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Mortgage Broker News | 19 Aug 2016, 08:15 AM Agree 0
A former banker argues in favour of saddling Canadian banks with more mortgage risk, but don’t expect those lending behemoths to take it lying down
  • Ron Butler | 19 Aug 2016, 09:50 AM Agree 0
    The statement that "having no skin in the game is very risky" is interesting because this is a system that has worked flawlessly for more than 60 years. So no actual risk for the last 6 decades. There has never been a cash call on the federal governments to bail out mortgage insurers. Mortgage insurers have gone broke in the past but to my knowledge the federal government did not fork over any money.

    Let's face facts, down loading a portion of the cost of loan default to the lender will simply result in higher rates, banks don't take ever take profit risks they just increase rates. Will mortgage insurers instantly reduce premiums to consumers? Wait........are those crickets I hear?

    So in the end the consumer pays more. Now here's the real worry for mortgage brokers: banks CAN share in the risk of default, banks and other FIs have balance sheets but what about monolines? What happens to companies with little (compared with FIs) or no balance sheet cash? Do some monolines close?

    This down loading of risk is the perfect storm for consumers with mortgages. The banks raise interest rates and the companies (monolines) that create the highest level of mortgage rate competition are crippled.

    Yep, brilliant idea.
  • Laurent Charbonneau | 27 Sep 2016, 11:35 AM Agree 0
    I have been in the mortgage lending business for 34 years and since 2008 the mortgage lending regulators constantly change mortgage lending rules and constantly make rules changes to prevent a financial crisis. What regulators are missing is that a huge part of the problem is the lack of regulations for credit cards; unsecured line of credits and consumer loans which are steadily making Canadians going further into debts. It is time for regulators to leave the mortgage industry alone for a while and look at imposing regulations in the consumer loans and cards industry instead. We often see clients refinance their mortgage only to pay off unsecured debts with their available equity left in their personal residence.
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