• With competitors entering home insurance market, it is time to sell high
  
• Flaherty's philosophy: "If it's in the Yellow Pages, government shouldn't be doing it"

Ottawa: The Canadian Taxpayers Federation (CTF) today reacted to findings the Canada Mortgage & Housing Corporation (CMHC) launched more extravagant taxpayer-backed mortgage products under a veil of secrecy. CMHC will extend insurance to prospective home buyers without a down payment. The Crown corporation will insure 100% of a home's value. In addition, CMHC will offer insurance for a 40-year mortgage amortization. Unlike previous product changes, these new deals were not announced via a press release. Information on these two products is available at:

• 100% Insurance
  
• 40 year mortgage

"To avoid another tongue lashing from the Bank of Canada, CMHC neglected to make this announcement public. Instead, it opted to quietly post it on its webpage," said CTF federal director John Williamson. "Since CMHC is so keen to operate like a private company, Ottawa should sell it."

On June 28, 2006, CMHC announced a product for extended amortization periods of up to 35-years. David Dodge, governor of the Bank of Canada, rebuked the Crown in a harshly worded letter. "I read with interest and dismay-that CMHC would offer mortgage insurance for interest-only loans and for amortization of up to 35-years," he wrote. This letter was released via freedom of information.

Mr. Williamson noted that while CMHC once served an important role in facilitating home mortgages in Canada, those days are long past. Even though it still retains a dominant role in the Canadian mortgage insurance market, the market is now rapidly filling up with eager and well-capitalized competitors. Currently there are two private sector mortgage insurers operating in Canada: Genworth and AIG. Two more are expected to begin operations next year. "There is no longer a compelling reason for the federal government to be involved in mortgage insurance," Williamson argued.

Australia sold its version of CMHC in 1997. Canada should follow this example. "Federal Human Resources Minister Diane Finley blundered when she said CMHC will not be privatized," noted Mr. Williamson, who also recalled that when (current Finance Minister) Jim Flaherty was seeking the leadership of the Ontario Progressive Conservative Party he said, "If it's in the Yellow Pages, government shouldn't be doing it and my government won't."

"On setting economic policy Finance Minister Flaherty is second only to the Prime Minister. He should apply his laissez-faire philosophy to Ottawa's numerous Crown corporations," stated Williamson. "With CMHC's current profit greater than $1-billion, today is the best time to sell CMHC. More and more competitors are entering the housing insurance market, meaning CMHC market share will only decline. There is no reason for the federal government to own this type of business."