The end of high ratio refinancing

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The Canadian Mortgage and Housing Corporation (CMHC) appears to be conceding the death of its high-ratio refinancing.

“CMHC’s insured loan volumes are influenced by the economy, housing markets, competitive pressures and the regulatory environment,” the CMHC’s 2013 annual report states. “Successive changes by the Government of Canada to the guarantee parameters specifying the types of mortgages that can be insured have reduced the size of the high ratio transactional homeowner mortgage loan insurance market while effectively eliminating the high ratio refinance market.”

The death knell of high ratio refinancing should come as no surprise, with the CMHC’s third quarter 2013 report quietly indicating a whopping 81 per cent drop in refinance business.

“Purchase volumes increased approximately 11 per cent while refinance volumes were approximately 81 per cent lower compared to the same period in 2012,” according to the report published in early December. “The latest mortgage insurance parameter changes that took effect in July 2012 effectively eliminated refinancing at loan-to-value over 80 per cent.”

And it’s a trend that has been taking place for some time, with market share between originations and refinances steadily shrinking: As recently as 2011 the limit was 90 per cent; it was reduced that year to 85 per cent and in 2012 was reduced five more percentage points to 80 per cent.

Overall the crown corporation insured 343,773 units last year, which was within the planned target range. Operating expense ratios were also one per cent better than planned.

“In 2013, CMHC’s mortgage loan insurance achieved an operating expense ratio of 12.8 per cent, one per cent better than plan due to lower OSFI, credit bureau and investment management fees, and up slightly from 11.7% in 2012,” the report states.

Over the past decade CMHC insurance has contributed over $15 million to the Canadian economy, according to the report.


CMHC cuts two programs
Advisor proposes reining in CMHC
CMHC raises premiums
  • Broker J on 2014-05-14 11:40:50 AM

    Really... This is news... sorry... Not exactly a shocker...

  • Lior, Mortgage Edge on 2014-05-14 12:14:23 PM

    Not really the end of high ratio refinancing.... just the end of high ratio refinancing through CMHC. Consumers still have access to different options albeit at a higher cost.

  • LanceH on 2014-05-14 12:26:39 PM

    CMHC has contributed 15m to the economy???? They contribute an avg of 2 BILLION a yr to gov coffers!! It makes all their other number suspect too in my view!

  • Victor on 2014-05-14 12:33:38 PM

    What, they thought that by reducing refinances to 80% they were going to increase this market? Seriously?
    Of course now that refinancing is down 81% they have to increase the premium so they don't lose profits. This helps consumers how?

  • kac on 2014-05-14 12:57:14 PM

    for years cmhc has raked in billions in insurance premiums while the markets rose and little chance at paying claims,once the market corrected itself and some claims were realized cmhc finally decides it probably shouldn't be in the business? How convenient!

  • Donna on 2014-05-14 1:03:37 PM

    It is very convenient. Funny how they wouldn't allow a person to refi their own home over 80% but buy your neighbours house and move to get 95%. Costs you land transfer tax which is of course payable to the government. Crooks! Great opportunity for Genworth and Canada Guarantee!! We should all boycott cmhc. Remember to port your fees if you move and are already a client!

  • Steve on 2014-05-14 2:25:55 PM

    CMHC is a cash cow. Clients pay more because government changed the rules. Government choices have led to reduced options and the people who need the most help cannot get it.
    Government lets consumer debt build up with no new rules - payday loans, 0 payments for 1 yr, 0% financing over 7 years. Consumer debt creates the problem and home equity used to be the solution. So rather than changing the rules on consumer debt, government deletes a tool.

  • Andrew on 2014-05-14 2:35:18 PM

    These new mortgage rules have also negatively effected those who want to take an ex-spouse or investment partner off of title with high ratio mortgages.

    Very few lenders allow an "enhanced transfer program" to accomplish this; which further reduces consumer choice.

    I would like to see the government take an active roll in regulating unsecured debt (credit cards and lines of credit), rather than tightening refinance rules.

    How often do we see clients pull money out of their house for anything other than to pay off unsecured debt. Personally, I'd say 80% or more of the refinances I do are to pay out unsecured debt... the remainder are doing ETO's for investment purchases. That however, is not the norm.

    Maybe if the banks and credit card company lobbyists weren't paying for most politicians campaigns, we would see meaningful reform, instead of trapping Canadians into revolving debt at high interest rates.

  • Michael on 2014-06-02 4:27:20 PM

    investment partners or spouses can still be removed from title in high ratio circumstance. CMHC looks at it like a sale of interest.

    Agreed that unsecured debt needs to be further regulated. classic are the do not pay programs that many consumers find themselves in a bind at the end of the day when all the interest is accelerated if the debt has not been paid off.

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