Top 10 Effects Of The New Mortgage Rules

top-ten-mortgage-rule-effectsWe may not go 10 for 10, but crystal ball-gazing is fun nonetheless.

In this humble of spirits, we present ten trends to watch out for in 2011, courtesy of Flaherty & Co.’s new mortgage regime:

  1. Lower purchase and refinance demand will depress mortgage volumes, sparking greater rate competition as lenders battle for less business
  2. A small portion of home buyers will sprint to buy homes with a 35-year amortization before March 18, followed by downward pressure on home prices after March 18 as the amortization reduction removes market liquidity
  3. Negative personal consumption and wealth will result thanks to equity take-out restrictions, rising rates and softening home prices
  4. Unsecured debt usage will increase as homeowners are restricted from accessing as much of their equity, leading to even greater bank profits in unsecured lending
  5. Default rates will see no material improvement
  6. No significant improvement will occur in the number of risky borrowers, due to no change in TDS limits or Beacon score requirements
  7. HELOC rate discounts will be less frequent as some non-bank offerings disappear and HELOC funding costs inch higher
  8. Banks will pick up mortgage market share
  9. More private lenders will offer high-interest uninsured 2nd mortgages to 90% LTV
  10. If amortization restrictions accelerate falling home prices, we’ll see somewhat greater default risk and more negative equity situations among low-equity homeowners

The Reason Bank CEOs are Superheroes (to their shareholders):

BankersIn one epic and brilliantly calculated move, bank CEOs like TD’s Ed Clark and BMO’s Bill Downe convinced Canadians they had consumers’ interests at heart, and convinced the Finance Department to:

  • Overlook credit card debt, a market that’s yielded double-digit growth for banks and funded $260 billion of purchases last year
  • Ignore the risk of unsecured lines of credit (ULOCs) so banks can continue offering them to their customers when 85% LTV refinances aren’t enough [Brokers don’t generally sell ULOCs.]
  • Quash broker’s primary source of growth (first-time buyers) with amortization restrictions
  • Cut off consumers’ ability to refinance profitable high-interest consumer debt into low-interest mortgage debt
  • Eliminate HELOC competition from non-deposit-taking lenders which rely on securitization (HELOCs have been massive money-makers for banks, with 170% growth over the last decade. HELOCs now account for 12% of household debt. Banks like TD, BMO, and RBC are largely unaffected by the new HELOC rules because they don’t depend on securitization. )
  • Increase HELOC funding costs at banks with broker channels (like Scotiabank and National Bank—both of which securitize some of their readvanceable products, according to sources)
  • Brush aside the consultative recommendations of CAAMP aimed at permitting well-qualified borrowers to retain mortgage flexibility in exchange for tighter borrower qualification standards
  • Make it harder for more people with collateral charge mortgages to change lenders (Thanks to the lower 85% LTV refi maximum. Bravo to TD’s Ed Clark on this one.)

In short, the big bank CEOs orchestrated a virtuoso performance for their shareholders, at the expense of sensible mortgage holders. It’s moves like this that justify every crumb of their $5 to $15 million+ compensation packages.

