The Canada Mortgage and Housing Corp.’s decision to cut back its mortgage default insurance coverage was likely directed by the department of finance, reports the Financial Post.

“This is all coming from finance,” an industry source said, indicating that one of Ottawa’s goals is to offload a greater slice of mortgage insurance business on private insurers.

CMHC, which controls a majority of the market with just two other private players making up the rest, said a week ago it would get out of the business of insuring second homes and require self-employed Canadians to have third-party income validation.

Former federal finance minister Jim Flaherty, who died in April, had even suggested the possibility the Crown corporation could eventually be privatized.

“The aim is to shift the balance towards private investors taking on more of the housing finance risk and the federal government taking on less on behalf of federal taxpayers,” said Finn Poschmann, vice-president of research at the C.D. Howe Institute.

That could mean rising rates for consumers who require insurance for loans no longer covered by CMHC.
 

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