Merix Financial’s always observant CEO Boris Bozic could have a PhD in mortgage industry analysis, if there were such a thing. Last Thursday he appeared on Canadian Mortgage Hangout. Here were 10 of his notable quotables from that webcast.
- “When you have regulators that threaten ‘interest rates are going up’ (for multiple years)…eventually the consumer says ‘enough already’”
- “The only statistic that I really look at is the employment number…If people are working, they can make their payments.”
- “The monolines play a critical role…in terms of offering (consumer) choice…And it’s only now that the government is realizing that.”
- Monoline lenders will represent about “$23 billion in volume” in the brokerage space in 2013.
- The recent drop in market share for monolines is a “direct reflection to the limitations on conventional mortgages today…The banks have been able to benefit from a number of those changes.”
- “…An issue for all of our monoline lenders…is the availability of conventional financing, because of the restrictions and the cap on bulk insurance.”
- “…The tone and the tenor coming out of Ottawa is that the government is looking to scale back the ‘risk’ (i.e., the sovereign guarantee on insured mortgages) for Canadian taxpayers.”
- Regarding the bad wrap on bulk insurance: “Wouldn’t’ you rather have the sovereign guarantee on a 70% LTV (mortgage) versus the 95%’er?”
- “One of the things we should be considering [is that a] 95% mortgage should be priced differently than a 70% LTV.”
(CMT Note: For a while now, many lenders have been offering cheaper rates on insured mortgages with 5% down, than those with 20-30% down. And it’s not by choice. It reflects the reality of what’s available in today’s funding market.) - “It would be beneficial…if we went back to a risk-based pricing”.
Rob McLister, CMT
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Last modified: April 26, 2017
First off Rob, thank you for posting about last weeks #cmhTV with Boris. Much appreciated!
Secondly, When are you coming on the show?
Hey Scott, Well at least I’m not put on the spot. LOL. But seriously, it would be a pleasure. We can coordinate offline? Cheers…r.
“It would be beneficial…if we went back to a risk-based pricing”.
What an amazing concept! Yes it would be beneficial if the government wasn’t massively distorting the market and forcing lenders to reward higher risk borrowers with lower rates.
Risk rate pricing would be great!! Deadbeats do not deserve the best rates – absolutely a great idea! It would also put people into houses that are deserving. NOTE – before everybody gets all bent out of shape – I know that sometimes borrowers are not deadbeats by their own choice (job loss, etc) – but I am sure you all know what I am talking about here.
risk based pricing, like they do in the States, absolutely ….
+1 to Rob for summarizing this for us…and +100 to risk-based pricing. It’s always amazed me how counter-intuitive it is that it costs people more to borrow at a low LTV than it does at a high LTV. Crazy.
The mortgage insurance premium paid by the borrower, greatly surpasses any “savings” due to lower interest rates for high LTV borrowers.
Due to mortgage bundling and securitization, is it really any wonder that government of Canada insured loans have lower funding costs?
Thanks Rob!
Time spent listening to Boris Bozic speak, is time well spent!
Great comments! Having been in the industry for over 20 years, it’s a breath of fresh air to hear a lender speak common sense. Pricing to risk is definitely lost in the “A” market. Have different pricing for different risk banks has been a long standing policy with grassroots finance companies and it works. PS: keep up the great work on the trailers Boris!
Yes the government is distorting the market by making it impossible to insure and securitize conventional mortgages at a reasonable cost. Low ratio insurance is essential for mortgage funding if you don’t have a balance sheet. Flaherty will happily insure a 95% LTV but he balks at 80% LTV. Senseless.