OTTAWA - The federal government is formally launching consultations to explore potential changes that would shift some of the financial risk tied to insured mortgages from the shoulders of taxpayers to lenders, such as the banks.
Under Canada's current system, the government says lenders are able to transfer virtually all of the risk from insured mortgages to insurers which are indirectly backstopped by taxpayers.
The Finance Department has been examining the possibility of making such a change for a couple of years and it's now seeking more input.
The consultations were announced by Finance Minister Bill Morneau earlier this month and are designed to help Ottawa determine whether having lenders absorb a modest chunk of loan losses on insured-mortgage defaults would help shore up stability in the system.
The trade-off from such a shift in risk away from taxpayers would likely raise costs for lenders, and therefore, homebuyers -- but the government expects any impact to be limited.
For several years, the International Monetary Fund has fired off warnings that Ottawa should consider scaling back its role in insuring home mortgages through Canada Mortgage and Housing Corp.
