On June 29, 2017 CMHC announced that it would pay a $4 billion dollar special dividend to the federal government. This dividend will be paid out over period of time not longer than two years. A spokesperson for CMHC was quoted as saying that the special dividend returns excess capital to the Government of Canada.
The payment of the $4 billion dollar follows CMHC’s announcement in May of 2017 that it would pay to the federal government a dividend of $145 million as part of CMHC’s commitment to pay a regular quarterly dividend to the government.
I find these moves interesting as they come after CMHC increased the premiums they charge for homeowner mortgage loan insurance in March of 2017. At the time CMHC announced the increase to mortgage insurance premiums they said they were doing so as capital requirements were an important part of setting mortgage insurance premiums.
According to CMHC they raised mortgage insurance premiums in March of 2017 so that they would have enough money to meet their capital requirements and then two months later start sending money to the federal government because they have an excess of capital over and above what they need to operate their business.
So what is it? Did CMHC need to increase mortgage loan premiums to run their business or did they increase the mortgage loan premiums to be able to pay more money to their shareholder, the government of Canada. It appears it is the later.
And if the increase in mortgage insurance premiums was done to allow CMHC to pay money to the federal government is this not just another tax on the consumer.
We have seen this issue in BC for years as the government has used ICBC and BC Hydro as a source of income. When ICBC or BC Hydro increase rates there is a public outcry from consumers. So why did we not hear the outcry regarding the increase to the CMHC premium increase. Because the increase was sold to the public as being needed to run their business and because CMHC had never sent any money to the federal government before so the consumer could not make the connection.
You can debate if it is the role of a crown corporation to break even or operate at a profit business. In my opinion any profits generated by a crown corporation that are passed on to the government are a tax. My issue is not that with the government using the crown corporations to raise revenue. My issue is that the governments are not being upfront and acknowledging that they are using the crown corporations to generate revenues so that they do not have to increase taxes that the public can hold them accountable for. It is much easier to let the crown corporations take the heat.
So what can you do as a consumer? If you have paid the higher mortgage insurance premium or are looking to buy a home and have less than 20% available for your down payment you may want to ask your Member of Parliament to explain why CMHC raised the mortgage insurance premiums to be able to pay a dividend to the government.
If you have any other mortgage questions contact an MA broker today.