Among other benefits, this step will buttress the organization against the worst effects of mounting unemployment, elevated debt levels, and dipping home prices, CMHC CEO Evan Siddall said.
“If there is an insurance claim, CMHC will be called upon to cover these losses,” Siddall said earlier this week. “We are therefore evaluating whether we should change our underwriting policies in light of these market conditions.”
CMHC predicted that if the national economy does not recover soon, approximately 20% of all mortgages could fall into arrears.
The COVID-19 pandemic has already led to a 42% annual decline in the economy during the second quarter, along with 3 million jobs lost since March, Bloomberg reported.
Average home prices could drop by 9% to 18% over the next 12 months, which might lead to “amplified losses” for young homeowners, Siddall said.
Market weakness will be especially apparent in the coming months, with TD Economics forecasting that the number of new mortgages nationwide will decrease by 35% to 40% in Q2-Q3.
The Canadian mortgage sector will encounter significant difficulties “over the near-term as employment trends weaken, credit loss provisioning moves higher, and housing / mortgage activity pulls back materially,” TD said in a recent study. “Collapsing equity markets have eroded an important source of down-payments. This is particularly true for first-time homebuyers, who disproportionately rely on personal savings to fund their payments.”
MBN
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