Rob McLister, CMT

  1. Rob:
    You paint a pretty a bleak picture here, but as I review last week’s events, I can only envision that these rule changes might actually be worse than we think.
    I’m sure we can all agree that consumers benefit from a healthy and vibrant independent mortgage broker channel and this new rule that forces homeowners with 19:1 leverage (95% LTV) to triple their home equity (85% LTV) before they can refinance is worrisome to say the least. What happens when we enter a sustained down cycle in the real estate market? When the day comes that house prices stop rising for a few years, the percentage of repeat business to mortgage brokers from first time homebuyers will go to zero – with a bullet! If house prices were to remain flat, or drop over a period of 5-10 years, our customers will be forced to renew at their bank (no doubt at Posted Rates) simply because they failed to triple the amount of equity in their homes. To the poor homeowner, it’s going to feel like a Margin Call. Getting bumped to the bank’s Posted Rate will make it even harder to hit the 15% equity target before their next mortgage event.
    Under this new rule, we could easily experience a market cycle where we are unable to advise our high ratio mortgage customers for 10 years or more. If this happens, we will lose these customers forever and our share of the conventional market could drop into the perilous single digit zone. While my confidence in the future of our industry is waning, I am clinging on to the belief that we still live in a consumer driven market where at least 25% of Canadian homeowners have chosen to deal with an independent mortgage professional.
    I am not a “glass half empty” kind of guy. But we need a dog in this fight! These rules are threatening to screw the homeowner and run us out of business. I can only believe that our government must have been hoodwinked into this disingenuous course of action by shareholder serving senior executive bankers. We need our own Champion. I think it has to be CAAMP. I know they just took a beating last week when the Minister of Finance summarily dismissed their Report, but I sincerely hope they are not done. We have no other voice. These rules are punitive for homeowners and potentially lethal for the independent mortgage distribution channel — which is the only vehicle that can protect the borrower by keeping the banks honest at the end of the day.
    Sandy Aitken,B.Eng., AMP
    (416) 849-1315

  2. Rob,
    Good, objective predictions.
    How about:
    a) Genworth experiences small but meaningful market share increase.
    b) People increase borrowing from investment trading accounts (rates are comparable to HELOC)
    c) And lets bang this drum again: the smallest non-bank lenders struggle – expect dividend cuts

  3. Excellent article!!! This is the true face of the mortgage rule changes and the true winners are the banks! Thanks for sharing this well written, point form and targeted piece.

  4. Hello Rob,
    Good story. I’m hoping job growth can offset some of the negatives in the article but overall I don’t think these rules are a net positive for the country. I guess we shouldn’t be surprised that the banks had other motives.

  5. Unfortunately a good time to own bank stocks…
    At least they increase their dividends and grow them also.
    I’d wait for a pull back though.

  6. Rob,
    Your report has succinctly exposed several real facts behind these changes and facts which were not openly discussed or exposed in the media or on television for variety of reasons.
    It appears vested interests may have been served.
    Where is the competition in our market place which has always proved to be in the best interest of all Canadians in the long run?
    If all our banks go to our Fed and want changes introduced and our Fed agrees to their requests there is really no real material grounds for competition between the banks.
    They always seem to move as a herd in one direction.
    The Fed and BOC did have valid reasons for making changes for high ratio mortgages but when banks take matters one step further and try to make the rules stick to conventional mortgages too, which were never the intention of our Fed or BOC, as the banks did last year it just does not seem fair to hard working Canadians.
    Let’s hope this time around banks will keep the 35 year amortization rules in place for conventional mortgages after the March deadline.

  7. What did brokers do when all there were max 25 yr mortgages? Things must have been extremely tough back then.

  8. I work for TD and I couldn’t be happier with the changes. Affordibility on $300k mortgage for 1st time homebuyer $100/m extra to qualify, not a biggie. Come on. Do you really want to be paying off secured debt over 40-35 yrs? Unbelievable.
    Overall I believe the market will only become stronger as people will start to think before buying. We should be thinking about the client here, try not be selfish here? I know were all commisioned.
    Short-term losses, longterm gains.

  9. I have banked with TD since 1986. Three times last week, TD tried to push up the credit limits on our credit cards!!! We should be thinking about the client here??? What a load of drivel. Since when?
    Chris R.

  10. Here’s a question for you TDbankbroker – how many first time home buyers actually stay in their existing home for the 35 years to pay down their mortgage? Everyone knows that the way to get your mortgage paid down is to get onto the property ladder early and keep moving up until you have earned enough equity to eventually scale down and pay out in cash.

