Brokers fear Oliver’s budget promise

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The government reining in portfolio insurance will cost homebuyers – and price many out of the market, according to one leading broker.
 
“Something brokers need to understand really clearly is that any curtailment of portfolio insurance … and the government trying to influence a reduction in CMHC’s portfolio insurance only ends up creating high mortgage rates for Canadians,” Ron Butler of Verico Butler Mortgage told MortgageBrokerNews.ca “We have to remember that right now all three of the companies, Genworth, CMHC and Canada Guaranty are all profitable, well capitalized and doing well.”
 
The Conservative government released its yearly budget Tuesday, and in it mentioned the importance of keeping the use of bulk insurance – employed by monolines and banks to back their conventional mortgages – in check.
 
But efforts to rein in portfolio insurance could result in lenders having to raise rates, according to Butler, which will affect lenders, brokers and consumers.
 
“The effect of curtailing portfolio insurance is that monolines have to raise their rates because if their cost or their ability to get portfolio insurance becomes impaired or the cost goes up, then they will do less business; they have two choices – either pass the cost onto the consumer or they have to do less business because they’re restricted by the reduction of portfolio insurance,” Butler said.
 
The government's pledge on that subject wasn't part of the budget speech, but made in the 500-plus pages Finance Minister Joe Oliver tabled in the House of Commons Tuesday.
 
“The Government will implement regulatory measures that limit the extension of portfolio insurance through the substitution of mortgages in insured pools, tie the use of portfolio insurance to CMHC securitization vehicles, and prohibit the use of government-backed insured mortgages as collateral in securitization vehicles that are not sponsored by CMHC,” the 2015 Federal budget states. “The Government continues to closely monitor the housing market and assess measures to further reduce taxpayer exposure and risks to the long-term stability of the sector.”
  • Jeremy on 2015-04-23 11:40:49 AM

    There is a third option... A reduction in broker compensation. This would allow lenders to remain competitive. I mean some brokers have already clearly stated they are willing to work for less, so this shouldn't upset anyone, right?

  • MP on 2015-04-23 4:08:48 PM

    Obviously you aren't a broker!

  • Dianne Chafe on 2015-04-23 4:26:07 PM

    Jeremy that is like saying employees should take a reduction in their income because the cost for their employers to do business is going up!
    Think about it.

  • MP on 2015-04-23 4:51:06 PM

    Exactly!! What a stupid idea Jeremy!!

  • Steve on 2015-04-23 6:53:01 PM

    If the government hadn't milked CMHC I would understand the increases... But, if it has enough profit, you will see insurance companies, hedge funds and pension funds get into the game etc. The risk will be transferred into lots of companies hands instead of just a few

  • Jeremy on 2015-04-23 9:07:59 PM

    MP, I am a broker and have been for 12 years and loving every minute of it.

    Dianne, clearly you are out of touch with how businesses are run. Business 101... Employers stop the bleeding by cutting it's work force and hirer at lower wages or worse yet...not at all. Have you heard what is going on in Alberta right now with respect to oil and gas? I'm not suggesting anyone should take a reduction. What I'm saying is, you will not have a choice, if lenders went that route. Think about it!

    What I find interesting is how brokers whine and cry that lenders should pay for this and pay for that. I get it, you want your cake and to eat it too...I'm with you. But to expect lenders to absorb one cost after another and not look at broker compensation...you are delusional!

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