Editor's note: The petition's wording has been updated since it was first sent to MortgageBrokerNews.ca. The following story has also been updated to reflect those changes.
A petition requesting the Department of Finance reconsider its recent mortgage rule changes has been launched.
We are asking the Department of Finance to consider the important place non-bank lenders play in the health and competitiveness of the Canadian Mortgage Market.
While we endorse the DOF’s intention of providing a secure housing market and stable mortgage environment for Canadians and we support the curbing of growing debt loads in our country we are asking that consideration be given to importance of choice and value for Canadian Mortgage consumers.
The broker who shared the petition
with MortgageBrokerNews.ca said the person responsible for it will remain anonymous for the time being.
Finance Minister Bill Morneau announced new housing policy measures aimed at protecting the nation’s housing industry.
Those preventative measures are; Standardizing lending criteria for high- and low-ratio mortgages, including a mortgage stress test, closing tax loopholes for capital gains exemptions on principal residence sales, and consulting with industry stakeholders to ensure risk is properly distributed. This may include lender risk sharing.
While the full impact of the rule changes has yet to be determined, many industry stakeholders have claimed they create a competitive disadvantage for the broker industry.
One requirement under the changes is that all insured mortgagors must qualify under the Bank of Canada’s benchmark five-year rate, which is currently 4.64%. According to Genworth
Canada, 1/3 of its 2016 insured clients would have had difficulty qualifying under these new requirements.
Another major change was around low-ratio mortgage insurance eligibility requirements.
As of November 30, 2016, low-ratio mortgages from lenders that insure using portfolio insurance must meet the same criteria heretofore required of high-ratio insured mortgages.
a great primer on what those requirements are:
- A loan whose purpose includes the purchase of a property or subsequent renewal of such a loan;
- A maximum amortization length of 25 years;
- A maximum property purchase price below $1,000,000 at the time the loan is approved;
- For variable-rate loans that allow fluctuations in the amortization period, loan payments that are recalculated at least once every five years to conform to the original amortization schedule;
- A minimum credit score of 600 at the time the loan is approved;
- A maximum Gross Debt Service ratio of 39 per cent and a maximum Total Debt Service ratio of 44 per cent at the time the loan is approved, calculated by applying the greater of the mortgage contract rate or the Bank of Canada conventional five-year fixed posted rate; and,
- A property that will be owner-occupied.
As a result of these changes, some monoline lenders have cut some programs.
One major channel lender told MortgageBrokerNews.ca that it is holding off on making any changed before more information is known and the potential impact fully studied.
To view the petition, click here