CMHC says impact of pandemic is starting to emerge

Robb NelsonMortgage Talk Canada

But the crown corporation says it is well-placed to deal with the increase in insurance claims

By Steve Randall

The Canadian housing market has shown incredible resilience despite the challenges of the pandemic but the impact on homeowners will only become clear in the months ahead.

As government support programs come to an end, there are concerns that mortgage defaults may increase as household finances are pressured by months of reduced income along with incoming redundancies.

In its latest financial report, the Canada Mortgage and Housing Corporation (CMHC) says that it has already started to see increases in claims for insured mortgage loans; but confirms that it has the financial stability required.

“While it will take several months for the economic impacts of COVID-19 to fully materialize, some factors are starting to work their way into in our financial results – for example, we are starting to see the impacts in our provisions for insurance claims,” said Lisa Williams, CMHC’s Chief Financial Officer. “We remain in a strong financial position to bear the full impacts of COVID-19, and to take further steps to support Canadians and the economic recovery if necessary.”

CMHC tightened its lending criteria in July including a higher minimum credit score and an end to non-traditional sources of down payment for insurance purposes.

The Government of Canada launched the Insured Mortgage Purchase Program (IMPP) in response to the pandemic to provide banks and mortgage lenders access to reliable funding to ensure continued lending to Canadians. To date, it has purchased $5.8 billion of insured mortgage pools.

“Flawed” commercial rent relief program
The crown corporation also administers the Canada Emergency Commercial Rent Assistance (CECRA) for small businesses, announced in April. The program lowers rent by at least 75% for small businesses experiencing financial hardship due to the pandemic.

This program is flawed according to a statement from the Canadian Federation of Independent Business (CFIB).

The program is due to end today (Aug.31) and even if an extension were to be announced, it would still leave too many unsupported, the CFIB says, with landlord participation required along with a high bar for revenue losses to qualify.

“The unfairness of this program is off the charts, with established businesses from coast-to-coast being shut out of accessing help they need in order to keep their businesses going,” said Laura Jones, Executive Vice-President at CFIB. “Does it make sense for a drycleaner on one side of the street to survive while the one on the other side shuts down simply because one landlord was able to apply for the program and the other one wasn’t?”

CFIB says a better solution would include:

  • Allowing tenants to access CECRA funds directly, regardless of their landlord’s participation
  • Expanding the forgivable portion of the Canada Emergency Business Account loan (currently 25 per cent of the $40,000 loan is forgivable—CFIB is advocating for a 50 per cent forgivable portion of a $60,000 loan).
  • Extending commercial eviction protection to cover hard-hit businesses through more months until rent relief can be fixed

“The big question now, is whether the new Finance Minister will give business owners some hope that she will fix the crazy-making unfairness built into rent relief. For many, the survival of their businesses depends on it,” added Jones.


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