Refi business remains down from pre-mortgage rule changes introduced this spring, according to new quarterly results released by CMHC.
“Homeowner Refinance activity initially fell by nearly 40 per cent (in the second quarter) and by the end of September was approximately 25 per cent below the pre-implementation levels for an overall year-over-year decrease of 31 per cent,” says the Crown corporation in a Q3 report released Tuesday.
That last figure is likely to rile brokers concerned that this spring’s mortgage rule changes – specifically, the reduction in loan to value maximums on refis – had signalled its departure from that end of the business.
The year-over-year decrease of 31 per cent, while not as steep as 40 per cent, still suggests broker refinance business has been severely curtailed, charged some industry veterans.
“It’s a repeat of what we saw when the government increased the down payment requirements for CMHC insurance on rental properties,” Curtis Cannon, a sub-mortgage broker with TMG The Mortgage Group in Prince George, B.C. “By decreasing its maximum loan-to- the government is basically saying, ‘We’re out of the refinance business.’ That’s regrettable because CMHC seems to have forgotten what they’re there for – to put and help keep Canadians in their homes.”
Earlier this year the Crown corporation announced that its insurance activity for refis fell 40 per cent for the quarter ended June 30, compared to “pre-implementation levels.” Moreover, the report adds, that activity has “continued to remain around this level.”
That translates into bad news for broker clients, who through no fault of their own, need to pull equity out of their homes in order to cover debts racked up by a death in the family, divorce and/or illness, said Cannon, concerned the government has abdicated its responsibility to aid those Canadians in its move to keep consumers from “using their homes like an ATM.”
“I don’t think that the new refi rules are good, at least not across the board in that the difference between accessing a LTV of 85 instead of 90 per cent may force someone who is in a tough situation out of their home,” said Cannon.
His comments run counter to those of other brokers who embraced the rule changes around refinancing as a way to put an end to “habitual refinancers.”
Still, CMHC, and the mortgage industry, as a whole, has seen a significant slowdown, according to the latest quarterly report.
“The decline in market activity and market share, as well as the changes in mortgage lending rules, resulted in insured volumes (units) at 30 September 2011 being 11 per cent below prior year volumes,” says the Q3 CMHC report.