I disagree totally with this perspective.
The problem with using 2008 is that most people's 5 year mortgages that were taken out with 40 years, zero down or 35 years and 5% down were done in 2006 onwards. So they did not come under pressure in 2008. If there was the same slide as in 2008-2009 from which everything ultimately recovered but a significant drop of about 15% occured, this would be a very different set of circumstances and one in which CMHC I am quite sure would have lost money.
What Flaherty belatedly figured out is that come 2011 onwards, those who have to refinance in a higher interest rate environment are going to have problems, especially if they put 5% or less down, prolonged mortgage period of 35 to 40 years, and happen to have bought nearer the peak and hence do not qualify unless they have amassed more down payment or had job promotions or significant pay increases.
Now I do agree that perhaps he has made it more difficult for someone who was marginal to get a mortgage. In fact, and I am talking about
Toronto now, if the person was marginal and renting is cheaper than ownership at these prices, he is in fact saving those individuals from possibly making one of the biggest mistakes of their life.
Now, will it be shown to be wrong. Yes if prices just keep going up indefinately, but when you are a marginal borrower with the biggest asset purchase you are making in your life, that is an awfully big assumption to be making.
I personally have very little respect for Mr. Flaherty's stewardship of the economy but here I think he is on the right track.
As well, the suggestion that the tax payer is not on the line I think is just naive and misleading. If CMHC were to experience a serious increase in inability to pay mortgages, they would be very quickly under water. I would hazard that if those mortgages that were CMHC insured were to have come due even over the 6-8 months of the downturn of 2008-2009, my suspicion is that CMHC would have been underwater and of course it is the taxpayer who would end up making that money. So to suggest otherwise I believe is ill advised at best or misleading at worst.