Canada Mortgage and Housing Corporation defended its methodology of evaluating properties on Thursday, after a newspaper report questioned whether the practice has led to artificially inflated home prices. “CMHC looks at the specific characteristics of the property in question,” the federal agency said in a statement Thursday. (via CMHC defends automated home price evaluation system - Business - CBC News)
- “CMHC has the most comprehensive database in Canada, including property information on approximately eight million properties.”
- On Thursday, the Globe and Mail newspaper published a report which quoted unnamed mortgage industry insiders warning regulators about the CMHC’s methodology for calculating how much a home is worth — and consequently how much debt someone wishing to buy it should be offered.
- At issue is a system known as Emili. Described by the CMHC as “a groundbreaking on-line mortgage loan insurance [decision-making] system,” Emili is essentially a database of properties that uses different factors as way of determining what a house is worth.
- Someone wanting to buy a $400,000 property might be approved because other units in the same postal code, with similar square footage, went for that much. But the property in question might not actually be worth that on the open market. So perhaps the borrower shouldn’t be approved to borrow that much to buy it.