CMHC CEO dismisses risk of mortgage fraud, but stresses housing troubles

For the past couple months, Home Capital Group has been making headlines–and last week was no different.

On June 1, Canadian Mortgage and Housing Corporation chief executive Evan Siddall spoke to reporters about the domestic mortgage industry in relation to what Financial Post calls “Home Capital’s current liquidity crisis.”

FP notes that CMHC has known about “potential documentation fraud at the alternative mortgage lender since at least 2015,” but that CMHC insists “mortgage fraud in Canada is rare.” Siddall said such fraud isn’t a “pervasive problem in Canada.” Read the full FP story.

Read: We’re confident in our mortgage book: bank CEOs

Canada’s housing strategy

Also on June 1, Siddall delivered a speech on the federal government’s national housing strategy, which was discussed in this year’s federal budget.

Read: Federal budget: what’s in and what’s out (See: Affordable housing, and Housing database)

In that speech, Siddall said the strategy is being created “to diminish the inequity that we see growing in our communities daily – to close the gap between the ‘haves’ and ‘have nots.'” He underlined this point several times, noting, “Research suggests that housing values exacerbate the gap between rich and poor.”

The objective of the overall strategy, he added, is not just to build more houses to help meet demand and deal with housing affordability challenges. On top of that, people must be shown “that affordable housing is essential to a growing economy and to a healthy society.”

For example, Siddall said, “When people have good housing, they tend to have better health. And healthy children and teens living in stable home environments have better educational outcomes.” (several research studies from around the globe are cited in the speech transcript).

This is why the bulk of the funding the government is dedicating to housing–$5 billion out of $11.2 billion over the next 11 years–“will be devoted” to the new National Housing Fund.

About the economy, Siddall said: “Economists looked at the experience of 54 economies from 1990 to 2015 and found that every 1% increase in the household debt-to-GDP ratio tended to lower growth in the long run by 0.1%.”

He added, “While household debt provides a temporary boost in consumption–mostly for less than a year–the negative long-run effects on consumption tend to intensify as household debt-to-GDP exceeds 60%. The overall drag on GDP growth tends to intensify when the ratio exceeds 80%,” and Canada sits above both thresholds.

Read his full speech.

Also read:

Is housing exposure a risk for portfolios?

Don’t introduce new housing measures: Canadian Bankers Association

For many Boomers, their wealth is in their home

Canada one of four advanced economies vulnerable to housing