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5 Dec

GOVERNMENT TO CHARGE CMHC A “RISK FEE”

General

Posted by: Linda Colpitts

CMHC’s quarterly financials revealed last week that the government will start charging the nation’s largest default insurer a “risk fee.”

 

Effective January 1st, 2014, CMHC will pay the federal government an additional 3.25% of its insurance premiums, plus 10 basis points extra on the low-ratio bulk insurance (aka Portfolio insurance) that it sells.

 

“The fees compensate the Government for risks stemming from its guarantee of mortgage insurance,” says Department of Finance spokesperson Stéphanie Rubec. “This measure supports the Government’s continuous efforts to reinforce the housing finance framework.”

 

Private mortgage insurers (Genworth Canada and Canada Guaranty) have been required to pay a fee of 2.25% of premiums since January 1st, 2013. CMHC’s fee is higher, Rubec says, because it “takes into account the 100% Government backing of CMHC’s liabilities as compared to the 90% guarantee of the private mortgage insurers’ obligations to lenders.”

 

CMHC projects the fees will amount to $50 million in 2014. Where will that money go? “The receipt of all fees from mortgage insurers are treated as part of the Government of Canada’s general revenues,” Rubec says.

 

Click here to read the full article from CanadianMortgageTrends.com.