Canada has entered a new era in housing.

Bill C-66, a bill to amendment the National Housing Act (NHA) and the Canada Mortgage and Housing Corporation (CMHC) Act was passed by Parliament and received Royal Assent on June 17.

These legislative changes will allow CMHC, our federal housing agency, to respond more quickly, and with more variety, to the changing housing needs of 30 million Canadians. Refining CMHC and its roles will allow it to participate more aggressively in the mortgage insurance industry and other areas of the housing and finance industries.

CMHC is now authorized to introduce new products and services and adopt new approaches to housing finance. The mortgage insurance that CMHC currently provides to lenders will be delivered without the restrictions that were CMHC's legacy from the days when government did not have to pay its own way. Mortgage insurance, paid for by the borrower, reduces the risks of lending for financial institutions, especially when the mortgage is more than 75 percent of the appraised value of the property. In 1998, CMHC insured approximately 477,000 housing units.

A key element of the NHA amendments gives CMHC the flexibility to consider a mortgage insurance program to cover reverse mortgages. This home equity conversion mortgage allows older homeowners to age in place, or stay in their homes as long as they like, by accessing their home equity. This type of mortgage does not have to be repaid until some preset time in the future: when the term ends, when the homeowner sells or when the homeowner dies. Using a reverse mortgage, homeowners can liberate their home equity in a lump sum, stream of payments or a combination of these payment plans while retaining ownership of their home.

A few pioneering lenders have offered reverse mortgages over the years but mainly in the major urban areas of Ontario, British Columbia and Alberta where real estate values are most stable. Without mortgage insurance, lenders are faced with the risk of losing money if the home did not appreciate in value as quickly as they estimated and/or the homeowner outlived their projections. Most lenders do not want to take these risks with reverse mortgages when the traditional mortgage market offers good returns at very low risk.

CMHC sources say a self-financing reverse mortgage insurance program will be developed by the end of 1999, probably using consultations and a pilot program.

The Canadian reverse mortgage marketplace will now expand to make this "have your home and money too" alternative available to all Canadian homeowners. Since retirement housing options are more limited in rural areas, reverse mortgage insurance may be a significant force in allowing those in rural areas to age in place.

This is the first involvement the government has had in the Canadian reverse mortgage marketplace.

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Published: June 22, 1999

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Futurist and Strategist PJ Wade is "The Catalyst" -- intent on "Challenging The Best Become Even Better." PJ earned this title by translating the dynamic impact of Boomers and their multi-generation families into relevant insights that start people thinking and taking action—in business and in life. Author of 7 books and more than 1600 published articles, PJ encourages individuals to become their own futurist. PJ writes and speaks about the insight, knowledge and solid decision-making skills that professionals and their clients need to live and work in this vortex of change. For instance, since PJ knows that home is headquarters for the new decades-long "unretirement," she wrote the popular book "Reverse Mortgages: Best Friend, Worst Enemy... Your Choice! (CatapultPublishing.com), which is filled with suggestions and insight on protecting and using home equity. Her new business book, "What's Your Point?," which identifies 7 common mistakes professionals unknowingly repeat to their detriment, will be published in 2009. As The Catalyst, PJ provides strategic communication, client appreciation and advanced education services to the financial, tourism, lifestyle and service sectors -- and the clients they serve. A frequently-quoted financial and business commentator, PJ is a thought-provoking strategic speaker who offers practical, real-life suggestions on leaving "the box" behind and embracing Forward Thinking -- a talent she regularly demonstrates in this column. For more on blogs, books and topics, visit TheCatalyst.com.