  11. The whole theory of, “buy as much house as you can” and then keep flipping your house for more and more every two or three years until you can downsize to what you actually want” is just plain dumb. You are beholden to the financial institutions that loaned you the money, and if the market melts down, or goes bad, you’re royally screwed.
    That’s the sad part of this whole thing that many people miss (and that some banks and brokers even want you to overlook). If you choose to live beyond your means, then a 35 year or 40 year amortization ain’t gonna help you man. Nor is a home equity line of credit.
    The way to get your mortgage paid down is to choose a property that you can actually afford. Also, it’s great to make large lump sum extra payments early on in the mortgage (as they will have the most impact). It’s equally prudent to have accelerated bi-weekly payments that decrease the time it takes for you to repay the mortgage.
    People want it easy. I hate to say it, but there is no such thing as a free lunch or a free house. Ain’t no such thing as getting on the property ladder early in this country or this real estate market. Seventy percent of Canadians are on that ladder already, so how early can you be?

  12. First off, bankers are not brokers so your name is misleading. A broker is someone who shops around for the best lender/product meeting a client’s needs. A banker sells one brand and one brand only.
    Secondly, no one pays off their 35-year mortgage in 35 years. Most do it in 20-25 years or less. Longer amortizations are just a way to provide flexibility in the short-run. Standing up for consumers’ right to chose how to run their finances isn’t selfish at all. It is the very definition of “thinking about the client.”

  13. “Secondly, no one pays off their 35-year mortgage in 35 years. Most do it in 20-25 years or less.”
    Where do you get this from? How long have 35 year mortgages been around? You hav no idea what you’re talking about.

  14. Spot on, Rob!
    I think independent brokers will be picking up more business from banks, especially high ratio refinances from individuals who are highly leveraged where the banks can only go up to 85%. We have more flexibility in that respect.
    As for HELOC pricing, I don’t believe there will be that big of a discrepancy because most of the major banks have exposure to the broker channel and at the end of the day business is business; they’ll still be looking to pick up deals from brokers. Given the level of competition among lenders through the broker channel, I believe there’s enough incentive for financial institutions to offer a competitive rate on HELOCs through brokers.
    Regarding the amortization restriction, we have yet to see the impact this change would have. The average applicant, based on a $300,000 mortgage, will see their monthly payment increase by $90 to $105 as a result of the reduced amortization. Indeed, it’s a sizable increase but I don’t think it would keep many applicants out of the market.

  15. It depends on the individual. By simply accelerating the mortgage payment, most borrowers can reduce the amortization over time. If you can get your client to increase their payment by as little as 10%, the amortization would be reduced significantly. The whole point is teaching clients how to pay off the mortgage faster without making significant sacrifices in their current cash-flow.

  16. Dignanm: Weak people use rudeness as a substitute for strength. Think about that for a while….
    Anyhow, that number came from the Financial Post. This is a quote:
    “The average Canadian pays very quickly,” says Mr. Bell. He notes most Canadians pay a mortgage with a 25-year amortization in 12 to 14 years by increasing their payments once their incomes rise. He figures the mortgage with a 40-year amortization will probably be paid off in 20 years.”
    I added five years to the 20 year estimate be conservative, even though that 20 year number actually applies to 40 year amortizations.

  17. If you borrow money, then you are at the mercy of the terms set by the borrowers. End of story.
    In this case, if you borrow money which is made available ONLY because of the government insurance, it is the same thing. And if your job relies upon that borrowed money (and Gov’t insurance), then same thing again.
    This is they way it has been for centuries, and nothing has changed.
    But just like the US and the other countries. When the RE party ends (or starts to end), everyone whines and complains about the banks and the government.

  18. “Secondly, no one pays off their 35-year mortgage in 35 years. Most do it in 20-25 years or less. Longer amortizations are just a way to provide flexibility in the short-run.”
    Complete hogwash. The 35 year mortgages have not been around long enough to make that statement. If they could afford it they would get a 20-25 in the first place. Relying on “income increases in future years” is another industry falsehood. Most do not know there income will increase,decrease or if they will lose their job. It’s like waiting for granny to die, you don’t borrow large against unknown life factors.
    BTW, the property ladder thing is a joke, your on the top rung at record prices and it will take you 5 years to accumulate any noticeable equity on a $400,000 mortgage and then you want to borrow and blow it ? What kind of responsible financial advice is that ? HELOC’s are a destructive device in the hands of most.
    I see alot of pathetic self serving whining over a mere 5 years difference or $100 a month. If your clients can’t cut that,they have no business owning in the first place.

