When the former Chairman of CMHC, Dino Chiesa, said in an interview last week that government officials were ready to exit the mortgage business, a bit of a stir was raised. While Chiesa didn’t say that CMHC had actually been for sale, he did hint at the fact that it was an option, and that it prompted the government to compare the closest example they have of a country that’s been successful in doing so – Australia. It’s not the first time our government agency has been compared to that of Australia’s, which was sold and successfully privatized, and it probably won’t be the last either.
Jim Flaherty made a statement when he submitted his budget in March that he was concerned about the role of CMHC and mortgages in Ottawa; and he later announced that CMHC would now be placed under the governance of the Office of the Superintendent of Financial Institutions.
Chiesa agrees that the role needs to be looked at saying, “We didn’t go and price what we could sell CMHC for, but we certainly looked at the role of a national housing agency.” Chiesa too, pointed to the Australian example, and how the CMHC board reviewed the effectiveness of CMHC “at least six times,” during the seven years that Chiesa served on the Board.
Chiesa also said that while it was something that was seriously considered, especially as concerns continued to mount about Oakville mortgages and Canadian mortgages. However Chiesa says, the ultimate decision was that they would “stay the course for the next few years,” and that it’s best of the agency was kept “in one form or another, because of what it’s contributed.”
But it’s not a simple matter of finding a buyer and getting some paperwork together. In order to sell CMHC, the government would have to determine whether or not they’re going to increase the legal limit on private mortgage insurance, which is currently $250 billion. It could also be disastrous to Canadian banks, as any insured mortgages on their books are considered to be “riskless assets,” meaning that they only improve a bank’s business.
Having the final word on the subject back in late April when speaking with the National Post, Flaherty said, “In the longer term, there are a number of government enterprises we review to see whether or not they need to remain within the public sector.”
