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Copying Canada

19 June 2012

When we’re comparing our country with other nations, it’s typically the States that we all look at. This is true for fashion trends, music, even many of our commercials. But when it comes to their mortgage and housing industry, we don’t want to touch it. In fact, we’ll do just about anything to differentiate ourselves. But there is one country we’ll often compare ourselves with when it comes to how mortgages are handled. And that’s Australia.

When Jim Flaherty started taking a very serious look at mortgages in Ottawa and wondering what could be changed, CMHC was one of the first names that came up. Many suggested privatizing the organization, just like Australia had done with all of their mortgage insurance. CMHC didn’t become privatized but there were some major changes, including changing the oversight of the company. Now though, Australia is looking at us and thinking that what we have just might be working. And maybe it will work for them, too.

When speaking about adopting certain aspects of CMHC’c system, Phil Naylor, chief executive of The Mortgage and Finance Association of Australia said, “The Canadian Mortgage and Housing Corporation has three roles: a mortgage insurer, a securitiser and the third being a general advice body. We weren’t suggesting that it function as either the first or third, but we’re suggesting our government take a look at what they do in the second part of their role.”

Naylor’s argument was that should Australia adopt the same sort of structure as CMHC for securization purposes, smaller Australian lenders would be the ones to benefit. In Canada with the same type of model, larger lenders typically borrow about 80 per cent of the funds available through securization and this would be no different in Australia.

But even the 20 per cent of small lenders that Canada sees is “a heck of a lot more than we’ve got in Australia,” says Naylor. “At the moment our securitised lenders in Australia have been reduced to 1 to 2 per cent of the market, and anything is better than that.”

Jim Flaherty has already stopped mortgage insurance on HELOCs, and he’s spoken about the Canadian federal government backing out of mortgage insurance altogether. But, Naylor says, he doesn’t believe that will happen.

“According to my contact with our sister organization in Canada, that has never been raised,” he said. “It’s the insurance part of the operations they’re looking at.”

It’s heartening to know that when other countries are looking at fixing their own mortgage problems, they look to Canada to see how we do things over here.

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