  19. LS Mortgage Agent: You’re jokeing right? What happens if housing prices go down? You do know that there are millions of boomers that are going to downsize/die off in the next 5-15 years, and there is no replacement population to pick up the inventory? You do realize that it is rational to expect that lending standards will return to pre-recession restrictions? You do realize that interest rates are at all time lows and will eventually go higher? You do realize that Canada’s home ownership rate is one of if not THE highest in the world? You do realize that Canadians have more consumer debt than Americans? You do realize that some (e.g., Ontario) have bigger deficits than California? You do realize that the appreciation of the Canadian dollar has decreased the value of commodity (e.g,. grain, oil, beef) exports by 20%?.
    I suspect your strategy for success is MUCH MUCH MUCH riskier than you think.

  20. The above article is 100%. W. Edmund Clark’s Bio provides an interesting read on Wikipedia, he is learning a lot from peers in his role on the Steering Committee of the Bilderberg Group. Shareholders rejoice, but consumers beware!

  21. That’s an interesting link you provided. It was written in 2007 when they knew even less about extended amortizations. Here’s some more interesting tid bits from the article
    “Brian Bell, vice-president of corporate development with AIG”
    Wasn’t this the same company that said all was well in the U.S. but needed a bailout to survive?
    “Mr. Bell, who estimates half of the new mortgages his company insures have amortizations of 35 or 40 years.”
    But I thought there was a low percentage of these being taken out? And this was back in 2007.
    “In addition to lengthening the amortization period, the Canadian market has also been recently introduced to interest-only loans and zero-equity mortgages. Consumers can effectively borrow 103% of the value of their home because borrowers tack the cost of mortgage insurance on to the total loan value.”
    No lax lending here.
    My point was that there is no data beyond what a VP of marketing claims is the case. Yes I agree that in the past people paid their mortgages down faster than the 25 years taken out. But most (young) people I know are making the minimum, and or borrowing to help pay their bills and live the life they’re used to.
    “Dignanm: Weak people use rudeness as a substitute for strength. Think about that for a while…. ”
    And don’t get so defensive. It’s a sign of weakness and self doubt ;)

  22. I think I have better things to do with my time than to read his bio but TD’s recent moves ultimately comes down to the same thing independent brokers are trying to accomplish: building a fence around the client.
    The major banks have the upper hand because they can tap into a huge database of existing customers. Huge database of clients, national brand name recognition, and a colossal balance sheet give them a ubiquitous advantage in this business. Don’t forget, some of the biggest lenders by volume in broker channel are directly owned or majority owned by the banks. So we too are culprits in helping them extend their monopoly. With that said, the major banks are also at a disadvantage on several fronts. There are a lot of properties and applicants that they can’t do, and that’s what independent brokers have to capitalize on.

  23. I want to know in your experience who holds on to a mortgage for 35-40 years. Come on be realistic!! Most people move every 10 to 12 years and some every 5. Just because the affordability is there now does NOT mean they cant have a plan to go forward.
    Good Lord you speak as if we are all sheep with only a 40 year plan.
    As for selfishness I AM thinking about the client. It makes no difference to me monetarily if they wish a longer amort. Especially rental properties.. where interest is tax deductible.
    The longer amportizations have some purpose .. and many people have a plan.

  24. Wow. And you are a broker?
    TDbankbroker was talking about paying off the mortgage balance, not about whether or not they move. If you pay off one balance, and take out a new one it is the same as not paying off the original.
    And a longer amort makes no difference to you monetarily? Really?? So you say that there is no increase to the total number of mortgages or the total amount in the market due to longer amort?
    Or you think that somehow that only benefits OTHER brokers?

