Since the financial crisis of 2008, we have seen mortgage regulations tighten almost every year. Have we turned the corner? The simple answer is no.
Regulators and politicians keep repeating the same talking points. “The taxpayer is exposed – we need to regulate to reduce risk” or “If we don’t want what happened in the US to happen to Canadians, we need to regulate the mortgage industry.” But do we really? Have regulators and politicians lost touch with reality?
If we take a quick look at regulation surrounding capital requirements for insurers, one could easily ask the question: Are we regulating the mortgage industry or just a segment of the mortgage industry? And are consumers and taxpayers better off today than they were prior to the recent wave of regulations?
CMHC’s recent suggestion that it might loosen guidelines for new immigrants and self -employed individuals was like bringing a glass of water to an industry that has been wandering in the desert for a while now. The problem is that sometimes when you’re that thirsty, you’ll drink just about anything to quench your thirst.
The CMHC announcement was vague, and quite frankly, it’s difficult to see how exactly they will implement such change. Going back to the Alt-A programs of the past is certainly not an option, as it goes against the government’s ongoing quest to collect more income taxes. Bringing back a program that basically allows a self-employed individual to minimize taxable revenues and still qualify for a home seems archaic at this point. Allowing new immigrants more flexible guidelines would certainly be welcomed; however, the percentage of market share this segment occupies is negligible.
Since the beginning of 2017, the broker channel has struggled to remain rate competitive in the conventional mortgage space. This is especially true for mortgage refinancing, as the ‘non-insurable’ category for lenders that do not have access to balance-sheet funds became costlier. Monoline lenders such as First National, MCAP and Merix struggled for most of 2017 to find a way to access balance-sheet funds (if any) and regain competitiveness in this market.
Some positive developments have arisen in recent weeks, as a few pilot projects have been launched across the country with more competitive rates and conditions, but funds are hard to come by, and the river might run dry very quickly.
The mortgage industry continues to fight and represent its point of view to government regulators and policymakers, but it remains to be seen if any significant changes will follow that might allow non-balance sheet lenders to regain their edge.
An industry with less competition is never a positive thing for consumers. Vigorous competition with fair and strict regulation is always a winning formula and is certainly welcomed by anyone working in the mortgage industry. Regulators have certainly taken the ‘strict’ part of this equation to heart. It remains to be seen if 2018 will be the year when we all come back to an equal playing field.
Canada could once boast that property accessibility for Canadians was its shining jewel when compared to other developed nations. Low arrears, strong underwriting and controlled risk have always been key elements that Canada could be proud of when showcasing its mortgage and real estate market. I fear that in attempting to regulate, we have lost touch with realities on the ground.
A good measure of any society is the facility of upward mobility that allows the weakest among us to thrive. One positive announcement from the CMHC does not erase the continuous tightening of the mortgage industry. Sometimes you have to hit rock bottom before rising again. Hopefully that moment is fast approaching.
A mortgage broker since 2006 and director of RLH Mortgages – PlaniPrêt, Ryan La Haye is one of Quebec’s top mortgage brokers in terms of volume and units.