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Mortgage Broker News | 22 Mar 2017, 08:15 AM Agree 0
Dustan Woodhouse examines just how preposterous the recent mortgage rule changes were by comparing lending practices of big banks and monolines
  • Mike Celuch, Windsor, ON | 22 Mar 2017, 09:13 AM Agree 0
    Great analogy Dustan, but in reality was the government behind this or was it the big banks lobbying politicians for these changes.
  • Tomas | 22 Mar 2017, 09:17 AM Agree 0
    What are the stats on who has more incidences of mortgage fraud, banks or non-banks?

    Hypotheticals are pointless, whoever incurs more fraud deserves to be penalized. Simple as that.
  • Stevie T. | 22 Mar 2017, 09:21 AM Agree 0
    Excellent article, thank you!
  • Brian | 22 Mar 2017, 09:32 AM Agree 0
    Please send this article to the national newspapers. We as brokers should advocate!
  • Ross T | 22 Mar 2017, 09:38 AM Agree 0
    Sorry you lost me at wine coolers and whisky Dustan
  • Neil Wilson | 22 Mar 2017, 09:40 AM Agree 0
    I appreciate Mortgage Broker News carrying this article and Dustan clear writing analogy. No offense to Mortgage Broker News intended but why isn't this issue being given the same press as the recent TD pressure for profits that is being exposed on CBC and other mainstream Media?
  • Paul Meredith | 22 Mar 2017, 09:43 AM Agree 0
    Extremely well put!
  • Rose | 22 Mar 2017, 10:03 AM Agree 0
    well stated..perfect analagy!
  • Cameron Mackie | 22 Mar 2017, 10:21 AM Agree 0
    Great article Dustin.

    I would lIke to see the stats on employment in the monolines by the end of this year and next. I'm sure the monolines will have large losses with this new choke hold and force many hard working employees out their door due to the drop in revenue and higher cost of doing business.

    This reminds me of the saying. A child (Government) is told if you eat this cookie now, you don't get the chocolate cake later.

  • Nikki Taddeo | 22 Mar 2017, 11:05 AM Agree 0
    Brilliant !..... Excellent analogy.......!!! This should be sent to all the newspapers!... All of our MP's should see this as well. I am going to send a copy of this to my local MP.....!!! And share this on social media.
    So lopsided isn't it. A friend of mine has a son that has been out of work for years. He opened a bank account and was given a visa card and overdraft privileges immediately. HE HAS NO WAY OF MAKING PAYMENTS ON SAID OVERDRAFT AND VISA, but obviously used both up within a very short period of time. Guess who had to pay for it!!!!
    Thanks so much Dustin....
  • Brian | 22 Mar 2017, 11:32 AM Agree 0
    Not an apt analogy. In any event, it boils down to one question - why is the government in the mortgage insurance (distortion) business in the first place? Let private industry price the risk and insure the risk. Of course, the banks and monolines love the old system (even the current system, but not as much), because the taxpayer is holding the risk and the lenders reap the interest reward. Clearly, dictated by self-interest, brokers, like the article writer, want easy mortgage availability as that begets more mortgage business for them. The new rules do the opposite. All these players have a vested interest in CMHC absorbing lender risk - all have an agenda, which is not unexpected but must be understood. Time to take CMHC back to its roots - helping veterans to buy a house when retiring from the service.
  • Lisa J | 22 Mar 2017, 12:00 PM Agree 0
    Well said!!!
  • Elaine Peligren | 22 Mar 2017, 12:11 PM Agree 0
    This analog should be taken to the general public. The only people really knowing about this are those affected. All Canadians should know about this.
  • | 22 Mar 2017, 12:55 PM Agree 0
    it is so correct with the assertion from our government that Canadians are too far in debt however to say they intend to rectify this by imposing such harsh criteria on mortgages and turning a blind eye to those floundering in car loans,visa's and locs debt is a cop out and shows really how much they care about the indebtedness. Monolines have taken it on the chin and for sure have been affected harshly,i do notice however that monolines do have tools available to continue to do business with rental offsets,100% add backs for cmhc high ratio suites in dictated areas and other tools available which they choose to not utilize and have tightened their procedures to a ridiculous extent when they should be trying to utilize the tools they have,they just choose not to. Where we in the sales force have been told to evolve they have chosen not to.
  • | 22 Mar 2017, 01:28 PM Agree 0
    I agree please send this article to the National News papers and news media !! Great article Dustin !!
  • Banker | 22 Mar 2017, 01:54 PM Agree 0
    Very simple answer: Company 2 relies on insurance against default from the gov't and thus the tax payer. Company #1 is taking on that risk themselves.

