Mortgage Bytes

August 14, 2008

Mortgage Bytes

Commentary

40-year amortizations keep getting bad press. Canwest's Jim Yih says, "There's no question Ottawa is doing the right thing in preventing people from extending the amortization periods too far." As we've said before, however, there are situations where 40-year ams are desirable and appropriate. Yes, it makes intuitive sense that borrowers should be made to qualify at a lower amortization (to prevent over-extension of credit). Banning 40-year ams altogether, however, penalizes responsible homeowners in the process. It prevents borrowers from exercising payment flexibility in cases that may well warrant it (income property purchases and self-employed borrowers for example).
The Canadian Bankers Association's CEO, Nancy Anthony, has rebutted the Ottawa Citizen's Mark Sutcliffe. Sutcliffe had drawn questionable parallels between the U.S. and Canadian mortgage markets in an article last month.
"Too many Canadians believe that home prices cannot go down." -- Seeking Alpha

Mortgage News

Dreyer Group's Jared Dryer on 10-year mortgages versus variables: "At this point in time to take a 10 year term at 5.80% will be a lot extra for security. You will be paying the bank a surcharge of 1.65% for that security vs. paying yourself. The choice is yours." (Link)
High ratio, interest-only mortgages and home equity lines of credit (HELOC) will no longer be insurable come October 15. That means you'll probably have to put down 20% to get them. CMHC will, however, continue insuring conventional interest-only mortgages and HELOCs.
45% of Canadians agree with the government's abolition of 40-year amortizations a $0-downpayments on insured mortgages. 23% disagree and say it limits consumer choice. This is according to a July 25, 2008 ResMor study.

Interest Rates

Fixed rates at the non-bank lenders have now started to come down. Bond yields, upon which fixed rates are based, started drifting lower over two weeks ago. Posted bank rates fell more than a week ago. You can now get quick close 5-year fixed specials in the mid-to-low 5% range.
BMO economist, Michael Gregory says, "We are seeing the tide turn on inflation. You look around, and suddenly growth is an issue." If that's true, rate-hike talk will die down to a whisper in the next few months...IF that's true.

Real Estate Markets

The average price of home in major Canadian cities fell 3.6% in July from a year ago, to $327,020. Toronto was up 1.5% while Vancouver dropped 1%. Financial Post
"Last year was probably a once-in-40-years kind of market." -- Bosley Real Estate's Michael O'Brien on Toronto's hot 2007 housing market. Sales are down 12% annually as of July according to the Globe.
MP Garth Turner enjoys walking out on a limb. He's predicting "Armageddon" in Regina, Winnepeg, and Saskatoon--with 50% drops in home values over the next year or two. He predicts a 30% fall in Vancouver and a 15% dip in "Torontopolis."
Downtown Vancouver commercial vacancy is just 2.5%. Rents are now averaging over $50 a sq. ft.
Residential property sales in Greater Vancouver declined 43.9% in July 2008 versus a year ago.
Housing starts fell 13.6% in July--much more than expected. TD called the drop "massive" but warns against making a "knee-jerk reaction." Some economists are largely attributing the weak numbers to wet weather in Ontario.
Demand for homes in St. John's, NF has reached "reached an exceptional level" according to CMHC. They say sales are "limited only by builder capacity constraints, due to a very tight labour market for skilled trades."

