A petition requesting the Department of Finance reconsider its recent mortgage rule changes has been launched.
It reads:
In light of the new mortgage rules in Canada that are scheduled to take affect October 17, 2016 the mortgage, real estate and insurance industry, as well as homeowners and citizens here believe that the rules imposed are excessive and:
1. Focused on minimizing/eliminating Monoline mortgage lenders that maintain healthy competition.
2. Eliminate re-financing options for homeowners
3. Will eliminate thousands of jobs in the real estate, mortgage and insurance sector
4. Reduce tax revenues at the municipal, provincial and federal level via lost wages, land transfer taxes and sales taxes from real estate industry affiliated businesses
5. Create a sharp decline in real estate values quickly depleting homeowners equity positions
The broker who shared the petition with MortgageBrokerNews.ca said the person responsible for it will remain anonymous for the time being.
Finance Minister Bill Morneau announced new housing policy measures aimed at protecting the nation’s housing industry.
Those preventative measures are; Standardizing lending criteria for high- and low-ratio mortgages, including a mortgage stress test, closing tax loopholes for capital gains exemptions on principal residence sales, and consulting with industry stakeholders to ensure risk is properly distributed. This may include lender risk sharing.
While the full impact of the rule changes has yet to be determined, many industry stakeholders have claimed they create a competitive disadvantage for the broker industry.
One requirement under the changes is that all insured mortgagors must qualify under the Bank of Canada’s benchmark five-year rate, which is currently 4.64%. According to Genworth Canada, 1/3 of its 2016 insured clients would not have had difficulty qualifying under these requirements.
Another major change was around low-ratio mortgage insurance eligibility requirements.
As of November 30, 2016, low-ratio mortgages from lenders that insure using portfolio insurance must meet the same criteria heretofore required of high-ratio insured mortgages.
Genworth published a great primer on what those requirements are:
A loan whose purpose includes the purchase of a property or subsequent renewal of such a loan;
A maximum amortization length of 25 years;
A maximum property purchase price below $1,000,000 at the time the loan is approved;
For variable-rate loans that allow fluctuations in the amortization period, loan payments that are recalculated at least once every five years to conform to the original amortization schedule;
A minimum credit score of 600 at the time the loan is approved;
A maximum Gross Debt Service ratio of 39 per cent and a maximum Total Debt Service ratio of 44 per cent at the time the loan is approved, calculated by applying the greater of the mortgage contract rate or the Bank of Canada conventional five-year fixed posted rate; and,
A property that will be owner-occupied.
As a result of these changes, some monoline lenders have cut some programs.
One major channel lender told MortgageBrokerNews.ca that it is holding off on making any changed before more information is known and the potential impact fully studied.