    The truth of the matter is that if these monolines NEED the government to backstop them, then here are the rules that you need to follow to get the insurance. It is the gov't insurance and they have the right to set the rules. If monolines do not like it then don't use it. Simple as that.

    With respect to your numbers on default being lower, who cares. Try and pitch that line to the other investors and see if they bite. I suspect they won't so why in gods name would we ask the tax payer to take on something that the free market won't?

    With respect to allowing these monolines to allow competition, they can still do this by using other source of funds. However if they find that their other sources cause them to be less competitive, then guess what, this is life. If they are not competitive then they are not competitive. Do not try to create equality where it does not exist.
    • Broker | 23 Mar 2017, 12:17 AM Agree 0
      I hope you realize the implicit government 'backstop' a bank charter provides? Literally the ability to lend money into existence - the largest built-in subsidy to any industry in Canada, bar none. So please, tell us more about the free market that banks lend in....

    • Dustan Woodhouse | 26 Mar 2017, 02:23 PM Agree 0
      Both companies have access to uninsured mortgage products.

      And actually the banks were the single largest purchasers of bulk insurance on mortgages in the game, all lenders mitigate risk by insuring whenever they can.

      In any event the analogy holds today as it is specific to buyers with less than 20% down - which means whichever company the buyer chooses they are getting an insured product.

      So which one creates more risk for the insurer (you) by offering a host of unsecured debt as part of the mortgage approval process?

      To be fair our tax dollars are not at risk even with as much as a 40% drop in property values nationwide (as per CMHC's own recent risk study and their significant reserves) - but nonetheless your tax dollars backstop individual mortgages from both companies and the governments own data shows which one does a better job of mitigating risk.

      The post is not as much in support of the monoline model as it is meant to highlight the risks that seem to be ignored. Risks playing out in 100% higher arrears rates.
  • Sales force agent | 22 Mar 2017, 01:58 PM Agree 0
    The only people affected are the mortgage brokers whose party is over. So long boys!
  • Tina F. | 22 Mar 2017, 06:11 PM Agree 0
    Excellent piece...love the analogy!
  • MortgagesLab | 22 Mar 2017, 07:29 PM Agree 0
    Great post Dustan, I'd love to understand the perspective of the government on why this benefits consumers.
  • | 22 Mar 2017, 07:35 PM Agree 0
    To Banker and Sales force agent,

    Monolines offer a wide variety of products the banks do not, its called competition and the public likes it given the fact they funds billions annually. Default rates do matter and more so when the difference between banks and monolines is that much. I'm a broker, worked for a bank and frankly brokers know more, provide choice and our licensing is superior to yours, which is nothing. NO offense, Canadians are better off with choice and competition and getting back to main issue, new guidelines meant well but 100% ill conceived and hurting Canadians they mistakenly think they are helping.
  • Kelly Rowe | 24 Mar 2017, 05:30 PM Agree 0
    Politicians = Government
  • Kelly Rowe | 24 Mar 2017, 05:33 PM Agree 0
    Politicians = Government
    Also think it is prudent to mention when the Government says that unsecured debt is not their problem, I say, well who takes on the load of debt from these consumers when they go bankrupt, ALL OF US.
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