Not many lenders go on record forecasting a housing bubble, but what they say in private surveys is another matter.
FICO, a consumer analytics firm, released poll results on Tuesday that show just how concerned lenders are about housing overvaluation. But its data, which was picked up by multiple media outlets, featured responses primarily from U.S. respondents. The opinions of Canadian lenders, alone, haven’t been fully reported.
Today, however, we got our hands on Canadian-specific data, and it revealed some surprising expectations.
Jeffrey D. Sherman, Special to CMT
The function of Canada’s securities regulation is to protect investors. To help investors make informed decisions, regulated public markets require broad access to information on exchange-listed companies.
In the June 9 article entitled “A Threat to Private Financing,” it was noted that Ontario has restrictions on the sale of securities. These limit many investors to buying only publicly traded Mortgage Investment Corporations (MICs), and not private MICs. This is sound regulatory policy.
Last week CMHC eliminated some more mortgage insurance offerings. Effective July 31, for example, it will no longer insure amortizations over 25-years or $1 million+ properties with low-ratio transactional insurance. (More details here)
Canada’s largest insurer says this was a business decision. But most business decisions maximize profit and/or significantly reduce risk. These changes don’t necessarily do that, making it appear more like a political decision.
Wayne Strandlund, Special to CMT
Borrower choice and the success of mortgage brokers is tied to the availability of a wide variety of mortgage funds. Apart from conventional insured and uninsured mortgages, there are Alt-A and B, 1st and 2nd mortgages available through the private mortgage market.
For years, Mortgage Investment Corporation (MIC) lenders have provided billions of dollars of this private alternative mortgage financing. But under proposed regulations, this opportunity for borrowers and brokers will be severely curtailed, causing measurable economic harm.
CMHC surprised the market last week by eliminating its insured second home and stated income programs. Many believed that the Department of Finance (DoF) had something to do with it.
We asked the DoF directly. Here’s what they told us:
Since 2008 the nation’s largest mortgage default insurer has been on a mission to reduce its risk exposure. Yesterday that mission continued with CMHC announcing that it would stop insuring both second homes and self-employed borrowers without traditional proof of income.
Canadians have used these two programs for the last nine and seven years respectively.
But these are not the only adjustments CMHC has in store. It put the market on notice that
In June 2012 Canada’s banking regulator (OSFI) created guideline B-20 to tighten underwriting practices on conventional mortgages.
To date, provincially regulated lenders (like credit unions) haven’t been significantly impacted by B-20 because OSFI only supervises federally regulated lenders.
But now, for the first time (that we know of), a province has put forth its own underwriting standards along the lines of OSFI’s B-20. That province is B.C. and these are its proposed Residential Mortgage Underwriting Guidelines (PDF).
CMT asked Doug McLean, Deputy Superintendent of FICOM, for details on why these rules were needed and what effect they’ll have. Among other things, it looks like we might be saying goodbye to 80% loan-to-value revolving HELOCs in B.C.
There’s been so much speculation on whether OSFI’s long-awaited B-21 mortgage insurer guidelines will slow the housing market.
Well, now that we’ve seen the draft, that seems unlikely. In fact, B-21 is simple, practical and sound policy, and most of the guidelines have already been adopted by lenders and insurers.
Here’s what’s new:
For mortgage brokers without face-to-face business models, the Internet makes it easy to close mortgages in another province. And a lot of brokers are doing just that, but not always legally.
That’s partly why the Mortgage Broker Regulator’s Council of Canada (MBRCC) put out this new tool.
They call it the Multijurisdictional Licensing Information Tool. It’s meant to help brokers know when they need to be licensed to work with a borrower in another province. CMT spoke with Martin Boyle, Policy Manager at the MBRCC for more details.
Since 2008 Finance MinisterJim Flaherty has dealt the mortgage business plenty of pain for promised long-term gain. So when news broke Tuesday that he quit, a wave of relief spread throughout the industry.
That relief was quickly replaced by concern about what his replacement Joe Oliver might have planned. (Our guess: probably not too much at this point.)
Speculation aside, this week’s Globe column reviews some of Flaherty’s impact on Canada’s mortgage landscape.