Report: OSFI has the wrong end of the stick

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A new report is backing up broker concerns OSFI is about to fix what ain’t broke – this new research identifying already-reduced amortizations, low arrears and high levels of homeowner equity.

“Mortgage borrowers are making significant efforts to accelerate repayment, such as voluntarily increasing their regular payments (23 per cent) and making lump sum payments (19 per cent), with some borrowers (10 per cent) doing both,” finds CAAMP's spring consumers' report, released Wednesday. "And approximately 50 per cent of borrowers pay $100 per month (or more) above their required payments.”

The report relies on an online survey of 2,000 Canadians, including 800 homeowners with mortgages. It was conducted by Maritz Research and adds weight to the findings of a CMHC report issued last week.

It also suggests that recent buyers expect amortization periods will be about 20 per cent shorter than their contracted length, mirroring the current reality for many Canadian homeowners.

To boot, the report also suggests 83 per cent of Canadians have at least 25 per cent equity in their homes. Separately and collectively, those findings point to a mortgage market well positioned to handle the challenges of a correction in the housing market and to protect the investment of the vast majority of homeowners.

Brokers are also hoping the findings will encourage OSFI to reconsider some of the underwriting
guidelines it will likely bring into force next month.

Those measures – from re-qualification at renewal to slashing the maximum loan-to-value on HELOCs – are meant to throw up a firewall around Canada’s housing market.
Brokers haven’t been convinced of the need for it.

The position is garnering support outside of the CAAMP research, with the official opposition in Otttawa registering the same concerns as brokers.

"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, the federal NDP’s finance critic, “if they have a good credit record and have never had a problem making their payment."

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

Brokers, 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.

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

  • Phil McDowell on 2012-06-01 1:30:37 AM

    Is it possible OSFI is just planning to conduct an economic "Fire Drill"? If they set up the conditions of accelarated forced sales, driving down property values during relatively solid economic times, the resulting damage they will be able to point to and say"See-told you so!". Then, OSFI/Dept of Finance can then revise policies to what they are now and call it a stimulus. Then we will have had a test run on the effects of a serious recession. It's an effective way to smarten us up before an uncontrolled down turn occurs. And, may just get that PHD thesis done by the egg-head who wants to conduct this test. Not saying this is fact, it is just a question.

  • Peter Dale on 2012-06-01 1:48:31 AM

    Your article is correct: who does know what re-qualification means. Equally important, however, is who is going to do it. If brokers are forced to re-qualify their clients, who is going to pay them for their time?

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