One broker believes the new B20 guidelines should allow lenders to create a residential mortgage-backed security market entirely focused on uninsured loans.
“They should be able to create an uninsured RMBS market and the paper would be clean enough for investors because of the B20 Guidelines they follow,” says Murray Groen, a broker with Mortgage Brokers City, The Groen Team. “I really think that the sky is not falling and things will work out.”
The concern in Canada over uninsured RMBS is asset quality, which hinges on qualified residential mortgages reflecting best mortgage lending practices.
Groen says that the majority of clients do fit and will be approved under the B20 guidelines.
“If the lenders are following those guidelines, why do they need CMHC or Genworth
or Canada Guaranty to cover the loans?
“So far, it is just at the discussion point from what I understand from the insurers I have spoken with, therefore I think this may become a tool that the government uses to slow down the economy when needed and pick up the economy in the housing and mortgage markets when needed as well,” he told MortgageBrokerNews.ca. “It is a way to stimulate or deflate the economy without moving rates.
Groen says the crucial part is educating investors that the loans are good and should be invested in.
“Once investors are onboard it really could have positive impact on the uninsured RMBS market, and it makes sense that as an industry we follow the guidelines to make this happen.”
Although Groen believes the mortgage industry, as a whole, may be slowing down, “the change in securitization of Insured MBS could and will help develop a sustainable uninsured RMBS market,” he says. “We may hit a few bumps along the way but overall I believe it to be good for Canada and will be good for our lenders as well as our borrowers.”