Canada to unveil housing oversight law on Thursday

Thu Apr 26, 2012 8:56am EDT
 
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OTTAWA (Reuters) - The Canadian government will introduce legislation on Thursday to enhance supervision of the federal housing agency and lay out rules for covered bonds, changes designed to minimize risk in a heated domestic housing market.

Finance Minister Jim Flaherty will speak about the proposed changes at 11 a.m. (1500 GMT), the Department of Finance said.

The regulatory changes are expected to be included in draft legislation that follows up on measures contained in the Conservative government's March 29 budget and that need parliamentary approval.

The legislation may also contain proposed amendments to the Telecommunications Act to lift foreign investment restrictions on telecom companies that hold less than a 10-percent market share.

In his budget, Flaherty proposed strengthened supervision of the Canada Mortgage and Housing Corporation (CMHC), the federal housing agency that issues mortgage insurance and guarantees mortgage-backed securities issued by banks.

He also promised a legislative framework for covered bonds, mortgage-backed securities that are sold by banks and guaranteed by CMHC. The budget said the changes would make the covered bond market more robust and would support financial stability by helping lenders find new sources of funding.

The minister said this month that his department and the banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), were studying additional reporting requirements for CMHC, particularly on securitization.

Currently CMHC reports to Parliament through the minister of human resources and skills development.

Flaherty has tightened rules three times since 2008 and OSFI is now tightening the mortgage underwriting criteria for banks.

(Reporting By Louise Egan)