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Avoiding Policy-made Crises

The-Mortgage-FilesA mortgage executive at a major bank (who requested anonymity) wrote to us today saying:

“Mortgage policy decisions are being made that may lead to the very outcomes that we are trying to avoid.”

He’s referencing the potential rule tightening and new mortgage liquidity constraints that are making headlines.

Both of those factors could raise the cost of mortgages and adversely impact homebuyer demand. These are risks, he says, that could cause a natural housing correction to snowball into something worse.

CAAMPIn a related vein, the Canadian Association of Accredited Mortgage Professionals emailed this message today:

“CAAMP is advocating the following fundamental messages:

  • Government has already tightened lending criteria significantly and mortgage volumes have decreased;
  • The issue of lenders and the mortgage insurance ceiling has nothing to do with lending practices, but rather liquidity and capital requirements;
  • Arrears and defaults in Canada remain low and are declining;
  • Homeowners have significant equity and are paying down their mortgages.”

CAAMP concludes:  “As an industry, we are vigilant and cautious against further measures that could precipitate a weakening of the housing market.”

Rob McLister, CMT