  25. Good try. AIGUG was a Canadian operation totally separate from AIG in the US. They had nothing to do with AIG’s policies south of the border.
    Insurers obviously know the numbers. It’s their business to know. Moreover, anyone with even the slightest knowledge of mortgage lending understands that people pay down mortgages 25-50% faster than their original amortization.
    I can tell you this for sure. I’d much rather rely on estimates from a reputable insurer source than some totally biased anonymous blog poster with no manners and no data to back himself up.

  26. Jonathan W,
    The point is that the comments were made between the time that total outstanding mortgage debt Doubled. Look up the data from 2000-2010. Anything that was said does not pertain to the situation we’re in right now.
    The comments were also made about 25 year mortgages because the data was obviously not there to comment on 35 and 40 year mortgages.
    If I had access to the hard data on mortgage debt, terms and repayment histories I would love to go through it and give you my thoughts. But unfortunately I haven’t been able to get my hands on it.
    “people pay down mortgages 25-50% faster than their original amortization.”
    Data please.
    “biased anonymous blog poster with no manners”
    Seriously, why are you so sensitive?

  27. JonathanW, you wrote
    “Insurers obviously know the numbers. It’s their business to know. ”
    Unfortunately this is simply not true. Most financial institutions follow market based pricing.
    I work for a large Insurance company (at a fairly high level), and we simply can’t afford to swim against the tide of what our competitors are doing, and typically we all provide whatever it is that the market wants.
    Scary though it sounds.

  28. 12 years ago, the banks tried to merge and monopolize and cut down competition. They didn’t succeed…thank goodness for Canadians. Now they are using the financial crisis to create FUD (fear, doubt, and uncertainty) to crush the mortgage broker channel. How many bank lobbyists are in Ottawa? Oh and a certain cabinet minister just joined CIBC. This should alarm consumers when you have a powerful lobby group working for their self interest. If the banks included clamming down on credit cards and credit lines – 2 facilities that do not help Canadians to build equity, then I say they are looking out for consumers’ best interest. Right now the banks are doing what ever it takes to shove anyone else aside including consumers. Look at the scandalous prepayment penalty calculation formula they use. There is no organization with a strong voice to go against the banks. What will the banks do next?

  29. For the last number of years, Canadians have partially funded their consumption through the flow of credit that went from the home equity that appeared ievery year n their rising home prices, through their wallets and into their credit card accounts. The cycle has repeated itself a number of times in recent years, and thanks in large part to the competitive nature of our mortgage default insurance industry, our banks and mono-lenders, we have managed to tap as much of this ‘home equity’ as we possibly can out of our country, only to satisfy our consumption and partially pay off credit cards once again.
    At some point the cycle has to end, and while the govt may address ccard debt separately, they seem to be trying to stem the flow of debt creation, starting with successively limiting access to home equity – the most dangerous source of new funds for ccard debt bailout, especially high ratio home equity refis!
    As mortgage professionals and financial planners (?) in this country, these changes should be applauded not because they limit choice to ‘astute’ homeowners, but because it appeals to the sensibilities of frugality and living within your means and of what it is to be Canadian!

  30. Do you really think the amortization makes no difference to you as a broker? Think about that if the maximum amortization you could offer your clients is 10 years. Instead of that condo in Vancouver its a mobile home in Surrey all of a sudden.

  31. These policies should be denounced, not applauded. Every one of these rules was poorly thought out and infinitely worse than the problem itself. This is nothing more than big government overstepping its bounds and bowing to the special interest banking lobby.
    Capitalistic acts between sensible consenting adults are what should be applauded, for they are the very basis of our economic existence. Anything else is just another government roadblock to the individual pursuit of economic freedom.

  32. Sorry, you totally lost me.
    What does your post have to do with insurers being able to estimate the effective amortization on a 35-year mortgage?

