Mortgage lenders tightening in major market

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The first to act was an insurer and now at least one major lender has followed suit by announcing it will tighten its lending standards in Alberta due to the effects the faltering oil industry are expected to have on the housing market.

“The warning signs are out,” Gerald Soloway, chief executive officer of Home Capital said, according to the Financial Post. “It’s only prudent for everybody who participates in that market to heighten their alertness.”

Home Capital released its yearly financial report last week, and in it stated its exposure in energy-producing regions, including Alberta, is “very limited”.

“The Company’s exposure to energy producing regions remains very limited with 3.8 per cent or $440.7 million of outstanding uninsured single-family mortgage loans in those regions (regions included are Alberta, Saskatchewan, and Newfoundland and Labrador),” the report states. “The average LTV for uninsured single family mortgage loans in these regions is 64.8 per cent.”

Still, Alberta has seen slugglish sales this year, with January’s numbers slipping 28.2 per cent year-over-year.
Genworth’s stance comes on the heels of a similar standpoint being taken by Canada’s second largest provider of mortgage default insurance.

According to the Globe and Mail, Genworth will take a closer look at mortgages originated in Alberta in anticipation of losses incurred as a result of the faltering oil industry. The insurer is also raising the target for its loss ratio, upping it to 20-30 per cent from the previous target of 15-25 per cent, in anticipation of possible losses.

“Clearly, the current environment, specifically the low oil prices, will put some pressure on losses and potentially the size of the housing market in Alberta,” Stuart Levings, president and CEO of Genworth Canada told analysts during a conference call last week about its fourth-quarter earnings, according to the Globe.
  • Steve on 2015-02-19 2:36:01 PM

    Can MBN stop with these fear mongering attention grabbing headlines?

    If you want to increase readership, get back to positive news...

    the sensationalist reporting is so American.. please get back to reporting on mortgage brokering issues... and try to keep it positives.. we don't want to read this sort of stuff..

    If i want something to push me over the edge and jump from that tall building, i'll remember to read your articles..

    come on people.. you can do better than this..

  • Kevin R on 2015-02-19 2:36:44 PM

    My Lord! It's not like we havent seen this with Oil prices before in the past. Whatever, when Oil heads back up & Canadians didnt flee that live in Alberta & are buying & needing mortgages then what. There are lots of good mortgages to be funded in Alberta. What a bunch of garbage. Their loss if they walk away from perfectly good business.

  • Craig H on 2015-02-19 3:05:58 PM

    It is interesting to read in the media of the precipitous decline in the Alberta market since oil prices have dropped. What gets missed though in all of this is that 2014 in Alberta was an outlier year with very high activity levels so of course comparing 2015 year to date with 2014 year to date it will look like the sky is falling. In actuality though, if you look at previous year to date stats from 2013, 2012, 2011 etc. 2015 is showing normal market activity. Enough of the fear mongering!

  • Grant M on 2015-02-19 4:42:30 PM

    Is it fear mongering to report on the general sentiment of lenders and mortgage insurers with regards to Alberta's Real Estate market?
    As an example of that sentiment I have just recently had a deal in Calgary that would have been a slam dunk 6 months ago get declined by both CMHC, and Genworth due to market risk and only 10% down.

  • casino on 2015-02-19 5:35:51 PM

    i think the US federal reserve said something about a 'soft landing' in 2006. Apparently Bank of Canada said 'soft landing' in 2014. Though, its going to be different in Canada!

    Plus, with our higher GDS/TDS ratio, our prudent lending standards allow Canadians to borrow more than Americans do. I think upwards is the only way it'll go.

  • Bernie on 2015-02-19 7:37:21 PM

    Does this tightening by the insurers and lenders cause the very down turn that they are afraid of? I think too much of a knee jerk reaction is dangerous. All that I have read says that for the most part this softening of the oil price is a 18 month correction and that Alberta will still have a growth rate of 2.5% for 2015, which is down from where we were but it is only .3% below the growth rate they are predicting for Ontario. Yes I think things will slow down a bit in Alberta over the next 12-18 months...but the sky is not falling :)

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