The latest federal budget included moves that will affect the mortgage industry, including new regulations to standardize mortgage prepayment disclosure and the elimination of the Insured Mortgage Purchase Program.
The government also said it will allow credit unions to operate as federal entities, which would give them national reach and is introducing legislation to set out a framework for covered bonds, a type of bond that remains on a banks' balance sheet and can be backed by assets like mortgages.
"If the use of covered mortgage bonds increases, it will create more liquidity and that should translate into cheaper funding for mortgages," said Martin Reid, president of Home Trust, adding that covered bonds are commonly used in Europe. "It would be one more tool in the arsenal along with the MBS (mortgage-backed securities) and CMB (Canada Mortgage Bond) programs."
As one of its measures toward greater consumer protection, the federal government said it would bring forward regulations to standardize how lenders disclose and calculate prepayment penalties to borrowers, which Reid said is a good way for lenders to increase transparency.
And, as speculated, the Insured Mortgage Purchase Program, in which CMHC bought insured mortgages from lenders to help them free up credit, is wrapping up.
"The need for that program has been diminishing quite significantly, so I don't think that was a big surprise," said Reid.