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Ottawa tightens mortgage rules

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Mortgage Broker News | 17 Jan 2011, 09:33 AM Agree 0
Finance Minister Jim Flaherty announced a second tightening of mortgage rules in the past 12 months as Canadian household debt became a growing concern at the end of 2010 and historically low interest rates continued to persist.
  • Elfie Hayes | 18 Jan 2011, 02:15 AM Agree 0
    Last week many of us commented on and shared our insights about Harper making it tougher to get a Mortgage. Who knew we'd open our news feeders to see this announcement on what is said to be the "Most Depressing Day of the Year".

    Thanks Ottawa for making sure it is!

    I'm sorry that Canada's mortgage insurers didn't take it upon themselves to make necessary changes to borrowing if they are concerned, rather than putting it in the hands of the Government AGAIN!

    The bigger issue here as I see it, is consumer debt. While interest rates fell through the floor credit card companies did not pull back at all.

    I scratch my head and ask why this segment of the financial world is left untouched by government rules or the hardship that the recession has caused so many Canadians. I believe they have actually had great benefit from a time that has seen financial downturn in our economy.

    I predict these mortgage rules will cause greater fallout for the Self-employed. They will surely be further penalized as they were with the last round of changes.

    Has anyone heard that the job losses have brought greater numbers of Canadians into Self-employment? They're willing to take a risk and work the long hours to be sure they have an income. Where will this lead for them. I bet we won't have to wait long to find out!

    I appreciate this forum to voice my own opinion about an industry that I am passionate about. Remember this post is just that, my opinion!

  • LB | 18 Jan 2011, 04:44 AM Agree 0
    Break it down to basic necessity: everybody needs a place to live (rent or own) but not everyone needs a credit card. Tackle the real issues and quit using the real estate sector for political manoeuvres.
  • Leaders Step Up | 18 Jan 2011, 05:43 AM Agree 0
    Leaders in the mortgage industry need to step up and defend our interest. If our industry is more cohesive, co-ordinated and more concise messaging about how we could be self regulated for the benefit of the consumer, then we may turn things around. Recent CAAMP survey is a wake up call to the industry to get your act together. The banking and investment industry are self regulated and enjoy continue growth and success.
  • Consumer Debt | 18 Jan 2011, 05:49 AM Agree 0
    High household debt is mainly driving by loose credit card and consumer finance companies. The push of no money down and no interest financing is fueling higher debt levels. The gov't should go after these culprits and not the mortgage industry.
  • Debt Ratio | 18 Jan 2011, 06:06 AM Agree 0
    Why do credit card and consumer finance companies allow to get away with not following debt ratio. If first time home buyer got a mortgage with debt ratios at 35/42. Afterward, they can get a vehicle loan with a high payment at would put there ratio now at 35/60. This now place the consumer in higher risk of default than when they initially took out the mortgage. Gov't is too quick to sanction the mortgage industry while allowing other credit companies to continue their harmful practice of shoveling unbridled and unchecked debts down the consumer's throat.
  • Brad Wadden | 18 Jan 2011, 06:11 AM Agree 0
    The problem isn't the mortgage lenders; it's car loans, credit cards, department store cards, and finance companies.

    Regulate them!

  • Tim in BC | 18 Jan 2011, 09:38 AM Agree 0
    Well Flaherty won't have to worry about people that rely on the housing sector to have too much debt because most of them will be unemployed or not making very much income. They won't qualify for a credit card or a mortgage.
  • Tim in BC | 18 Jan 2011, 09:42 AM Agree 0
    Sorry I take that back. They will still qualify for a credit card.
  • Rajesh Kothari | 19 Jan 2011, 12:31 AM Agree 0
    By limiting refinances to 85% or less LTV's & not supporting HELOC's , the finance minister obviously is limiting the ability of home owners to consolidate their higher interest debts like credit cards, unsecured LOC's and car loans with the low interest debt of the secured LOC or a refinanced mortgage. Homeowers will hurt more now than before as they are now being forced to pay high interest their credit cards and even higher if they are in default. It will take take decades to pay down their balances or be forced to declare bankruptcy if they cannot keep up with the payments.
    The finance minister wants Canadians to do more savings ? How ? by paying higher interest to credit card companies and by limiting their choice to use lower interest options ?
    If the Gov't is serious & concerned about rising interest rates & homeowers being unable to pay their higher refinanced home debts - then the finance minister was better off limiting homeowners to a 5 year fixed rate only insured mortgages in case of refinances to consolidate debt. Higher savings come from higher income & economic stability will come from creating new jobs which the government hasn't done anything about. The Gov't says that Canada was insulated from the recession - I believe that Canada has always been in a recession & never seen a real boom .
  • M | 19 Jan 2011, 08:52 AM Agree 0
    The real problem I think is credit cards. There needs to be some government tightening on credit cards. They are too easy to obtain.

    People in general need to stop wanting to keep up with the Jonses. Live within their means and only spend what they make.

