DLC Head Gary Mauris Consults With Jim Flaherty

Gary-Mauris-Jim-FlahertyDominion Lending Center President, Gary Mauris, attended the 2011 pre-budget consultation Wednesday in Regina.

He spoke with Finance Department Minister, Jim Flaherty, and conveyed numerous points, including:

  • Acknowledgement of the Finance Department’s vital role in providing emergency mortgage liquidity during the credit crisis.
  • Concern about Monday’s sweeping policy changes that Mauris says “weren’t necessary.”
  • An alternative to eliminating 35-year high-ratio amortizations, whereby a borrower may qualify at a 30-year amortized payment but retain the right to a 35-year amortization (a sound alternative also supported by CAAMP)
  • Concern that LTV reductions on refinances will impair Canadians' ability to eliminate high-interest debt. Mauris stated, “What this policy is going to do, is force some homeowners who are experiencing job loss, sickness, separation, divorce, health challenges, or urgent unforeseen family crises, into having to sell their homes to get access to their very own equity.”
  • The need for the government to support our Insurers equally, which Mauris says benefits the consumer through choice and fair play. (CMHC’s insured mortgages are 100% backed by the government whereas private insurers are only 90% backed.)
  • A plea for the government to “have a very hard look at unsecured debt and specifically the credit card issuers.” Canadians’ debt risk is not due to mortgages he says. “It’s due to easy access to high interest credit cards, and other unsecured debt.”

In discussing the meeting with Mauris, he stated, “Our Industry is under assault and Canadians are the ones who are most affected.” He believes the mortgage broker industry needs to “bind together,” regardless of its competitive nature, and “speak with a common voice” so that brokers can continue “delivering choice, value, options and trusted advice to Canadians.”

  1. It’s the constant refinancing of said credit cards that has some Canadians in trouble. Credit Card companies are not about to stop borrowing money to people they collect a lot of interest from, get repaid, and wash, rinse, and repeat.
    A “concern that LTV reductions on refinances will impair Canadians’ ability to eliminate high interest debt?” Really, Mr. Mauris? Isn’t that why we’re at this point?
    The LTV reductions on refinances attacks the refinance problem, and will serve to ease some of the competitive pressures of the housing markets across Canada, along with the reduction to a 30 year amortization. I don’t mean to sound like a prude, but if you can’t repay your mortgage in a 30-year amortization, you probably should buy a smaller house.

  2. I agree with Mr. Mauris. When credit cards bills get the better of you due to crisis situations (i.e. job loss, sickness, divorce, etc) where is a person to get a lower interest loan? Your home equity is usually the best option to consolidate all debt, lower your total interest paid, and get yourself ahead. By taking away the longer amortizations we may be just feeding the big banks with more high interest business in the form of personal loans or worse, forcing people to just stay paying the high interest credit cards for eternity. I think the credit card companies should be given a hard look at by the finance minister and soon. 20+% interest rates are outrageous!

  3. Liz, really? You want to offer credit cards for less than 20%? Go for it! Take your extra cash and loan it out for whatever rate you want!

  4. Years ago while I was working for the Bank, it was standard practice when a person refincanced for the purpose of consolidating debt that their credit cards were cut up and mailed back to the credit card companies along a letter.
    What’s happened between now and then?
    Why don’t the banks and or govt solve the easy access to unsecured debt (the root of the problem) before pulling the rug out from under these peoples feet who too easily get sucked into debt and then have to look for a way to get out… Its a case of the tail wagging the dog!

  5. Rob,
    Would you or anyone else on this blog know of any other country that has an equivalent of a government owned and controlled mortgage insurance agency, like the CMHC, so as to control and direct the mortgage industry and steer Canadians in a particular direction?
    USA has Fannie and Freddie but initially they were not set up to be an extension of the government.
    What about in Australia? UK? Europe? Japan? Any other country that come to mind?
    Rob… As a follow up to this question would you know whether it is likely that our banks may go a step further and apply the new mortgage rules of 35 to 30 years to Conventional mortgages too and not just High Ratio mortgages after March 18?

  6. Dave – you said “but if you can’t repay your mortgage in a 30-year amortization, you probably should buy a smaller house.”
    – It isn’t so much about the affordability of it, but rather having the CHOICE to lower payments. The extra cash could then be used to invest while the cost of borrowing is so low! What do you think big businesses do to make money? They pay as little as they possibly can every month so they can invest the rest! I think it should be consumers CHOICE.

  7. Standard practice? Sometimes as a condition of the consolidation loan, certain C.C. may be closed but it largely depends on the clients TDS ratio.

