Canadian banks shouldn’t bear mortgage losses - Do you agree

Homebuyers with less than a 20% down payment are required to get mortgage default insurance, either from CMHC or one of the private mortgage insurers, when borrowing from a bank. That insurance covers the banks in cases where borrowers default on their loans.

Although both CMHC and private mortgage insurers are self-sustainable—claims are covered by the premiums paid by policy holders—all mortgage default insurance is backed by Ottawa. That means that in a dire crisis, such as a major housing market collapse, taxpayers could be left footing part of the bill.

As a result, the Conservative government had been looking at ways to reduce taxpayer exposure to the housing market, and the idea of forcing banks to pay a deductible on mortgage insurance claims was one of the ideas that it had floated.

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