    If you follow these rules there won't be this problem.
  • Mike the Mortgage Broker from Marmora | 19 Jan 2011, 09:32 AM Agree 0
    Congrats to the PM & the Minister of Finance!..somebody finally stood up to the banks & looked out for best interests of the consumer & the taxpayer...& it wasn't our industry or the "leadership" of of our associations.

    HELOCs as a first mortgage are the kiss of death to the consumer & their confidence in our industry.

    1) HELOCS are registered in Ontario as collateral mortgages allowing the lender to re-advance funds..did you explain that to your client?

    2) Collateral mortgages, unlike "normal mortgages" allow the lender to increase the interest rate when the HELOC is in default. Many of you were flogging a certain bank's HELOCS not knowing that the bank was having the client sign docs that allowed the rate to be increased to P+10%, yes PRIME + TEN%!, when the borrower was in default. Nobody buys a house planning to go go into default, but stuff happens...did you explain that to your client?

    3) HELOCS allow the lender the right to offset. If the borrower has other unsecured debt with that lender & the borrower goes into default, the lender can claim the unsecured debt to be secured under the collateral mortgage agreement...did you explain that to your client?

    4) THe bank had your clients sign the HELOC docs in the bank or in the client's home with a bank-approved "closing shop", not the borrower's lawyer who would be bound to explain these risk's to the borrower...did you explain that to your client?

    5) Your borrower's future options are reduced & costs increased with a HELOC because lenders do not accept "transfers" of HELOCs the way they accept "transfers" of normal first mortgages. A borrower would be forced to pay the costs of dischargeing the HELOC & then paying costs to register the new mortgage...did you explain that to your client?

    Why should the Canadian tax payer guarantee HELOCs used to bailout the poor credit card & consumer debt underwriting of the chartered banks? Why allow the banks/credit card companies to strip the "fat" off a consumer, then toss the poor bugger's carcass into an interst only HELOC, guaranteed by the rest of us?

    THe credit card companies will have to do better due diligence before they hand-out unsecured $20K limits...now they won't be able to consolidate the credit card debts by giving the consumer an LOC, then increasing the limits on the LOC until they need to roll it into a mortgage.

    As a mortgage broker of a certain age, I am absolutely embarressed by being in the same business as you "5 day mortgage agent whizzards" who keep drinking the bank's kool-aid & really don't know your ass from your elbow about mortgages, mortgage law or real estate...before you totally screw-up our industry why don't you put on your pointed little hat & go back to your previous job of asking that most earth shattering of questions,"Sir, would you like large fries with that?"
  • Jeremy From Calgary | 19 Jan 2011, 09:39 AM Agree 0
    Jim, if you're following this, you're a bonehead! So is your puppet master Harper! This is a political move prior to a possible election call. What you just did will do little to help things moving forward. It diverts the attention from and protects the big banks golden egg, high interest credit facilities. This move also reduces competition among the lenders by removing HELOC products from companies like Merix and MCAP, not to mention further tying the hands of the consumer moving forward.

    Jim, I want to also thank you for giving the banks 50 billion, the same banks who fail to properly manage their own money, off the backs of hard working Canadians. I guess 500 million quarterly profits is not enough.

    Get your head out of the big bank's ass and do something that will actually benefit Canadians!

  • AB Mortgage Broker | 19 Jan 2011, 12:22 PM Agree 0
    Mike, I can understand and appreciate your concerns regarding the industry. If everyone put the same passion towards our business as you do your writing, the industry would be a much different place.

    You speak about the HELOC and I want to set the record straight. Canada's big bank do not insure their HELOCs and therefore the HELOC with remain after March 18! This new rule only affects the non-bank lenders! I seem to recall banks suggesting to clients to refinance and take out equity for depreciating assets back in 2006 and 2007. 100% of the bank want and try their hardest to keep clients on the books as long as possible. The big banks will continue to take advantage of the naive consumer and it's up to our industry to educate the public.

    I find it interesting that you'd praise Harper and Flaherty. Please explain to us how they stood up to the banks? This decision is exactly what the big 5 wanted!
  • Mike the Mortgage Broker from Marmora | 20 Jan 2011, 01:46 AM Agree 0
    AB
    I put more passion in my business than I do my writing.

    I would like to know your source of info about "the banks not insuring their HELOCs"...based on my experience & sources within the banks I have been advised that BANKS DO BUY "portfolio insurance" on HELOCs, bank pays the insurance premium & then package them off as MBSs...as away to balance risk & as a source of revenue.

    HELOCs will remain after March, but on the banks own books....so they will be harder to qualify for...is that bad? Probably not as Canadians have been using their homes like ATM's the same way our neighbours to the south have been...I don't think the 5 were all kicking with the same foot...In my opinion a certain green bank was becoming significantly more agressive & less consumer friendly in this manner...now the playing field is at least even....and the consumer wins
  • julie pearson | 29 Jun 2012, 06:25 AM Agree 0
    this should of been done before too many family got into debts and all. I know broker that puts in wrong income and all they should loose there lisense they dont think of the consequense of the family .... I have a long story i can tell about this broker that does that hope to hear from you .
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