Hostname: page-component-cd9895bd7-q99xh Total loading time: 0 Render date: 2024-12-22T18:48:38.609Z Has data issue: false hasContentIssue false
  • English
  • Français

Housing Finance in Canada: Looking Back to Move Forward

Published online by Cambridge University Press:  01 January 2020

Lawrence L. Schembri
Lawrence L. Schembri*
Affiliation:
Deputy Governor, Bank of Canada
*
E-mail: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

The Canadian system of housing finance proved to be resilient and efficient during the global financial crisis and its aftermath. The system's effectiveness is the result of a rigorous prudential regulatory and supervisory regime coupled with targeted government guarantees of mortgage insurance and securitisation products. In the post-crisis period, household debt levels and house prices have risen, owing, in part, to accommodative monetary conditions necessary to support the economic recovery. These vulnerabilities were mitigated by tightening macroprudential policy, specifically mortgage insurance rules, and strengthening mortgage-underwriting standards. Looking ahead, the housing finance framework needs to be adjusted and strengthened by rebalancing the risk exposures away from the government towards the private sector participants in the housing finance market. Although some measures have already been taken for this purpose, more adjustments may be needed to create the right incentives and achieve a sustainable rebalancing in risk exposures. Measures should also be considered to promote a liquid private-label mortgage securitisation market in Canada.

Keywords

housingmortgagesecuritisationCanadaR31R38G21
Type
Research Articles
Information
National Institute Economic Review , Volume 230 , November 2014 , pp. R45 - R57
Copyright
Copyright © 2014 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

Prepared for the NIESR/ESRC Conference on ‘The Future of Housing Finance’ held at the Bank of England in London, England on 12 September 2014. The author would like to thank Allan Crawford, Césaire Meh, Jie Zhou, Lorie Zorn and two anonymous referees for helpful advice, Derrick Schroeter for superb research assistance, and E. Philip Davis for his support and for organising the conference. All errors are the responsibility of the author and the views expressed in this paper are those of the author.

References

Bank of Canada (2014), Financial System Review, June.Google Scholar
Bank of England and European Central Bank (2014), ‘The case for a better functioning securitisation market in Europe’, Joint Discussion Paper, May.Google Scholar
Basel Committee on Banking Supervision (BCBS) (2011), Report on Asset Securitization Incentives, July.Google Scholar
Calabria, M. (2011), ‘Fannie, Freddie, and the subprime mortgage market’, Cato Institute Briefing Paper No. 120.Google Scholar
Canada Mortgage and Housing Corporation (CMHC) (2013), ‘Just the facts: comparing Canada and U.S. housing finance systems’, 29 August.Google Scholar
CIBC World Markets (2012), ‘Consumer Watch’, 30 October.Google Scholar
Crawford, A.Meh, C.Zhou, J. (2013), ‘The residential mortgage market in Canada: a primer’, Bank of Canada Financial System Review (December), pp. 53–63.Google Scholar
Financial Stability Board (2012), Principles for Sound Residential Mortgage Underwriting Practices.Google Scholar
Ghent, A.Kudlyak, M. (2011), ‘Recourse and residential mortgage default: evidence from U.S. states’, Federal Reserve Bank of Richmond Working Paper No. WP09-10R.CrossRefGoogle Scholar
Government of Canada (2014), Economic Action Plan 2014, February.Google Scholar
Kiff, J.Mennill, S.Paulin, G. (2010), ‘How the Canadian housing finance system performed through the credit crisis: lessons for other markets’, Journal of Structured Finance, 16 (3), pp. 44–64.CrossRefGoogle Scholar
Office of the Superintendent of Financial Institutions (OSFI) (2012), Guideline B-20: Residential Mortgage Underwriting Practices and Procedures, June.Google Scholar
Office of the Superintendent of Financial Institutions (OSFI) (2014), Guideline B-21: Residential Mortgage Insurance Underwriting Practices and Procedures, April.Google Scholar
Rajan, R.G. (2010), Fault Lines: How Hidden Fractures Still Threaten the World Economy, Princeton, N.J., Princeton University Press.Google Scholar