  33. Yes I’m sensitive…to rude people. You don’t blurt out “you don’t know what you’re taking about” when you have no idea what the other person knows.
    The article clearly indicated that AIGUG was estimating the effective amortization on a 40-year mortgage. Mortgage debt levels are secondary to LTV. LTVs have not increased that much since 2000.
    The point is, there is nothing to suggest that this insurer’s estimate – made on the public record – is unreasonable. You may not want to believe it but you have no evidence to support your position.
    The fact that you’re disputing common industry knowledge about effective amortizations demonstrates your inexperience. You are totally ignoring the effect of accelerated payments and lump-sum prepayments.

  34. Your ‘capitalistic freedoms’ are being exercised on the backs of the government of Canada and become a liability to Canadian taxpayers. There is nothing stopping private interests from funding mortgages with 100% ltvs and 40 yr amortizations if they deem it to make business sense, just stop having those mortgages guaranteed with the seal of the Govt of Canada.
    Amortizations on AAA rated mortgage debt over 25 years has been around since 2006 for goodness sake. Some people talk as if they’ve been in existence since 1929. Refinancing above 75% came into being in 1998, again, not that long ago.
    ‘Capitalistic acts’ ? Never heard of that, but it sounds like something you’d do in a back alley in Toronto. Capitalism is our economic system in which the means of production are privately owned and operated for a private profit; decisions regarding supply, demand, price, distribution, and investments are made by private interests in the free market; profit is distributed to owners who choose to invest in businesses, and wages are paid to workers employed by businesses and companies.
    It has little to do with government guaranteed mortgages as a result of equity take-outs and debt consolidations. If those are ‘capitalistic acts’, they are pretty lame ones, and certainly do not contruibute to economic freedom but rather debtors prison!
    Maybe CMHC and Private insurers who benefit from the govt guarantees should only be able to provide MI to first time homebuyers, the original intent of these programs?

  35. #29837,
    Can I borrow this post for my essay on privatizing the CMHC and dropping all government gaurantees on mortgages?
    After all, the creation of the CMHC and government mortgage insurance was “big government overstepping its bounds and bowing to the special interest banking lobby.”
    How can we have capitalistic acts and pursue individual freedom with such enormous government meddling in what should be private affairs.

  36. “What does your post have to do with insurers being able to estimate the effective amortization on a 35-year mortgage?”
    Since you specified an Insurance company in your quote “Insurers obviously know the numbers. It’s their business to know”, you were not referring to calculating the amortization, since any bank can do that.
    A first year math student, (or even a cheap calculator) can calculate a 35 year amortization.
    An insurance company’s job is to price the risk inherent in any policy they provide. That has nothing to do with calculating the amorization, but rather in pricing the risk there will be a claim on the policy.

  37. Very interesting predictions and follow-up comments!
    Rob, Sandy, if there’s a silver lining in any of this, it might be as follows. Let me know if you think this is plausible:
    1) As rates increase, spreads compress therefore forcing margin-sensitive banks to build a little more headroom into every deal.
    2) Remaining non-bank lenders, hungry for business from fewer brokers and less overall volume, remain as competitive as possible.
    3) As profitable lending in other channels picks up – particularly commercial lending – banks are able to push standby cash out the door in other directions, taking pressure off residential mortgages as a focal point. (There is a supply-side angle with all of this competition we’ve seen: buckets of cash sitting around)
    4) Satisfied with stemming their market share erosion and damaging the broker competition, banks go back to being fat and sleepy.
    All of the above lead to a rate and service advantage for brokers – for a portion of the market – that compares to 2002-2006 or so when we slaughtered the banks on both for the Canadian consumer who cares enough about their finances to do a little homework and look outside the box.
    Of course, one wouldn’t use the above scenario as a basis to do their business planning, but it could happen.

  38. Thanks Lorilee! =)
    And thanks to Sandy, Tomas, Taz, David, FN, Lior, Jesse, and Gord for the gracious comments as well–and to everyone else for contributing to the debate. These rules present numerous issues, many of which are completely under the RADAR to the average observer.