Mortgage Broker News

CAAMP is "providing input to the Department of Finance relating to...the proposed [620 minimum] credit score especially as it affects new Canadians." There is a big question regarding how the governments new rules will affect programs aimed at new immigrants, who don't have a credit score.
Check out this week's jobs in CMT's Mortgage Jobs database, or post a job on CMT's homepage!
In July, PMI Canada singled out CMHC and said, "Fostering increased mortgage insurance competition will allow PMI Canada to bring innovative risk solutions to lenders." PMI was seemingly unaware of their impending fate (closure).
Wells Fargo has a new email address where brokers can send a deal for a quick review before submission. It's meant to help determine if a deal meets Wells' criteria. Log into their broker site for more info.
Mortgage brokers have funded 1.04% less mortgage volume this year versus the same time last year. They funded 46.41% less subprime business. Source: Filogix
First Foundation Residential Mortgages is now offering reverse mortgages through Canadian Home Income Plan (CHIP).
"I want to get us back to our roots - make the company more familial as opposed to corporate." - Mortgage Intelligence President, Mark Moreau (via CMP)
Colleen Adams is the new VP, Marketing & Sales at Xceed. Collen formerly worked at BMO in 2007.
Quest Capital, Canada's leading mortgage investment company, posted $7.5 million in profit. It's average outstanding loans grew 38% year-over-year.

Miscellaneous

We got a question today about where to buy Canadian Mortgage Bonds. The answer is, you can buy them at most major securities dealers, like Investors Group, TD Waterhouse, E*Trade, etc. Commissions differ by broker. E*Trade, for example, charges $6.95 to $19.95 per trade depending on your assets and trading frequency.
The BC Real Estate Association has a handy checklist and guide for buying pre-sale properties.
Canada ranks number one in adoption of online banking, with 67.1% of Canadian Internet users banking online in April 2008. Of Canada's 24 million Internet users, 15.5 million visited a banking site in April--the month the survey was conducted. Other English-speaking countries had significantly less participation:

U.K.: 49.5%
U.S.: 44.4%
Australia: 41.7%

"There's 1,000 people a day turning 65 [in Canada], and there's an incredible shortfall of suitable housing." -- Vancouver Sun.
Interested in finding out about BC foreclosures and scooping up a cheap property? That's the idea behind ForeclosureList.ca foreclosure notification service. It costs $99 a month (there's a $1 seven day trial) We haven't tried it so we can't comment on its value, but Straight.com has this story about it.
11% of foreign home buyers in the U.S. last year were Canadian. 53% got a mortgage while 47% paid cash, according to Canoe.com.

Posted in Reverse Mortgages

Comments

Commentary

40-year amortizations keep getting bad press. Canwest's Jim Yih says, "There's no question Ottawa is doing the right thing in preventing people from extending the amortization periods too far." As we've said before, however, there are situations where 40-year ams are desirable and appropriate. Yes, it makes intuitive sense that borrowers should be made to qualify at a lower amortization (to prevent over-extension of credit). Banning 40-year ams altogether, however, penalizes responsible homeowners in the process. It prevents borrowers from exercising payment flexibility in cases that may well warrant it (income property purchases and self-employed borrowers for example).
The Canadian Bankers Association's CEO, Nancy Anthony, has rebutted the Ottawa Citizen's Mark Sutcliffe. Sutcliffe had drawn questionable parallels between the U.S. and Canadian mortgage markets in an article last month.
"Too many Canadians believe that home prices cannot go down." -- Seeking Alpha

Mortgage News

Dreyer Group's Jared Dryer on 10-year mortgages versus variables: "At this point in time to take a 10 year term at 5.80% will be a lot extra for security. You will be paying the bank a surcharge of 1.65% for that security vs. paying yourself. The choice is yours." (Link)
High ratio, interest-only mortgages and home equity lines of credit (HELOC) will no longer be insurable come October 15. That means you'll probably have to put down 20% to get them. CMHC will, however, continue insuring conventional interest-only mortgages and HELOCs.
45% of Canadians agree with the government's abolition of 40-year amortizations a $0-downpayments on insured mortgages. 23% disagree and say it limits consumer choice. This is according to a July 25, 2008 ResMor study.

Interest Rates

Fixed rates at the non-bank lenders have now started to come down. Bond yields, upon which fixed rates are based, started drifting lower over two weeks ago. Posted bank rates fell more than a week ago. You can now get quick close 5-year fixed specials in the mid-to-low 5% range.
BMO economist, Michael Gregory says, "We are seeing the tide turn on inflation. You look around, and suddenly growth is an issue." If that's true, rate-hike talk will die down to a whisper in the next few months...IF that's true.

