Insurance volumes at Canada Mortgage and Housing Corp. continued to decline during the second quarter, with portfolio insurance constituting the bulk of the drop, as a result of new federal mortgage rules that kicked in late last year.
CMHC said it provided mortgage loan insurance for 78,607 units during the second quarter – down 33 per cent from a year ago when it insured 117,463 units.
That includes both homeowner and portfolio insurance, which were both down from a year ago.
The decline is a continuation of a trend that the mortgage insurer experienced during the first quarter of the year, after the government introduced stricter "stress test" rules for borrowers and revamped the regulations surrounding portfolio insurance.
CMHC's volumes for homeowner insurance were down about 25 per cent from a year ago to 36,836 units after the federal government introduced new rules late last year, including stricter stress-testing rules for borrowers taking out fixed-rate loans of five years or more.
The new rules aim to stabilize the housing market by ensuring that borrowers could still afford their mortgages in the event that interest rates rise.
"Those volumes dropped off right away when those changes were implemented, which was at the very end of 2016, and we have seen our volumes remain relatively stable since that time," said Steven Mennill, CMHC's senior vice-president of insurance.
"I anticipate that that reduction in volume of about 25 per cent is relatively permanent, provided that the operating environment stays stable."
The Crown corporation said portfolio insurance for financial institutions plunged roughly 76 per cent from a year ago to just 8,691 units, compared with 36,553 units during the second quarter of last year.
Portfolio insurance is bulk insurance bought by financial institutions for their portfolios of uninsured mortgages.
The decline was caused by new regulations that restrict the types of mortgages eligible for insurance, CMHC said.
For example, lenders can no longer insure mortgages on homes worth more than $1-million or investment properties.
Another factor was new capital requirements which had prompted CMHC and its competitors on Jan. 1 to boost the premiums they charge on portfolio insurance.
"That has essentially lowered the demand for the product," Mr. Mennill said.
"Again, we think that change is permanent as long as the regulatory environment stays stable," he added.
CMHC's second-quarter profit was $397-million, up about 17 per cent from a year ago, while total revenue climbed 12 per cent to $1.24-billion.
CMHC says it will pay a $240-million dividend to the federal government.