Focus on refis, not first-timers

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Instead of focusing on first-time buyers, CAAMP should push Ottawa on refinancing restrictions, says one industry vet, reacting to news the association has now tailored its lobby efforts.
 
“From what I hear from other brokers, they haven’t done a refinance in ages,” says Ian McSevney, president of lender Altmore Mortgage Investment Corp. “We as brokers are not just a transactional provider for first-time buyers; we offer financial advice. And right now, people need to refinance their homes to improve their cash flow and save for retirement.”
 
Finance Minister Jim Flaherty appeared to offer a don’t-call-us-we’ll-call-you rebuff following a meeting with CAAMP CEO Jim Murphy where the association head again asked for an easing of restrictions for first-time home buyers. He cited the upcoming spring sales season as needing a helping hand to lift itself out of the doldrums.
 
“I’m not an economist, but they (Ottawa) have done something right,” admits McSevney, a CAAMP member, on the rules concerning first-time buyers. “But CAAMP needs to have Flaherty revisit the refis.”
 
Murphy told Flaherty that last year’s measures have “gone too far” in cooling the market, and urged that a return to 30-year mortgages and an increase of the tax incentive for first-time home buyers be put in place to spur the spring sales season. The current incentive is $750.
 
“The spring months are the most important months for new sales and re-sales,” said Murphy.
 
Flaherty’s office declined to comment following the meeting, but did state it was “unlikely” that there will be any rule changes.
 
Murphy points to the stiffer lending guidelines as having made it too difficult for young people to enter the housing market at a time when prices remain high.
 
“I’m not sure what Murphy is trying to do on the benchmark for first-time buyers,” McSevney told MortgageBrokerNews.ca. “Really, we are only back to where it was in 2005-2006.
 
“What I want is to go back to 85 or 90 per cent on the LTVs," he says. "The 80 per cent benchmark has taken a huge toll on my business.”
  • Shayne on 2013-03-13 3:30:55 AM

    “What I want is to go back to 85 or 90 per cent on the LTVs," he says. "The 80 per cent benchmark has taken a huge toll on my business.

    I think a proactive approach on speaking with clients about consumer debt before there is a need to refinance is a better way to go.

    Who are we truly worried about here? A broker's business or home owners using their homes as an ATM?

  • Christopher on 2013-03-13 4:26:49 AM

    A first refinance to improve cash flow for investment purposes is one thing. A second is on the path to bankruptcy, and we as brokers/agents should bear a good portion of the responsibility.

  • Paolo Di Petta | dipettamortgage.com on 2013-03-13 4:37:13 AM

    I disagree, these constant refi's are part of what put us into this mess in the first place. A home is not an ATM and should not be treated as such.

    Either way, it won't matter (at least not in the GTA). Home prices have peaked, and there simply isn't any more room to keep refinancing. We all knew this day would come eventually.

  • Ron Price on 2013-03-13 5:00:31 AM

    Hey everybody there is still 75% of the market out there for us to CAPTURE and to generate new business from. What's done is done. Focus on 'Winning' business from the banks by letting your audience know that bank collateral mortgages are bad for the consumers health. Do them a favour and educate them as to why they should absolutely AVOID BANK MORTGAGES AND CHOOSE YOU!

  • John Bargis on 2013-03-13 9:56:30 AM

    I completely agree with both of Mr. McSevney's comments about Ottawa having done something right, as it relates to the changes made to slow down the already overheated real estate market, and that Mr. Murphy should have focused on the refi argument as a better approach with the Finance Minister's office.

    Perhaps Mr. Murphy should have gone to Ottawa with a comprehensive argument as to why the refi restrictions should be reconsidered. We all know that the average debt levels per household in Canada are alarmingly high - a legitimate concern. But was the correct response by the regulators to abruptly make the changes on refi's that they did? I think not. If eradicating debt is the real issue, would it have made more sense to allow borrowers to refinance their debt once per 5 year term under the 5 year MQR of 5.24%, with payments calculated at the same rate and a reduced amortization, thereby forcing the pay down of debt at an accelerated rate? This coupled with stronger regulation around unsecured debt, (which is in large part a contributing factor to the household debt concerns), could have been a more viable solution. Instead, borrowers are now faced with higher borrowing costs through alternative sources, and are no further ahead in quelling their debt challenges.

  • Ian McSevney on 2013-03-13 2:21:05 PM

    Shayne and Paolo.

    I am worried about the health of consumers and the fact is that the arbitrary wipe out of refinanciing beyond 80% LTV has taken a toll on my business.

    I make my living as a Mortgage Broker and I want to see a healthy mortgage market for all parties. Consumers, Lenders and Brokers. I do not believe taking away options rather than adjusting them is the way to go.

    In my comment to CMP I indicated that serial refinancers who have refinaced three and four times over the last 10 and 12 years are partly to blame for why these stricter rules came into play. I did state that in my comments that as a Broker we are responsible to advise our clients and not just service their mortgage request transactionally. I did not advocate to simply go back to allowing high ratio refinancing across the board but rather that I would like to see a return to available programmes under which borrowers coud refinance for true debt consolidation or asset enhancement when it is needed and when it is completed in a controlled environment. One where we are preventing and advising the client not to re-debt. We need to offer people the ability to shore up unsecured debt so that they can increase cash flow and redirect that available cash flow towards saving for retirement and other needs.

    I agree a house is not an ATM but a consumer who has built up some equity deserves to put that equity to work for themselves with the right advice from a Mortgage Broker in the best possible way.

    Yes, I am worried about my business! Because I practiced significantly in the area of refinaces. But I have always preached responsible use of ones equity for the best possible benefit.

    I would like to see Jim Murphy lobbying for a return to available refinance programmes over lobbying for first time home buyers. Because current home owners who need to refinance are already out there and in the market needing our help and guidance.

    John thanks for your remark I think you truly understand what my comments are elude to.

  • Paolo Di Petta | dipettamortgage.com on 2013-03-14 2:05:53 AM

    @Ian, while I don't totally disagree with you, I have one huge issue of contention: "a consumer who has built up some equity deserves to put that equity to work for themselves..."

    The problem is, a lot of people (at least in the GTA) haven't "built up equity". With the rapid appreciation in home values, I've repeatedly seen the same applications/applicants come in from other brokerages year-after-year, and some of these people owe more than they originally paid for the home. I don't do those kinds of deals, but someone must be doing them, because these people are still in their home. When property values stagnate, they're going to be in for a rude awakening.

    Instead of giving people the ability to take on more debt, we should see more programs that encourage the paydown of debt (both secured and unsecured).

    Not to mention, the interest rates won't stay this low forever. We need to encourage people to pay down debt now that it's cheap and easier to do. If we keep letting them take on more debt at extended amortizations, they're going to get hammered when the cost of carrying debt goes back up.

    The biggest problem is that too many people have sold the monthly payment philosophy. Using extended amortizations and low rates, people are under the impression that they have more money than they actually do.

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