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Canada’s housing agency said its mortgage insurance business may never return to normal levels after it made the costly decision to temporarily toughen qualification requirements during the early months of the pandemic.

Canada Mortgage and Housing Corp. reverted back to easier standards in July of last year after it lost substantial market share to private-sector competitors, which never followed the federal insurer’s lead when it introduced new rules in July, 2020.

Now, CMHC is not sure whether it will make up the lost ground.

“We have been making a concerted effort to do what we can to win back some of our business,” CMHC chief executive officer Romy Bowers said at the agency’s annual meeting on Wednesday. “It is really hard to know if we will attain prepandemic levels of market share.”

Prior to the pandemic, CMHC had a market share of 47 per cent. After the agency implemented its tougher rules – which required a higher credit score and more income to qualify – CMHC lost business to two private mortgage insurers, Canada Guaranty Mortgage Insurance Co. and Sagen MI Canada Inc.

CMHC had thought the stricter rules would reduce taxpayer risk and curb the frenetic demand that was pushing up home prices. But they continued to soar, and lenders and their borrowers instead relied on the private-sector insurers.

Major lenders require mortgage insurance if a borrower makes a down payment of less than 20 per cent on the purchase of a home priced below $1-million. There is no insurance for homes priced above that level.

CMHC’s market share fell to the mid-20s percentage range after the 2020 rule change and is now around 35 per cent, according to Ms. Bowers, who assumed the CEO role a year ago and reversed the policy a few months into her tenure. In announcing the reversal, the agency called the decision costly and not as effective as anticipated.

The agency’s figures for the past two years show a steady decline in the number of homeowners insured. In the first quarter of 2020, CMHC provided insurance to 1.12 million homeowners with $224-billion worth of mortgages. In the fourth quarter of last year, the agency provided insurance to 951,651 homeowners with $193-billion worth of mortgages.

At the same time, insurance for apartment building owners rose. In the first three months of 2020, CMHC provided insurance to 24,703 apartment buildings with $88-billion worth of mortgages. In the fourth quarter of last year, it was 26,427 multiresidential buildings with $114-billion worth of mortgages.

“It’s certainly cost them, and their taxpayer owners, millions in profit,” mortgage strategist Robert McLister said.

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