  39. Bravo!
    First time I have read a broker’s comments which are EXACTLY what I have been thinking.
    The BIG banks obviously have used whatever influence they can to try to get that bit of market share back.

  40. Hey Gord,
    I guess it is just our nature to look for a silver lining. On the extreme end of the optimistic side you might have something here… but I’m not convinced that rising rates and spread compression are so tightly correlated and I’m confident that we don’t have to worry about the banks going back to being fat. From birth, what else have they ever known? As for sleepy, we can only wish…
    Some non bank lenders may find a silver lining in the 85% LTV refinance rule which can now be exploited by lenders that do not Post Rates materially higher than their best actual available rates. A smart lender could use that fact to encourage brokers to send them more of their high ratio clients on the basis that it is genuinely in their client’s best interest (at renewal). This becomes an even stronger argument given the new 30 year am, which will dampen house prices because property value is really driven by the marginal borrower. Today’s marginal borrower is April’s non qualifier. This doesn’t mean prices will drop. House prices may still go up or down in 2011. I saw one economist estimate that prices will be 7% lower than they would otherwise have been, simply because the marginal borrower bar has moved. That’s sounds right to me.
    I’m still looking for OUR silver lining….I do believe that the independent mortgage professional that advises clients on financial/debt “strategy” in the context of a “plan” will feel less pain from these changes than those who sell mortgage product on rate. The interest rate advantage for brokers you remember back in the day – that’s a precious memory – treasure it. I’m afraid that’s all it will ever be…

  41. Sandy, I concur.
    Gord, I’d do the happy dance if you were right. Alas, I fear that “Fat” is the long lost 8th Dwarf. The banks fired him and Sleepy in 2009 and replaced them with lean grain-fed mortgage specialists armed with beefy rate discretion.*
    * Disclaimer: This sentence is tongue in cheek. Mortgage specialists please hold your emails. ;)

  42. Wow, properties build equity? Ok sure then how do you explain the rescent dips in the market (last 3 yrs in vancouver). Equity hasnt built as your stating, I wouldnt want to listen to your advice ” BUY A PROPERTY IT WILL BUILD EQUITY AND THEN YOU CAN PAY YOUR MORTGAGE DOWN IN CASH” come on guy, get real.

  43. 1st off dont tell me how to run my job, I have access to alternate lending ie..rbc…firstline…cu’s etc…just like you. Yes, the banks are getting smart.
    2ndly, you have to agree with me that clients are paying LESS in interest now to the BANK.

  44. “Just because the affordability is there now does NOT mean they cant have a plan to go forward.”
    “As for selfishness I AM thinking about the client.”
    If you were thinking about your client you would be VERY WORRIED about not having a plan now, because I plan my clients for the FUTURE now. I care about my clients A LOT and maybe just a little bit more than you… TY

  45. Hey TD,
    Aren’t you allowed to register the lending up to 120% of the value of the property. Making it easier for clients to access credit. That was the quotes I got from TD BDM’s. So we have to scale back and TD is allowed to register above the value of the home. How safe is that approach? oh wait you don’t care as as long as your mortgage retention has higher success rate and you prevent clients from moving lenders due to higher fees to discharge a collateral charge. We will never learn that big business like banks is just in it for themselves and don’t have consumer interest at heart. Just because TD is open late doesn’t mean it gives a crap. Just wants to do some more applications for credit during that time.

  46. Hi
    Can you explain exactly how a TD mortgage specialist has access to Firstline?
    Why would TD allow its mortgage specialists to send deals to FirstLine which is a broker-only lender and competitor?

  47. You are a TD banker not broker despite what you may think. The fact that you said you have access to RBC confirms that you have no idea what you are talking about!! Furthermore, you have to first place the deal with TD and if TD can’t do it, then you forward the file to a broker in Vancouver who TD has partnered up with. I can understand you wanting to be the sheep in wolf’s clothing, haha.
    Oh, and Wasn’t it TD who is now registering ALL mortgages as a collateral charge? Who is the real winner in this one? Come on, your world is GREEN not rose coloured!!

