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No Big Changes Coming for Canada's Mortgage-Financing System

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Article from the Wall Street Journal  By Paul Vieira

Focus Is on Risk to Taxpayers

OTTAWA—Major changes to the rules governing Canada's mortgage-financing regime aren't in the offing, Canadian Finance Minister Joe Oliver said Sunday, as he played down suggestions Ottawa is looking to force the country's banks to bear more housing risk.

Mr. Oliver said Ottawa's goal over the longer term is to gradually reduce the risk taxpayers are exposed to through mortgage insurance as issued by government-owned Canada Mortgage and Housing Corp. and fully backed by the government.

"We do not have in mind any major moves in this regard," said Mr. Oliver, who spoke to Canadian reporters from Australia, where he attended the Group of 20 summit of finance and central-bank chiefs.

While Mr. Oliver was in Australia, the head of CMHC, the country's dominant mortgage insurer, said in a speech in Montreal on Friday that Canadian policy makers were considering changes to the country's housing-finance system, and among them is getting the country's banks to share in the risk as a way to eliminate so-called moral hazard.

Mr. Oliver said such a policy change, as described by CMHC CEO Evan Siddall, is "not something we are contemplating at this time." Any revamp under consideration would be more modest in nature, he added.

Under Canada's mortgage-insurance rules, mortgage insurance is required on loans to home buyers who make a down payment of less than 20% of the total price. The coverage, backed by the treasury in Ottawa, protects the lender in the event of a default by the homeowner. CMHC has roughly 550 billion Canada dollars (US$502.4 billion) of insurance in force on its books, the company's records indicate.


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