Brokers apprehensive about potential B-21

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Brokers may not buy into Realtor optimism, with two industry players taking to’s comments section to air their fears of the impending B-21 guidelines.

“This time the insurers are said to be the target and this could mean anything from increasing the down payment amount to a minimum of 10 per cent or 15 per cent, affecting mostly first-time buyers, to limitations on bulk insurance which is bound to affect almost everyone else,” Lior Hershkovitz of Mortgage Edge said. “With the banks required to hold a greater portion of the risk on their books, mortgage approvals will become more stringent.

“I can't begin to imagine how this would impact the monolines.”

Expected to be opened to public comment in March, the B21 guidelines will require the three mortgage insurers – Genworth, Canada Guaranty and CMHC -- to more stringently police the mortgage default insurance loans they provide.

And brokers are already speculating about the affect the potential guidelines will have on the industry as a whole.

“One major change may be a requirement to create a pooled database of insured mortgage information and insured mortgage applications to be maintained by all three insurers,” Ron Butler of Verico Butler Mortgage said. “This common database would be intended to allow the insurers to see the all of the application info sent through all lenders applying for an insured mortgage."

According to Butler this database would allow insurers to better track mortgage applications and variations in data “and also allow them to piece together whether there is a consistent pattern of multiple home purchases.”

Brokers may be waiting with baited breath to see if the B-21 guidelines pass but there seems to be a consensus that the industry will feel the impact if they do.

“Let's face facts, B-20 did not make mortgage lending any easier for mortgage brokers; it's a good bet B-21 will be just as painful,” Butler said.

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  • Stephanie Lopushinsky on 2014-01-15 8:42:37 AM

    If the true objective of B21, in the long term, is to slowly remove the insurers completely then they would be more likely to minimize their exposure with more challenging guidelines. I would anticipate that one will have to qualify at the bench and perhaps limit the amount of insured homes that one can have at one time. The changes will be indicative of the true motives of the government. However what I would like to see is provisions that would allow Canadians tax credits for these premiums. Canadians are in a catch 22 with these insurers.

  • Privatize CMHC on 2014-01-15 8:56:24 AM

    Don't need the real estate market bubble to be on the taxpayers back. Let the private companies and the banks insure 5% down mortgages and charge whatever fees they see fit. Too much taxpayer money is covering the butts of idiot Canadians buying with 5% down and no net worth or savings.

  • Keep CMHC on 2014-01-15 12:58:58 PM

    CMHC has double the required reserves and pumps avg 2 Billion/yr into Gov coffers. Not to mention Gov access to the huge database and all that can be derived from it. The old . . backs of taxpayers argument is one I expect from the ill informed gen public, not someone within the industry.

  • Ditto on Keep CMHC on 2014-01-15 7:16:56 PM

    Without the insurers, first time buyers will almost certainly be pushed out of the market, especially in pricier markets (Toronto, Vancouver, Calgary, etc). Why shut down a cash cow? I seem to recall very low default rates in the last CMHC presentation that I attended. Bottom line, if the government wasn't making money from it, they would have shut it down a long time ago. Having said that, for lenders that insure conventional deals...I've never been keen on that.

  • Agreed on 2014-01-16 7:00:14 AM

    The mandate for CMHC was to assist young ppl trying to get into home ownership. It was never meant as a backstop for banks seeking bulk insurance. The financial crisis is far enough behind us that said practice should be wound down. That's the perfect product for a private insurer that has no Gov guarantees. In short, I agree with you.

  • Paolo Di Petta | on 2014-01-16 11:41:08 AM

    Too many people posting on here under pseudonyms - if you have an opinion, be proud of it and be brave.

    In regards to rule changes - again, it's a little too late, but I guess better late than never. Low downpayments with the risk subsidized by taxpayers hasn't made housing more affordable, it has just made it appear more affordable.

    People will stretch their dollar as far as you let them, and all this access to cheap debt has lead to everyone overpaying. House prices didn't magically detach from incomes on their own.

    I, for one, welcome B-21 changes. Time to bring prices back to a level that makes sense. It'll hurt in the short term, but in the longer term, prices will normalize and housing will become affordable again.

    And anyone who acts like the "on the backs of taxpayers" argument is false, you have too much faith in our government. Sure the CMHC has been making money hand over fist until now, but don't think it's been quietly accumulating for a rainy day. I have the sinking suspicion it won't be enough should we see a downturn.

  • Guarantee on 2014-01-16 5:20:39 PM

    In regards to comment by Agreed, your facts are a little off: the private insurers do have a government guarantee, currently with a 10% deductible. They are hoping that will disappear with another Conservative win next election, putting everyone on equal ground. And the 90% guarantee is just in the event the insurer bankrupts; in reality the private insurers currently pay 100% of the claim, just like CMHC.

  • Daniel McKay on 2014-01-21 3:11:55 PM

    What bothers me the most about all the insurer changes is that they have greatly reduced the level of risk in what they are insuring, but yet premiums have not decreased at all. Although I agree that CMHC "is making money hand over fist" based on premiums/default ratios, I believe that it is at zero profit to the gov't (someone please correct me if my interpretation is wrong here) because I don't think the feds can pull money out of CMHC and allocate it elsewhere. All the "profits" they generate just gets spent on CMHC's other programs & initiatives or just sits in the coffers. I would much rather see them drop premiums, or issue premium rebate checks to clients upon their CMHC coverage terminating without default.

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