From the Financial Post "Canada steps up housing market oversight"
Canadian authorities are stepping up oversight of the nation’s housing market even as lenders such as Bank of Nova Scotia warn that tougher rules could threaten the economic recovery.
The country’s banking regulator, the Office of the Superintendent of Financial Institutions, said Tuesdsay it will boost supervision of private mortgage insurers while examining “emerging” risks to the financial system in several areas, including residential mortgages.
Policy makers, including Finance Minister Jim Flaherty, have said that parts of Canada’s housing market have become overvalued as consumers add to record debt levels, encouraged by some of the lowest mortgage rates in decades. Flaherty said in his budget last week the government will enhance supervision of Canada Mortgage & Housing Corp., a federal agency that insures some mortgages.
The Ottawa-based Office of the Superintendent of Financial Institutions said Tuesday it will produce a report for Flaherty on government guarantees on mortgage insurance. An OSFI spokeswoman, Leonie Roux, said the report would apply to private insurance providers such as Genworth MI Canada Inc. and not CMHC.
“Elevated household debt levels not only make households vulnerable to adverse shocks but continued low interest rates could encourage even higher household indebtedness,” OSFI said in a planning document released on its website yesterday.
The government is considering whether OSFI can play a role in “strengthening the oversight of CMHC’s commercial operations,” Chisholm Pothier, Flaherty’s chief spokesman, said Tuesday in an e-mail. OSFI doesn’t currently regulate CMHC, instead, it reports to the country’s parliament through Human Resources and Skills Development Minister Diane Finley.
“Someone is going to have to safeguard CMHC, and I would assume that falls under OSFI,” said Ian Pollick, senior fixed- ncome strategist at RBC Capital Markets in Toronto. “There is no other real national regulator.”If OSFI takes over the oversight of CMHC, there could be some dracanion changes. Remember that the OSFI has poured over the chartered banks books in the last year and have found that "Canada's housing market beginning to resemble U.S.'s subprime mess. I think the reason why Flaherty did not touch the mortgage market in the budget is because he can allow OSFI to take over the reins and wash his hands clean of any fall out of a housing bubble bust. Things keep getting more interesting.