  8. Hi fn,
    Re: question #1 — See: http://bit.ly/gtqhC9
    (Source: Research Institute for Housing America September 2010; Dr. Michael Lea)
    Re: question #2 — Last time amortizations dropped from 40 years to 35 years, several banks imposed the same 35-year limit on conventional mortgages.
    Some banks even started enforcing the new limits before the official government enactment date.
    Cheers…
    Rob

  9. I agree Frank! Years ago they were closed. We cut them up the client signed a letter and we sent them back…. But the credit card companies re-opened them knowing there was now a risk. Heavens they will even re-open a credit card after a debt settlement! Could the Government not implement a mandatory period of time that you could not refinance your insured mortgage for debt consolidation if you had done so in the last three to 5 years? CMHC use to decline on a consolidation that was done too early or too often… Maybe this would take care of the chronic consolidators and leave the people who really need the help the ability to get the help…
    KarenB

  10. Thanks Rob,
    Tha data through the link you have provided is fantastic!
    It just goes to show that even though Canada is showcased as an open and free economy major components within our economy like the mortgage industry, housing, banking etc. are all controlled and directed by the government through its wholly owned agency, CMHC.
    So it proves a point to me that pure market forces are not allowed to be played out within our economy.
    So, we will never experience a housing market failure like in the US or parts of Europe, which so many folks are obsessed about, because CMHC can change mortgage rules over and over again to tighten or loosen the flow of money whenever the government wants to. If my facts are right CMHC in the last 12 years has changed mortgage rules 8 times…in 1999, 2003, 2005, 2006, 2007, 2008, 2010 and 2011.
    Something to think about!
    Cheers.

  11. I agree with Mr. Marius. Its not the refinancing that matters. What matters is the type of debt that accrues the most interest. I think age discretion should be considered when looking at the LTV. I would estimate that 90% of people pay their mortgage on time. Its one of the biggest debts that people carry, but also the one debt that people will always pay – they dont want to lose the place where they live. So, this being said, there should merely be a limit to the number of facilities someone can carry on the bureau. If they want an additional one….one other must be consolidated with another allowing the borrower access to one more facitlty( and only if he qualifies to do so). I would also suggest more stringent rules on refinances. For instance, I just did a mortgage where the client needed to bring in 1400 dollars just to make the deal happen. I would say, allow this amount to be put on the mortgage, and having his facilities included in the refi closed properly. In addition a note going to the creditor telling them it must not be reopened for 6 years. THIS would be the way to go. NOT so much a change in the structural concept of what we do, just more on the conditional concept. “Mr. Client we are performing a refinance for you, the lender ( insured) is allowing you to go to 105% of your value of your home. Should you accept this offer you save so much dollars, your payment will be this much – based on a 2 year time frame to bring you down below the 95% mark. And your facilities will be closed that we are paying out – FOR SIX YEARS”.
    Although this is the same concept of a bankruptcy, it will act like so. Making the client realize they don’t need to use debt. Releasing them from the prison they have developed inside their financial mind.
    I worked for a major bank for several years before becoming a broker. I left because of morale issues. It’s not the brokers of the world that create this havoc, and its definitely not the mortgage products. Its the way in which our 6 major financial institutions seek profits. When I worked for a bank they MADE you sell credit cards. THEY counted the amount everyday. THEY also paid you most times the best in commission. For example. A 100K mortgage funded would pay you something like 600 lets say. Selling 3 visa’s would get earn you more than 600 in a day. Its ludicrous…..its absolutely benign.
    NOW, don’t get me wrong….some people refuse them, some don’t need them. We need to get to a point where most don’t need them.
    I left the bank because I refinanced a client to payout their visa’s cards. Once they were closed…the bank gave them 2 more back. But hey, Gordon Grekko said it right…..ITS NOT ILLEGAL…its just IMMORAL

  12. Although I do not agree with the changes I think that it is important to remember a couple of things. Canadians are rampant consumers. We spend more per capita than most. Unsecured debt is the true issue. However it is the responsibility of the consumer to manage their money effectively. With a 58% increase in insolvency the government is controlling what they can and perhaps rightly so. Mortgage brokers have benefited from consumerism for decades, it is what drives people to want bigger and better homes, fancier kitchens, etc. The days of retiring mortgage free are almost gone, the days of staying in the same home for 40 years are gone. So yes, lament the changes, but understand that we have helped to create the mess. Afterall, don’t we work our databases to encourage refinance?

  13. I agree with LS Mortgage Agent: qualify people at 30-years (or even 25-years if you must, or for a refinance), BUT, give people the choice. I used a 40 year amortization option as a way to mitigate the risk of losing my job (the company I worked for was for sale …). I could easily have qualified for a 25 year amortization, but how would I have mitigated risk with that scenario? Anyhow, 3 years later, I still have a job … and have wiped more than 6 years from my term …

  14. Another version of it’s different here. It’s not: median income, employment, and economic cycle dictate direction of prices. Government’s influence is in creating the cycles in the first place with misguided policy (CMHC), and in delaying and making worse the peaks and troughs through policy adjustment induced market distortion.

  15. A great link. But I’m not sure I reach the same euphoric conclusion as frn.
    frn is saying that because of the CMHC’s stewardship of our housing market, we will never have a housing market failure like the US (currently 25%).
    I might agree if the CMHC’s 8 interventions in the market since 1999 had maintained a stable, balanced market.
    However, that is not the case. Rather, prices are up 50%+ in real terms during that period.
    In contrast to frn, I see the market manipulation of the CMHC (as almost unique amongst other countries) as confirmation that our own decline has been delayed and ultimately worsened by the gov’t intervention.
    I believe we will eventually look back in disbelief at the market rigging activities of the CMHC and our own hubris in accepting and trusting in that market intervention.
    You can’t make wealth out of nothing (ie housing wealth) just by changing the rules every 18 months.

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