  48. “Aren’t you allowed to register the lending up to 120% of the value of the property. Making it easier for clients to access credit. That was the quotes I got from TD BDM’s.”
    Saves MY client from paying a LEGAL fee. And if you havent noticed Jason we aren’t the first Bank to do this.
    Now if a borrower qualifies with a broker, then he/she PAYS LEGALS. TY

  49. Extactly what you said, wow you actually work in the industry. Good for you. Now does it bother you that I’m sending my deals to other lenders as a Broker would. 100% of the brokers hate that inhouse brokers for banks have access to alternate lending. AT the end of the day we are making banking comfortable for our clients. That’s why TD is ranked #1 in customer service. TY

  50. There are two sides to a balance sheet. People like you focus only on the liabilities and purposely ignore the assets. Canadian taxpayers have better access to housing and lower mortgage rates thanks to government support of the housing market.
    It doesn’t matter how long 35 year amortization have been around. They served a vital purpose. If you abuse them and land in debtor’s prison, that’s your problem. Other people shouldn’t have to suffer because a fraction of Canadians can’t manage their money.

  51. Thanks for a great post Rob. As you say, there is a good reason the banks campaigned for this (and it’s not because they’re looking out for their customers!)
    To those who posted (esp. TDbankBroker) that this is somehow good for consumers, I don’t understand how removing choices helps consumers (well qualified, informed borrowers in this case). Maybe there is some mental block that keeps bank reps from suggesting that you should take a longer amortization AND higher payments as a way to build flexibility into your mortgage (and overall lower risk.)
    I’m just happy I was able to take advantage of the 40 year amortization when I needed it … It delivered 3 years of better sleep.

  52. i am a new emmegrant, i have some money . i want to buy a house (first) to live in and 3 appartements for rent
    i can pay 20% of the price of each
    my question is:can i do this
    and will i be treated in the loan differently in property no2 and no3 and then no 4
    and will i be paying more taxes in no 2 property and no 3 and no 4 and can i do this as bussniss and deal with these properties as investements and will i have the bussiniss owner benfets like i can hire my son and have a car under my bussniss name and do and will it help in taxes
    and do ypu think that this agood way to invest safely my money and will i get good money from it ,thanks alot ALI

  53. Thanks Chris.
    Folks often confuse amortization at origination with effective amortization.
    For example, most of us can agree that taking a full 35 years to pay off an owner-occupied residential mortgage generally isn’t the wisest move in the books.
    Nonetheless, 35-year amortizations, when used responsibly, for a specific purpose, and for a limited time, are a tool that provides utility.
    Unfortunately, this tool no longer exists–even for people with default risk approaching zero.

  54. “I don’t understand how removing choices helps consumers (well qualified, informed borrowers in this case).”
    What choices did we have when there were 25 yr ams around? Were there no choices? If anything private money will be more readily available for clients who really need it.
    Chris if your borrower is “well qualified” then $33 per $100k shouldn’t make that much of a difference when it comes to ams & payments.
    Is THE BANK not making less in interest paid on these mortgages?
    Your last comment made me laugh a bit….better sleep because of your 40 yr am. Have fun when your kids are paying off your mortgage for you. You know that money could have went somewhere else…other than the BANK. TY.

  55. “What choices did we have when there were 25 yr ams around?”
    What choices did we have when banks would only lend at posted rates??? Maybe we shoud go back to posted rates while we’re at it!!!

  56. “What choices did we have when banks would only lend at posted rates??? Maybe we shoud go back to posted rates while we’re at it!!!”
    Oh really you are really making sense now, how about lets stay on topic…we’re talking about choices. Aaaaand, There’s plenty of choices. TY

  57. Rob, why wasn’t there such a fuss when we took the 40 year am away?
    Anyways, In the end as a homeowner, in my opinion, this move strengthens the market for me. I’m all for it.

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