In October 2008, the Harper government reduced the maximum mortgage amortization from 40 years to 35 years. In January 2011, Jim Flaherty reduced it to 30 years. Today, the Finance Minister reduced it to 25 years.
Just yesterday, Finance Minister Jim Flaherty repeated the mantra that the government acted early to get rid of risky mortgages. What he and Prime Minister Stephen Harper do not explain, however, is that the expansion of zero-down, 40-year mortgages began with measures contained in the first Conservative budget in May of 2006. At the time, Mr. Flaherty announced that the government was opening up the market to more private insurers. “These changes will result in greater choice and innovation in the market for mortgage insurance, benefiting consumers and promoting home ownership,” Mr. Flaherty said.
The new rules encouraged the entry of such U.S. players as American International Group – the world’s largest insurance company – and Triad Guarantee Inc. of Winston-Salem, N.C. Former Triad chief executive officer Mark Tonnesen, who spearheaded his company’s aborted push into Canada, said the proliferation of high-risk mortgages could have been mitigated if Ottawa had been more watchful. “There was a lack of regulation around the expansion of increased risk,” he said.