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Flaherty Talks Mortgages With CAAMP

Flaherty-CAAMPFinance Minister Jim Flaherty met Monday in Toronto with the Canadian Association of Accredited Mortgage Professionals (CAAMP). The Minister meets annually with stakeholders such as CAAMP and, as can be expected, housing and the mortgage market topped the agenda.

The objective of the meeting was to discuss the health of the industry, as assessed by CAAMP. Among the issues raised and discussed:

  • As reported, the Minister continued to express his comfort with the current pace of housing and the insured mortgage market.
    • That said, what OSFI does with things like the maximum conventional amortization is a different story. (OSFI head Julie Dickson wouldn’t possibly tighten lending before speaking at our national mortgage conference in November, would she?)
  • Mr. Flaherty made clear to CAAMP the vital role of housing in creating jobs, especially in a province like Ontario where manufacturing and provincial exports have been sliding.
  • The Minister also expressed appreciation of the important role brokers play in creating a competitive mortgage market.
  • CAAMP officials expressed the vital function of government-guaranteed mortgage backed securities (MBS). Expect more discussion on this and further policy measures.
    • Small to mid-sized lenders (directly or indirectly) rely on government-backed “market MBS” for mortgage funding. That contrasts somewhat with large banks, which often use it to ease their regulatory capital burdens.
    • The government’s recently imposed MBS limit is currently a focal point in the industry. We’ve seen what happens when funding dries up for monoline lenders. It happened in Australia where four big banks now control more than 4 out of 5 mortgages—affecting product choice and pricing. Insomuch as it adds no material risk to taxpayers, Ottawa must foster a level playing field for prudently run small lenders.

The Department of Finance continues to monitor housing through a microscope. There’s been a large rebound in home sales lately, which has some in the mortgage business fearing more regulatory tightening. But given that:

  • most people have expended their sub-3% pre-approved mortgage rates
  • affordability has deteriorated
  • we’re still feeling residual effects of last year’s mortgage regulations…

…the fall housing market might not maintain such a vigorous pace.

Rob McLister, CMT