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What Governments Should Do in Mortgage Markets

Author

Listed:
  • Finn Poschmann

    (C.D. Howe Institute)

Abstract

The federal government’s role in mortgage markets is pervasive and should be scaled back, while encouraging more competition in the mortgage insurance business, according to this study. The author notes that the mortgage insurance book of Canada Mortgage and Housing Corporation, CMHC, which is a Crown agency, now backstops mortgage lending equivalent to more than 30 percent of gross domestic product. While the net exposure is less than this, the arrangement subjects Canadian taxpayers to large, ill-defined risks. The author suggests several steps to manage these risks better.

Suggested Citation

  • Finn Poschmann, 2011. "What Governments Should Do in Mortgage Markets," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 318, January.
    • Handle: RePEc:cdh:commen:318
    as

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    File URL: https://www.cdhowe.org/what-governments-should-do-in-mortgage-markets-4/4389
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    References listed on IDEAS

    as
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    17. Jotham Peters & Chris Bataille & Nic Rivers & Mark Jaccard, 2010. "Taxing Emissions, Not Income: How to Moderate the Regional Impact of Federal Environment Policy," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 314, November.
    18. Michael Hart, 2010. "A Matter of Trust: Expanding the Preclearance of Commerce between Canada and the United States," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 309, September.
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    20. James R. Thompson, 2007. "Credit Risk Transfer: To Sell Or To Insure," Working Paper 1131, Economics Department, Queen's University.
    21. David C. Allan & Philippe Bergevin, 2010. "The Canadian ABS Market: Where Do We Go From Here?," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 315, November.
    22. Diego Aragon & Andrew Caplin & Sumit Chopra & John V. Leahy & Yann LeCun & Marco Scoffier & Joseph Tracy, 2010. "Reassessing FHA Risk," NBER Working Papers 15802, National Bureau of Economic Research, Inc.
    23. Bob Baldwin & Brian FitzGerald, 2010. "Seeking Certainty in Uncertain Times: A Review of Recent Government-Sponsored Studies on the Regulation of Canadian Pension Plans," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 310, September.
    24. John Richards, 2011. "School Dropouts: Who Are They and What Can Be Done?," e-briefs 109, C.D. Howe Institute.
    25. Andrew Green & Michael Trebilcock, 2010. "The Eco-Fee Imbroglio: Lessons from Ontario’s Troubled Experiment in Charging for Waste Management," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 316, December.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Steve E. Hrudey, 2011. "Safe Drinking Water Policy for Canada - Turning Hindsight into Foresight," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 323, February.
    2. Alan Walks, 2014. "Canada's Housing Bubble Story: Mortgage Securitization, the State, and the Global Financial Crisis," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 38(1), pages 256-284, January.
    3. Philippe Bergevin & William B.P. Robson, 2011. "The Costs of Inflexible Indexing: Avoiding the Adverse Fiscal Impacts of Lower Inflation," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 322, February.
    4. Colin Busby & William B.P. Robson, 2011. "A Social Insurance Model for Pharmacare: Ontario's Options for a More Sustainable, Cost-Effective Drug Program," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 326, April.
    5. Angelo Melino, 2011. "Moving Monetary Policy Forward: Why Small Steps - and a Lower Inflation Target - Make Sense for the Bank of Canada," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 319, January.
    6. Bev Dahlby & Ergete Ferede, 2011. "What Does it Cost Society to Raise a Dollar of Tax Revenue? The Marginal Cost of Public Funds," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 324, March.
    7. Paul R. Masson, 2013. "The Dangers of an Extended Period of Low Interest Rates: Why the Bank of Canada Should Start Raising Them Now," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 381, May.
    8. David A. Dodge & Richard Dion, 2011. "Chronic Healthcare Spending Disease: A Macro Diagnosis and Prognosis," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 327, April.
    9. Pierre Fortin, 2011. "Staying the Course: Quebec's Fiscal Balance Challenge," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 325, March.
    10. Christopher Ragan, 2011. "Precision Targeting: The Economics – and Politics – of Improving Canada’s Inflation-Targeting Framework," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 321, February.
    11. James P. Bruce, 2011. "Protecting Groundwater: The Invisible and Vital Resource," C.D. Howe Institute Backgrounder, C.D. Howe Institute, issue 136, February.
    12. Finn Poschmann & Philippe Bergevin, 2013. "Reining in the Risks: Rethinking the Role of Crown Financial Corporations in Canada," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 372, February.
    13. John Richards, 2011. "Aboriginal Education in Quebec: A Benchmarking Exercise," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 328, April.
    14. Thorsten V. Koeppl & James C. MacGee, 2017. "Mortgage Insurance Deductibles: An Idea Whose Time Hasn’t Come," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 485, July.
    15. Alexandre Laurin & William B.P. Robson, 2011. "A Faster Track to Fiscal Balance: The 2011 Shadow Budget," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 320, February.

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    More about this item

    Keywords

    Financial Services; Canada; Canada Mortgage and Housing Corporation (CMHC); mortgage insurance;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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