CMHC Mortgage Loan Insurance Overview

Mortgage loan insurance is typically required when homebuyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protect lenders against mortgage default, and enables consumers to purchase homes with a minimum down payment of 5%. In Canada, mortgage loan insurance is available from CMHC (a Crown corporation) and from private mortgage loan insurers and is backed by the Government of Canada. The Minister of Finance sets the parameters related to the government guarantee of mortgage loan insurance. Since government-backing applies to all insurers, CMHC and private sector insurers must operate within these parameters.

Since 1954, CMHC’s role in providing mortgage loan insurance products and tools has helped shape Canada’s housing market and has contributed to its stability in both good and bad economic times. CMHC provides qualified Canadian buyers across the country with better access to loans to help them meet their housing needs.

CMHC’s mortgage loan insurance activity is comprised of transactional homeowner insurance (high ratio and low ratio homeowner mortgage loans), portfolio insurance and multi-unit residential insurance. Mandated to operate on a commercial basis, this activity is self-sustaining and does not receive funding, in whole or in part, from parliamentary appropriations. The premiums and fees it collects and interest it earns must cover related claims and other expenses and also provide a reasonable return to the Government. In fact, over the past decade, CMHC’s insurance business, alone, has contributed $15 billion of the total $18 billion of contributions made by CMHC towards improving the Government of Canada’s fiscal position.

Serving Gaps in the Marketplace

CMHC is the only insurer of loans for large multi-unit properties (greater than four units) including rental, multi-unit retirement and long-term care facilities. As well, CMHC insures high ratio homeowner loans for those in rural areas and smaller communities which are underserved by private sector insurers.

Managing Within the Total Outstanding Insured Loans Limit

CMHC’s insurance in-force has a legislated $600 billion limit. At the end of the third quarter of 2014, CMHC’s total insurance-in-force was $546 billion, $11 billion lower than the insurance-in-force at year-end 2013. CMHC expects mortgage repayments to continue in the range of approximately $60 to $65 billion per year. These repayments offset future increases to CMHC’s insurance-in-force resulting from new business being written.

More information on CMHC’s insurance-in-force is available in CMHC’s most recent Quarterly Financial Report (as at  September 30, 2014).

Ensuring Overall Portfolio Quality

CMHC is able to positively influence the functioning of the residential mortgage market by implementing stringent underwriting standards and promoting consistency, quality assurance, fairness and due diligence across the lending industry.

All applications for insurance are initially reviewed and assessed by lenders prior to submission to CMHC. Upon receipt of an application for mortgage loan insurance, CMHC assesses the risks presented by the borrower, property, market in which the property is located, and the application as a whole. Key borrower risk factors include the level and source of down payment and stringent credit requirements that demonstrate the borrower’s ability to manage financial obligations.

Arrears and Claims Paid

The profile of CMHC’s insurance-in-force demonstrates the nature and level of risk associated with the Corporation’s mortgage loan insurance business. As at 30 September 2014, the rate of arrears (loans that are more than 90 days past due over the number of outstanding insured loans) was 0.34%, consistent with year-end 2013. While the overall arrears rate was unchanged compared to year-end 2013, the arrears rate for both Transactional Homeowner and Multi-unit residential declined slightly.  

It is important to note that not all mortgages in arrears result in a claim to CMHC, as lenders are required to work with borrowers who are experiencing difficulty to help bring their mortgage back into good standing and resume regular payments.

Claims paid during the third quarter of 2014 were $31 million (33.7 %) higher than the prior quarter and $34 million (38.2. %) higher than the same quarter last year.

The increase over the quarterly periods was primarily a result of higher Multi-unit residential claims paid due to the timing of the payment processing of several large claims and higher Transactional Homeowner claims paid.

CMHC's Arrears Rates (%)

Distribution of CMHC’s Insurance-in-Force

Below, you will find information about various characteristics of CMHC’s mortgage loan insurance in force, as reported in CMHC’s most recent Mortgage Loan Insurance Business Supplement (as at 30 September 2014).

Distribution of Transactional Homeowner and Portfolio Insurance-in-Force by Loan-to-Value (LTV) Ratio Based on Updated Property Values¹ (%)

¹ LTV calculated on the basis of updated property values reflecting changes in local resale prices.

Distribution of Insurance-in-Force by Outstanding Loan Amount² (%)

² Distribution based on units.

Average Outstanding Loan Amount ($)

Distribution of Insurance-in-Force by Province/Territory³

³ Distribution based on dollars, not number of loans.

Distribution of Transactional Homeowner Insurance-in-Force by Credit Score at Origination

Distribution of Transactional Homeowner Insurance-in-Force by Gross Debt Service (GDS) Ratios⁴

⁴ Distribution based on loan amounts, not number of loans.

Date modified: November 28, 2014