Canada Mortgage and Housing Corp., the crown corporation that is the largest mortgage default insurer in the country, is paying Ottawa a $240 million dividend.

Despite the payment, CMHC said Tuesday federal regulatory changes brought into the market in the fourth quarter of 2016 decreased the size of the insured mortgage market. During the second quarter, the Crown corporation provided mortgage loan insurance for almost 79,000 units across the country. On a year-to-date basis, almost 125,000 units have been insured.

“Volumes decreased largely as a result of the new regulations,” said CMHC, referring to new income tests that have forced consumers with less than a 20 per cent down payment to qualify based on the Bank of Canada five-year posted rate, now 4.84%, as opposed to the lower rate on their contract.

Under federal rules, consumers with less than 20% down must get mortgage default insurance which protects banks in the event of default. CMHC is the largest player in the sector followed by private entities Genworth Canada and Canada Guaranty.

CMHC said it continues to see an improvement in the quality of its mortgage loan insurance portfolio, which was 0.29% overall in the second quarter. It said during the first half of 2017, the typical CHMC-insured homebuyer an average mortgage of $255,014 with an average credit score of 752.

The average gross debt service (GDS) and total debt service (TDS) ratios were 26.7% and 36.5% respectively. As of June 30, 2017, CMHC’s total insurance-in-force was $496 billion – below its legislated insurance-in-force limit of $600 billion.

Net income (after taxes) for the second quarter was $397 million and, based on the continued strength in the sector, the decision was made by CMHC’s board to issue the $240 million dividend payable to its shareholder, the government of Canada.

CMHC : New Mortgage Rules are Shrinking the Size of the Insured Housing Market by Garry Marr | Financial Post