MPC Calls for Halt to Further Mortgage Tightening

Mortgage Professionals Canada has asked the Department of Finance for a moratorium on mortgage rule changes until the effects of the current changes are known.

Speaking before the Standing Committee on Finance this week, MPC CEO Paul Taylor spoke to the association’s key concerns about the new rules and its hope that certain aspects will be revisited.

“The recent changes are having a cumulative negative impact on the mortgage market and ultimately on the Canadian consumer,” MPC president and CEO Paul Taylor said. “We are asking for slight amendments to the portfolio insurance eligibility guidelines, and to wait for the remaining existing changes to make their way through the market before implementing any further changes.”

He touched on the disproportionate impact the portfolio insurance changes are having on non-traditional bank lenders, as well as the reduced purchasing power for young homeowners due to the more stringent stress testing of insured mortgages.

Taylor also told the committee how the new rules are negatively affecting the mortgage broker channel and hurting competition.

“Canadian consumers have been more and more inclined to use the services of a mortgage broker to provide choice, advocacy and support, and to assist in the technical requirements of mortgage qualification,” he said. “Placing competitive disadvantages [on] the non‐traditional bank lenders will adversely affect this segment of the Canadian mortgage marketplace…We therefore maintain that in light of decreased competition, increased financing costs, decreased purchasing power, and increased regional prices and access disparity, that the government suspend any further changes to the housing market it is considering.”

MPC’s Recommendations

The association made the following specific recommendations to the Standing Committee on Finance:

  1. Allow for refinanced mortgages to be included in portfolio insurance. “If an 80% loan‐to‐value ratio is unacceptable, please consider reducing the threshold to 75% rather than removing eligibility to these products entirely,” Taylor said. “This adjustment would alleviate some of the competitive disadvantage pressure the cumulative effect of these changes place on the non‐traditional bank lenders.”
  2. Reconsider the increased capital reserve requirements implemented on January 1, 2017, for insured mortgages, as they are making low-ratio insurance too costly for small‐ and mid‐sized lenders.
  3. Apply the stress test to all mortgages sold by all federally regulated lenders, not just insured mortgages.
  4. Uncouple the stress-test rate from the big five banks’ posted rates. Use an independent mechanism to determine the rate.
  5. Conduct a review of the long‐term impact of regional‐based pricing on the Canadian economy as a whole, and the potential additional harmful effects on already-strained regional economies.

The first three recommendations above would needfully re-level the playing field between major banks and Canada’s 400+ other lenders. It would put real choice back to hands of Canadians and meaningfully reduce borrowing costs for well-qualified borrowers. If the government deemed it necessary, these “fixes” to a now broken system could be re-instated with stricter qualification criteria, ensuring the government’s concerns (e.g., over-leverage) are addressed.

We’ll have more on the hearings to come, including surprising testimony from OSFI.

  1. These hearing are public record, just Google “Parliamentary Hearings” and click on the Finance committee. The entire 15 hours is there to watch. Listen to what the regulators have to say and watch their body language. You will observe the complete disdain that OSFI’s Ms. Rogers holds for our whole channel. If you listen carefully you will hear abject lies such as words to the effect of:: “we just set capital requirements for the mortgage insurers they can price their product in whatever way they please” completely false. If you only have ONE PRODUCT to sell and you are forced to re-direct more of your sale price to reserves how in the world can you just leave the price the same as before? Run at a loss? Fire half your staff? There is a massive amount of misinformation being pushed out by various Ottawa bureaucrats and we all need to study this and carefully think about how we should respond, It is becoming very clear that there is a purposeful desire to reduce the volume of monoline and broker originated mortgage business in Canada. We all need clearly grasp these changes were not accidental. It is very unlikely we will change these bureaucrats minds, we have to change their bosses minds. We have to make the politicians feel the need to step in and reverse their bureaucrats actions.

  2. It only makes sense to wait and see how the new changes affect the mortgage industry before adding new changes. There have been so many recent changes that consumers need a mortgage agent to help them navigate and explain the new rules imposed by our government. The lenders are still holding back products to implement the new rules, while they figure out how to navigate them.
    The regulators need to take a breath and wait, and let the consumers breathe a little as well before confusing them more:)

  3. Why… why #3???
    Qualification is hard enough. Asking clients with 20% or more to qualify as per the Stress Test further hurts everyone. When they are already so strict on allowance income types, minimum liability types, property types, area allowances why poke the bear…
    Number 3 is lame…

    1. That is intended to level the playing field, since the Banks not only set the qualifying rate that their competitors are forced to use, the Banks are free to then ignore the qualifying rate in lending their own funds. Its a discrepancy that severely hinders their monoline competitors.

      The better solution would be to go back to the way it was, with bulk insurance available for conventional transactions. Its clear the government won’t do that, so they should at least make everyone (banks included) play by the same rules.

  4. Totally agree with you on #3 W.H.Y. All this item does is make it more difficult for the consumer to qualify if they are forced to qualify at 4.64 with conventional mtges with the big 6 banks. If we are honest with ourselves, call it what it is: we don’t want the big banks to have an advantage over brokers on this. Seems we are talking out of the both sides of our mouth here. On the one hand, we are crying foul as the changes will hurt the consumer. Then if our next breath we are asking for changes to make things more fair for brokers even though it hurts the consumer. It doesn’t take a genius to read right through this guys.

    1. I don’t see any problem with this Jim. The government is arguing that low ratio mortgages need to be stress tested. The Bank of Canada said the ratio of uninsured borrowers with LTI ratios over 450% is becoming worrisome. So it follows that low ratio mortgages at banks should be stress tested too. If Ottawa doesn’t require this, it is being hypocritical. I think MPC is simply reminding officials of this point.

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