NDP sides with brokers on OSFI proposal

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The federal NDP is on side with mortgage brokers, concerned OSFI’s proposals – especially around re-qualifying renewals – goes one, two or maybe even three steps too far.

"We just need to make sure that people are protected in some of these temporary situations (where they may have lost a job),” said Peggy Nash, finance critic for the official opposition this week, ”if they have a good credit record and have never had a problem making their payment."

The concern echoes those of brokers across the country, specifically pointing to what many argue is the most controversial proposal now being contemplated by the federal banking regulator as a way of tightening mortgage lending.

OSFI has floated the idea of forcing mortgage-holders to re-qualify at renewal, although exactly what that involves remains unclear.

Broker, and their professional associations, were among the first to balk at the suggestion, arguing it could create the kind of market crisis the proposals aim to overt.

Nash appears to agree, with her party most worried Canadians temporarily out of work could possibly lose their homes. She’s asking the Harper government to back off.

OSFI has suggested it has little intention of backing down, It’s manager of policy developing expressing concern about the country’s ability to meet a significant housing correction head on.

“Are the banks equipped to handle a 40 percent drop (in property values)?” writes Vlasios Melessanakis, the manager of policy development for the Office of the Superintendent of Financial Institutions, in an internal document responding to broker Rob McLister and an article posted to his website in March.

"Canada is not immune. Just because nothing happened in Canada in 2008 (a U.S.-centered crisis), does not mean that Canada is not vulnerable to a housing correction now.”

The posture reveals the extent to which the regulator is committed to bringing forward a slew of tighter mortgage lending rules for federally regulated institutions. The broker channel has raised a red flag on several points -- not only renewals but the consideration of a borrower’s age at the time of application.

  • Frustrated Broker - on behalf of solid clients on 2012-05-26 3:09:15 AM

    It is not just people that have maybe lost a job...Think about it....Seems that the government was ok giving people 40 year ams and 100% financing a few years ago. Now they expect borrowers to qualify after just 4 or 5 years (with a significant value drop in the market) to be able to keep their home with reducing the amortization to 30 year max and the loan to value to 85% max on a refinance AND now renewal. Now adding "qualifying" to the mix.... Seems to me if there is a major blow out in our market, it will be at the hands of the government, who are trying to over correct the 100% financing and 40 year am fiasco, and as a result they are forcing hard working people out of their homes and damaging the market directly. Hard working borrowers that STILL EARN the same income as they did 4 years ago or 5 years ago, no longer qualify for their mortgage. It is NOT because the rates have increased (as was a large part of the issue in the states), THIS is completely controlled by the government deciding that those same people do not deserve to keep their homes.
    I sometimes think that they forget what decisions they have made in the past, and that they created this mess themselves. Open your eyes, powers that be.... You caused all of this in the first place... The government will be almost solely responsible for increasing the number of families forced from their homes and vastly increasing the foreclosure rate.

  • Broker Luke on 2012-05-26 5:58:02 AM

    what if one spouse is on maternity leave or paternity leave when the mortgage is up for renewal? They lose their home I guess! As they won't qualify at renewal. Almost every recession of the last 30 years has been caused by the government overshooting on rates or changing policies. The system fixes itself if left untouched. Why is it everyone outside of the gov't can see this but they can't??!! Do we just hope one of our overpaid politicians has a kid who loses their home??? That's probably the only way they'd change the rules back. I am aware the view is different from their point on the mountain compared to little old me. But I also know that the higher up the mountain you go, the foggier it gets and the less oxygen you have to breathe! I believe those in OSFI may be suffering from lack of oxygen to the brain if they introduce these awful rules.

  • A broker on 2012-05-26 7:01:25 AM

    With the NDP on our side, scares the hell out of me. Seriously we should welcome their support. It is quite clear that OSFI is unloading scores of trial balloons, seeking reactions from the industry & the public, because they haven't the depth of Board or management knowledge as how to bring inline the banks & insurers.

  • Donald Wilson on 2012-05-27 4:24:05 AM

    It is typical of people taking on new responsibilities they've never had before. OSFI has no experience in the mortgage industry, little background in this type of financing, no experience in oversight of a mortgage insurance company like CMHC, and yet they come into their proposed new position like they actually know what they are doing. Excuse me, Mr. Harper. Wake Up. Don't hire the janitor to run the school. Please.

  • BC Broker on 2012-05-29 2:38:35 AM

    Hold on a second... OFSI is not new to mortgage lending, they have been regulating the banks for longer than brokers have been around... they have been auditing them, setting lending policy, etc all that time.

    Has any broker stopped to consider that this need to prequalify will drive more business to the broker channel? How much do you lose currently to auto renewals? There are tons of articles here that are about brokers complaining about the banks "scooping" their clients, especially at renewal time.

    Also... people are pushing the panic button on this, but stop to consider... (1) no bank would reasonably refuse to renew a client, there will always be options. (2) These new rule changes will affect a very small portion of consumers - think about it... the average period a mortgage is kept in Canada is LESS than 4 years and the bulk of those change lenders, which means that the majority of home owners have been refinancing early... which means that they have had to re-qualify.

    I am starting to think that the powers that be in the broker channel just like to do whatever is opposite the government is doing in order to make themselves LOOK like they are doing something.

    Fact of the matter is that the removal of Auto renewals would harm the banks far more than it would brokers, and since the banks are a powerful lobby, and banks sit on the board of CAAMP... well of course they would all oppose the changes. The banks own statistics do not support the sheer panic they are causing over this, they are more concerned about losing that easy money than they are about the consumer.

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