{
  "title": "Canada: Financial Sector Assessment Program-Technical Note-Housing Finance",
  "publication": "IMF Staff Country Reports, January 24, 2020",
  "sourceUrl": "https://www.imf.org/en/publications/cr/issues/2020/01/23/canada-financial-sector-assessment-program-technical-note-housing-finance-48971",
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  "summary": "This Technical Note on Financial Safety Net and Crisis Management for the Canada focuses on housing finance. Housing finance is broadly resilient, but pockets of vulnerabilities exist.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- This Technical Note on Financial Safety Net and Crisis Management for the Canada focuses on housing finance.\n- Housing finance is broadly resilient, but pockets of vulnerabilities exist.\n- Mortgage finance is dominated by domestic systemically important financial institutions (D-SIFIs) and supported by the government via mortgage insurance, securitization guarantees, and other policies."
    },
    {
      "heading": "Market structure and lending patterns",
      "content": "- D-SIFIs have a market share of about 70 percent and focus on prime borrowers.\n- Lending by D-SIFIs is backed by their strong balance sheets.\n- The cost of prime mortgage financing is low and little differentiated.\n- Credit risk is under‑priced in some segments."
    },
    {
      "heading": "Potential amplification mechanisms and vulnerabilities",
      "content": "- Aspects of Canada’s mortgage finance may amplify procyclical effects of falling house prices during severe downturns.\n- Core lenders focus on low‑risk mortgage lending; in response to deteriorating household debt‑servicing capacity they may:\n  - constrain new lending, or\n  - constrain renewals of maturing uninsured mortgages,\n  - potentially adding pressures on the housing market.\n- Alternatively, a sudden adoption of risk‑based pricing to accommodate financially weak borrowers might amplify household debt servicing fragility."
    },
    {
      "heading": "Key statements and implications",
      "content": "- Mortgage finance concentration in D‑SIFIs combined with government support (mortgage insurance, securitization guarantees, and other policies) shapes risk distribution in the housing finance system.\n- Low and undifferentiated cost of prime mortgage financing implies some credit risk is under‑priced, particularly in specific segments.\n- Two adverse-developments scenarios described:\n  - Constraining credit supply (new lending or renewals) by core lenders as households’ debt‑servicing capacity deteriorates, which could increase housing market stress.\n  - Sudden shift to risk‑based pricing for weaker borrowers, which could increase household debt servicing fragility.\n\nInternational Monetary Fund. Canada: Financial Sector Assessment Program-Technical Note-Housing Finance, January 24, 2020.\n\n---\n\n Content in this bundle\n\n- 1canea2020002\n  - 1canea2020002 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 1canea2020002 (PDF){rel=\"external\" type=\"application/pdf\"}"
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    "Published: January 24, 2020",
    "Series: IMF Staff Country Reports",
    "DOI: https://doi.org/10.5089/9781513527147.002",
    "This Technical Note on Financial Safety Net and Crisis Management for the Canada focuses on housing finance.",
    "Housing finance is broadly resilient, but pockets of vulnerabilities exist.",
    "Mortgage finance is dominated by domestic systemically important financial institutions (D-SIFIs) and supported by the government via mortgage insurance, securitization guarantees, and other policies.",
    "D-SIFIs have a market share of about 70 percent and focus on prime borrowers.",
    "Lending by D-SIFIs is backed by their strong balance sheets.",
    "The cost of prime mortgage financing is low and little differentiated.",
    "Credit risk is under‑priced in some segments.",
    "Aspects of Canada’s mortgage finance may amplify procyclical effects of falling house prices during severe downturns.",
    "Core lenders focus on low‑risk mortgage lending; in response to deteriorating household debt‑servicing capacity they may:",
    "Alternatively, a sudden adoption of risk‑based pricing to accommodate financially weak borrowers might amplify household debt servicing fragility.",
    "Mortgage finance concentration in D‑SIFIs combined with government support (mortgage insurance, securitization guarantees, and other policies) shapes risk distribution in the housing finance system.",
    "Low and undifferentiated cost of prime mortgage financing implies some credit risk is under‑priced, particularly in specific segments.",
    "Two adverse-developments scenarios described:",
    "**1canea2020002**"
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