In July 2020, with CEO Evan Siddall at the helm, the CMHC decided to tighten the rules for insured mortgages. With revisions like a much higher minimum credit score, and much lower maximums for gross and total debt service ratios, it instantly became much more difficult for Canadians to qualify for an insured mortgage. Unsurprisingly, this proved to be an unpopular move. So why did Siddall do it?
Fear, for one. Siddall predicted that the pandemic would cause an economic downturn, and that home prices would plummet by as much as 18%. He also assumed that by introducing these restrictions, the CMHC’s two main competitors (Canada Guaranty and Sagen) would follow suit.
As we now know, the economy didn’t crash. Home prices certainly did not plummet, nevermind by 18%. And Canada’s two other prominent insurers didn’t impose more restrictive criteria as he predicted (and hoped) they would. The result was a decision driven by fear and ego that cost the government billions of dollars in lost revenue, and made it harder for Canadians to secure a mortgage.
A year later, we have a lot more clarity on the state of Canada’s economy and housing market. Evan Siddall has stepped down, and newly appointed CEO of the CMHC Romy Bowers has reversed every one of the misguided decisions made last July. The best part? In her statement announcing the reversal, she admitted that those tighter rules were a mistake – which in my mind is a generous understatement.
The new leadership could prove to be a turning point for the CMHC. Bowers has already proven that she is a thoughtful decision-maker that isn’t too proud to admit the mistakes of her organization. The CMHC needs to be governed by the interests of Canadian homeowners rather than the subjective opinion of it’s leaders.
The Bottom Line
The CMHC has historically made it their mission to promote home ownership. But somewhere along the way, that changed. Now it seems as though their priority has shifted towards affordable housing.
Doesn’t this sound like the bar has been lowered? Has the CMHC given up on making homeownership achievable and attractive? In my opinion, with the right decisions and financial planning, anyone can own a home if they put their mind to it. Tightening the rules and allowing less people to access funds to purchase a home isn’t the answer. Homeownership CAN be a realistic goal for every Canadian.
The world has changed a lot, but one thing that hasn’t changed is the way owning a home makes you feel. It brings about stability. Promotes a stronger sense of community. Instills a sense of accomplishment that you just can’t get when you rent your home.
It’s time to bring back a sense of pride in owning a home. Hopefully Romy Bowers can usher the CMHC into a new era that returns us to those values. As someone who takes pride in helping Canadians achieve their home ownership dreams, I’ll continue to do my part on that front as well.
Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.
Steve Garganis: 416-224-0114; email@example.com