Random thoughts on this week’s mortgage rule madness…
Who’s Left Standing in December
It’s unclear which insured-lenders will still do refinances, rentals, super-jumbos ($1 million+) and 26- to 35-year amortizations come December. As we’ve seen, some lenders have already announced their (hopefully temporary) withdrawal from these categories. Lenders I spoke with today were scurrying to arrange purchase agreements with balance sheet lenders to create liquidity for these mortgages. It’s going to be a week or two before we know the bank’s appetite. They won’t rush to load up their balance sheets with non-standard mortgages. That, we know.
The Demand Effect
Will Dunning, chief economist at Mortgage Professionals Canada, tells BNN, wait until December’s CREA housing data is in before speculating on how the DoF’s rules will sway home prices. That interview.
Market Reaction T + 2
It’s 2/365ths A.D. (After Debacle), and investors have spoken again. For a second day they dumped stock in insurance-dependent lenders. In the process, untold millions in market value were obliterated.
These are ultra-high-quality lenders, managed by good, honest people, underwriting rock-solid low-arrears mortgages and saving Canadians billions (literally). They don’t deserve this in any way.
Most banks are outperforming the market.
Time for Perspective
As bad as these changes were for consumers and lenders, we all know that Canadian lenders are run by extremely resourceful people. Some lenders may die off or consolidate if the Department of Finance doesn’t relent on its decree, but many will find a way to keep doing these uninsurable deals at higher interest rates.
I had a chat with Gary Mauris tonight, head of Canada’s largest broker network. Here was his take:
“I’d like to suggest and encourage all industry participants to exercise patience until we have clear, accurate information and the industry has done a thorough evaluation of the material impact. We as an industry have gone through numerous policy changes in the past, and have weathered the global credit crisis. These regulatory changes will no doubt be disruptive in the short term, but our industry is resilient and we will adapt and continue the valuable service that we provide Canadians. It’s important that we continue to focus on all the positives of our industry and avoid getting caught up in the negative rhetoric that only draws attention and damages the good work and many advances that this industry has achieved. Anytime there are headwinds in an industry, there are also opportunities. Now is the time to highlight our expertise, help the public navigate the changes and be financial thought leaders during this time of temporary uncertainty.“