The agency said that lenders have increased their demand for insurance of their mortgages amid “liquidity needs” since the 2007 financial crisis.
“This does not affect the availability of CMHC’s mortgage loan insurance for qualified home buyers and will not impact the cost of buying a house,” Sauriol said in the statement.
Portfolio insurance allows lenders to insure mortgages that aren’t already backstopped by the housing agency. Under Canadian law, homebuyers who put down less than 20 percent of the cost must insure the mortgage. Banks also buy insurance for other home loans before securitizing them.
CMHC said it had C$541 billion ($539 billion) of insurance in force as of Sept. 30. The organization’s legislated limit is C$600 billion, it said.