Real Estate Markets

The average price of home in major Canadian cities fell 3.6% in July from a year ago, to $327,020. Toronto was up 1.5% while Vancouver dropped 1%. Financial Post
"Last year was probably a once-in-40-years kind of market." -- Bosley Real Estate's Michael O'Brien on Toronto's hot 2007 housing market. Sales are down 12% annually as of July according to the Globe.
MP Garth Turner enjoys walking out on a limb. He's predicting "Armageddon" in Regina, Winnepeg, and Saskatoon--with 50% drops in home values over the next year or two. He predicts a 30% fall in Vancouver and a 15% dip in "Torontopolis."
Downtown Vancouver commercial vacancy is just 2.5%. Rents are now averaging over $50 a sq. ft.
Residential property sales in Greater Vancouver declined 43.9% in July 2008 versus a year ago.
Housing starts fell 13.6% in July--much more than expected. TD called the drop "massive" but warns against making a "knee-jerk reaction." Some economists are largely attributing the weak numbers to wet weather in Ontario.
Demand for homes in St. John's, NF has reached "reached an exceptional level" according to CMHC. They say sales are "limited only by builder capacity constraints, due to a very tight labour market for skilled trades."

Mortgage Broker News

CAAMP is "providing input to the Department of Finance relating to...the proposed [620 minimum] credit score especially as it affects new Canadians." There is a big question regarding how the governments new rules will affect programs aimed at new immigrants, who don't have a credit score.
Check out this week's jobs in CMT's Mortgage Jobs database, or post a job on CMT's homepage!
In July, PMI Canada singled out CMHC and said, "Fostering increased mortgage insurance competition will allow PMI Canada to bring innovative risk solutions to lenders." PMI was seemingly unaware of their impending fate (closure).
Wells Fargo has a new email address where brokers can send a deal for a quick review before submission. It's meant to help determine if a deal meets Wells' criteria. Log into their broker site for more info.
Mortgage brokers have funded 1.04% less mortgage volume this year versus the same time last year. They funded 46.41% less subprime business. Source: Filogix
First Foundation Residential Mortgages is now offering reverse mortgages through Canadian Home Income Plan (CHIP).
"I want to get us back to our roots - make the company more familial as opposed to corporate." - Mortgage Intelligence President, Mark Moreau (via CMP)
Colleen Adams is the new VP, Marketing & Sales at Xceed. Collen formerly worked at BMO in 2007.
Quest Capital, Canada's leading mortgage investment company, posted $7.5 million in profit. It's average outstanding loans grew 38% year-over-year.

Miscellaneous

We got a question today about where to buy Canadian Mortgage Bonds. The answer is, you can buy them at most major securities dealers, like Investors Group, TD Waterhouse, E*Trade, etc. Commissions differ by broker. E*Trade, for example, charges $6.95 to $19.95 per trade depending on your assets and trading frequency.
The BC Real Estate Association has a handy checklist and guide for buying pre-sale properties.
Canada ranks number one in adoption of online banking, with 67.1% of Canadian Internet users banking online in April 2008. Of Canada's 24 million Internet users, 15.5 million visited a banking site in April--the month the survey was conducted. Other English-speaking countries had significantly less participation:

U.K.: 49.5%
U.S.: 44.4%
Australia: 41.7%

"There's 1,000 people a day turning 65 [in Canada], and there's an incredible shortfall of suitable housing." -- Vancouver Sun.
Interested in finding out about BC foreclosures and scooping up a cheap property? That's the idea behind ForeclosureList.ca foreclosure notification service. It costs $99 a month (there's a $1 seven day trial) We haven't tried it so we can't comment on its value, but Straight.com has this story about it.
11% of foreign home buyers in the U.S. last year were Canadian. 53% got a mortgage while 47% paid cash, according to Canoe.com.