Latest in mortgage news: BC regulator slaps CIBC with $3.4M fine over mortgage violation
CIBC was recently fined over $3.4 million by British Columbia’s consumer protection agency, Consumer Protection BC, for violations related to mortgage discharge documentation.
The regulator said CIBC failed to meet its obligations in properly discharging mortgages upon sales, a violation found by inspectors and acknowledged by the bank in an undertaking between parties dated October 6.
By law, lenders must provide a discharge document to the borrower within 30 days of a mortgage loan being fully paid, enabling the Land Title and Survey Authority of British Columbia to clear the property title. Lenders can charge up to a maximum of $75 for the discharge document.
This fine is part of a broader enforcement action, as CIBC is the latest major lending institution in Canada to face penalties this year for similar violations. Fines have also previously been levied against TD Canada Trust ($5.3 million), Scotiabank ($387,150), BMO ($132,700) and HSBC ($305,900). Six other financial institutions operating in B.C. have also faced penalties for non-compliance with mortgage discharge regulations.
“Consumer Protection BC’s recent assessment of the financial sector’s compliance with provincial consumer protection laws showed that there is broad non-compliance when it comes to the requirement to provide a consumer with a discharge document within 30 days of a mortgage loan being paid in full,” Consumer Protection BC said in a statement in July.
Consumer Protection BC’s investigation covered the period between January 1, 2018, and April 1, 2022, during which the bank is now required to demonstrate that all standard residential mortgages have been properly discharged. CIBC has 30 days to pay the fine, which will go to the regulator’s Consumer Advancement Fund.
In other news…
Homebuilding at “full capacity” as new starts rise 8% in September
Despite high interest rates and high construction costs, Canadian homebuilding activity surged in September.
New housing starts totalled 270,500 units in the month, representing an 8% jump from August, according to data released Wednesday by the Canada Mortgage and housing Corporation (CMHC). The biggest increases were seen in Montreal (+98%) and Toronto (+20%), while starts were down by 17% in Vancouver.
“Starts have been steadily grinding up, with the six-month average now at its strongest since February,” noted BMO’s Priscilla Thiagamoorthy. “The report reinforces the argument that Canadian homebuilding continues to run at full capacity.”
Housing starts are now about 20% above pre-pandemic levels on a trend basis, according to Rishi Sondhi of TD Economics.
And while recent government actions, including removing GST on purpose-built rental building and zoning changes to allow for more density, Sindhi said the current level of activity isn’t likely to be sustained.
“We still expect starts to cool through next year, as past declines in home sales filter through into homebuilding,” he wrote.
Royal LePage lowers home price forecast for Q4
Following a “sluggish” third quarter in Canadian real estate, Royal LePage has revised down its house price outlook for Q4.
Despite the lower forecast, the agency is still expecting the aggregate price of a home to rise by 7% in the fourth quarter, down from a previous forecast of 8.5%. It expects some cities to see higher year-over-year price growth in Q4, including Calgary (+9.5%), the Greater Toronto Area (+9%), the Greater Montreal Area (+8%) and Winnipeg (+8%).
More moderate gains are expected in Edmonton (+3%) and Regina (+4%).
“With activity slowing, home prices softened in some of our major markets over the last three months, following a stronger-than-expected second quarter,” said Phil Soper, president and CEO of Royal LePage. “While trading volumes in most regions remain sluggish, Canada’s housing market is on solid footing, with pent-up demand building. We don’t anticipate a material change in property prices through the remainder of the year.”
Mortgage arrears holding steady near record low
Despite 475 basis points (4.75%) worth of rate tightening over the past year and a half, mortgage arrears continue to remain just off their all-time low.
For the seventh straight month, the national arrears rate held steady at 0.15%, or 7,846 mortgages out of a total of 5.08 million, according to data from the Canadian Bankers Association.
The arrears rate tracks mortgages that are behind payments by three months or more. While this has ticked up from the all-time low of 0.14% reached last year, it is well below the highs seen during the pandemic, which saw a peak of 0.27% in June 2020.
The arrears rate is highest in Saskatchewan (0.57%), Alberta (0.32%) and Manitoba (0.28%), and is lowest in British Columbia (0.12%), Quebec (0.12%) and Ontario (0.09%).
$1T needed to ease housing affordability: CMHC
The Canada Mortgage and Housing Corporation (CMHC) recently estimated that it will take an investment of at least $1 trillion to alleviate the country’s housing affordability woes by the end of the decade.
This projection is based on CMHC figures that suggest 3.5 million additional units of housing will be needed to bring the country’s housing stock to over 22 million by 2030.
According to the report authored by CMHC deputy chief economist Aled ab Iorwerth, this massive investment will require collaboration between the private sector alongside government policies and investments. The private sector’s involvement is seen as crucial due to the sheer scale of the challenge, which is too large for governments to tackle independently, he said.
“When demand is strong and increasing, combined with insufficient and unresponsive supply, you end up with a housing affordability crisis,” ab lorwerth wrote. “Housing experts, economists and advocates can all agree on this. It’s no longer a question of whether we need to increase supply but rather how it can be increased.”
Toronto’s vacant home tax will increase to 3%
Toronto City Council has voted to increase the city’s annual vacant home tax from 1% to 3%.
The move comes less than a year after the tax came into effect in February and is part of the city’s efforts to pledge more funds towards housing programs as it tries to alleviate the housing affordability and availability crisis.
A staff report estimated that this hike could generate about $105 million in 2025, which is roughly double the expected revenue in 2024 at the 1% tax rate. The increased revenue from this tax hike is anticipated to decline in the subsequent years as more homes are filled.
A property is considered vacant if it hasn’t been used as the owner’s principal residence or was not occupied by tenants for a total of six months of the previous calendar year.