Brokers are on the hunt and credit unions are already welcoming a wave interest as new federal guidelines limit HELOCs at the banks and make their own higher LTVs more enticing.
The OSFI move to cut the maximum LTV to 65 per cent from 80 per cent for HELOCs offered by federally-regulated lenders is expected to result in a mini boom for provincially regulated CUs in Ontario and other provinces. There regulators are refusing to impose those new rules on credit unions.
Those cooperative institutions are already reporting a spike of broker queries.
“We’ve seen a bit of increase in calls from the broker channel asking about whether we are following the OSFI guideline or sticking with our current LTVs,” said Rita Epp, director of retail and special credit at Meridian Credit Union Ltd. “Our policy is business as usual.
“We review each application on a case-by-case basis. If we find it is best for the member and the credit union, we will provide our maximum 80 per cent LTV on the line of credit.”
While it may be “too early,” she said, to determine how much business that new interest will generate, “it could be a definite advantage over the banks for us.”
The altered HELOC guidelines came into effect Monday, coinciding with Finance Minister Jim Flaherty’s activation of rule changes for government-backed mortgages.
Brokers have largely panned the changes as unnecessary given the slowing market and the OSFI action.
“Taken together, the Minister’s announcement and the OSFI final guidelines may have an effect of precipitating the housing downturn that the government wants to avoid,” Jim Murphy, CAAMP CEO, told MortgageBrokerNews.ca.
Credit unions are not bound by federal regulations, although many are sticking with their current LTV caps, now lower than the old 80 per cent cut-off.
The OSFI ruling could be welcome news for credit unions, said Phil Fiuza, manager of mortgage services and broker organization centre, with IC Savings. It’s sticking with a maximum 75 per cent LTV on HELOCs.
“We believe our current practices as very prudent so we will continue to offer up to 75 per cent,” Fiuza said. “The ruling will most likely benefit credit union whose main product offering are line of credits. We focus more on fixed term loans.”
Not all credit unions are rejecting the OSFI ruling. Some have embraced them.
“We will be complying with the OSFI guideline,” said Andre Chapleau, media relations director of Desjardins Credit Union, “It’s a good move in the sense that homes are not supposed to be treated as an ATM (automated teller machine.”