It is not possible to understand the Canadian housing bubble phenomenon without understanding the role of CMHC (Canada Mortgage and Housing Corporation) in mortgage lending. First, a bit of history.
CMHC was created in 1946 (the known as Central Mortgage and Housing Corp.). The mandate of CMHC was to administer the National Housing Act and the Home Improvement Loans Guarantee Act. Essentially it was created to provide soldiers returning home from war with access to affordable mortgages.
Today, CMHC describes their role as follows:
“Canada Mortgage and Housing Corporation (CMHC) is Canada’s national housing agency. We are committed to helping Canadians access a wide choice of quality, affordable homes, while making vibrant, healthy communities and cities a reality across the country. CMHC works to enhance Canada’s housing finance options, assist Canadians who cannot afford housing in the private market, improve building standards and housing construction, and provide policymakers with the information and analysis they need to sustain a vibrant housing market in Canada” (more)