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Canada’s Housing Agency Says Stress Test Shows Only Remote Risk

Residential condo buildings and single family houses are seen above Burrard Inlet in North Vancouver, British Columbia, Canada. 

Canada Mortgage & Housing Corp., the nation’s housing agency and main provider of mortgage insurance, forecasts that it would remain solvent in all but the most extreme economic scenario envisioned in its annual stress test.

Residential condo buildings and single family houses are seen above Burrard Inlet in North Vancouver, British Columbia, Canada. 

Canada Mortgage & Housing Corp., the nation’s housing agency and main provider of mortgage insurance, forecasts that it would remain solvent in all but the most extreme economic scenario envisioned in its annual stress test.

Photographer: Darryl Dyck/Bloomberg

Canada Mortgage & Housing Corp., the nation’s housing agency and main provider of mortgage insurance, forecasts that it would remain solvent in all but the most extreme economic scenario envisioned in its annual stress test.

The CMHC said Thursday that it would be forced to recapitalize itself only if the economy underwent a second sharp downturn and the government failed to provide support for Canadians in need. That scenario, which it considers the least plausible outcome in its stress test, would entail a peak unemployment rate of 25%, a 48% drop in housing prices with 12 quarters of declining prices and as much as C$15.3 billion ($12.1 billion) in cumulative claim losses.