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Mortgage Broker News | 29 Aug 2011, 06:10 AM Agree 0
New quarterly financials from CMHC are confirming the fears of many brokers, worried the government’s latest mortgage rule changes effectively signalled its exit from the refinance business, now down 40 per cent and expected to stay there.
  • AB Mortgage Broker | 31 Aug 2011, 02:13 AM Agree 0
    The change was at a time when the government could pretend like it was doing something to protect the consumer during an election time. If the government was serious about helping consumers, it would go after the predatory banks.

    This is what happens when the big banks lobby government. The government has zero backbone! The banks should handle their own retention issues, not lobby government to help them. Why tie the hands of the consumer?

    On with the mortgage revolution!!
  • Math Doesn't Add Up | 31 Aug 2011, 02:19 AM Agree 0
    We have a client who's house is valued at $200,000. CMHC now limits the refinance to 85% or $170,000. Assuming this is a 25 year amortization, CMHC will charge our client $2,550 (1.5%) for mortgage insurance. A year ago, this client would have qualified for 90%, or a mortgage for $180,000 which CMHC would have charged $3,600 in premiums. So for the additional 5% LTV, CMHC would have earned an additional $950. Technically, CMHC would have earned 1.5% on the first 85% and 9.5% on the last 5%. Where is the risk? The new risk is not far around the corner when homeowners are forced to sell their home to recapture equity. Hmmm... real estate bubble?
  • Angela Wong-Liao - Invis Inc | 31 Aug 2011, 02:19 AM Agree 0
    Despite the reduction in refinancing businesses for the mortgage channel, I am still a big supporter of the government's decision to tighten our mortgage rules. The habitual refinancers regarded their homes as an ATM versus a retirement insurance is very risky. In my opinion, Canada is able to avoid similar financial crisis from our American counterpart is because of our very strong and prudent government involvement, we should salute our current government policy instead of complaining.
  • Jim - Broker | 31 Aug 2011, 02:40 AM Agree 0
    I am overwhelmed by what the government thinks they are doing is helping the consumer. They have stated they are helping the consumer out. But in reality they are cutting the consumers hand off in situations that would help them out. By refinancing this can help cut total costs for high interest loans, credit cards, lines of credit that the consumer can easily attain with little to nothing in the form of ability to pay back. If the government trully is out for the consumer then they should work with mortgage brokers and lenders and not against them. Plus if they are looking for the consumer's best interest then they should be looking at ways to help them by going against the credit card companies and loan companies offering the consumer loans with outrageous interest rates and fees. Come on who is the government really looking out for?
  • It is not going to change so stop crying about it | 31 Aug 2011, 03:04 AM Agree 0
    enough said
  • Alberta Broker | 31 Aug 2011, 03:06 AM Agree 0
    In regards to Angela Wongs comment;
    Angela just because you use your home as "retirement insurance" does not mean that everyone else has to or should be doing the same. I completely disagree with what the government has done. I have clients that are paying over 5% right now and I can not get them out of their mortgage to get a lower rate as they do not have enough equity. Lets face it with some of the penalties that these people are being quoted its difficult at best for anyone to come up with 18k to pay out a penalty etc. If I own a home and I have equity I should be able to use that equity any way I like even if some feel Im using my home like an ATM. If I can buy my home with as little as 5% down then I should be able to re-fi to 95% as well.
  • David | 31 Aug 2011, 04:46 AM Agree 0
    Alberta and the rest of you complaining really don't "get it". Everything you are saying is exactly what was being said in the US 4 years ago. Allowing the public to borrow up to 95% of the value of their home at these low interest rates for a maximum term of 5 years is bringing on the exact same crisis as the "teaser rate" mortgage crises in the US.

    The issue with the inevitable rise in interest rates (which I believe is significantly further away than most think) is the magnified effect of a higher interest rate from such low levels. As extreme as the 1980-1982 interest rate highs of 20%+ were, we're at that same extreme on the low side. Ask your mortgage broker to calculate what your monthly payment will be at 6%, which is where fixed rates were only 4 years ago, and compare that with what your monthly payment is now and decide if you'll be able to afford that. A 6% mortgage is still low by historical standards and believe me, if/when the bond market starts to move in the other direction, fixed interest rates will be moving up for a long time and to significantly higher levels (think 3.5% moving to 6% - 7%).

    The most significant issue we face as mortgage holders here in Canada is not having a 30 year fixed mortgage product. If consumers had the certainty of payment afforded by a 30 year fixed mortgage the risk of default would be reduced by an order of magnitude for more and any of these rule changes the Government is/has brought in.

    The value of our real estate market will likely not drop as severly as the US, however the percentage of mortgages going into default in a rising interest rate environment will be frighteningly similar. I hope consumers reading this will take a hard look at their situation and plan accordingly for their next mortgage renewal. I truely hope any mortgage brokers are explaining this to their clients and helping them plan for their future.

  • Sk Broker | 31 Aug 2011, 06:41 AM Agree 0
    Well, under the new Gov't regulations, credit card companies must disclose on Consumers monthly statements, the time frame it would take to pay off the balance at the minimum payments. Great!, But where are those Consumers going to turn for the consoildation if they cannot make use of their equity? So, people are now turning to the debt settlement companies instead,which is great for their business!
  • Comment for David | 31 Aug 2011, 07:16 AM Agree 0
    Hey David, maybe you should do some research on IRD penalties before you ever start calling for 30yr fixed rate mortgages in this country.
  • gee- Broker | 31 Aug 2011, 10:55 AM Agree 0
    I have worked in the Financial Institutions and the Brokerage Industry. We cannot continue to drop rates, increase amortization, to allow people into the market. If rates fell and rose with the economics of the times, the prices would do the same. Everytime rates went down, prices wentup, amortizations were extended to 30/40 years to make homes affordable prices went up. I have had difficulty finacially at times as well and rest assured Credit was not the answer, it was the problem. The price of homes is unrealistic to most in BC especially unless you are an immigrant with to much money and very little common sense.. Builders love those guys. Governement meddling has taken market forces out of the equation.. Canadian debt is at record highs and we think we are OK.. what if...
  • Mark Nelson | 01 Sep 2011, 04:32 AM Agree 0
    Nobody in their right mind is going to incurr the expenses of a high ratio mtg refi to buy a flat screen Tv or a vacation or anything else friviolus. The go to 85% or 90% because they NEED TO... simple simple simple. Maybe they wernt good at managing their money but thats their only fault. Some are going to be victims because of the latest changes the gov't made... they have to sell and so they'll sell for less, now think about a 1000 or even 10000 people in that boat and what it would do to the real estate market? Look around its already happened. More listings have deflated the values because the changes have put people in a position where they have to sell. The Gov't has dumbed these rules down to the dumbest people. Lives have been ruined by the quick and drastic changes they've made. In Sept 08, just 3 years ago, someone couldve bought a home with 0 down, A rates and a 40 year am.... or refi'd to 95% LTV and 40 yrs. Too drastic too quick.
  • Reply to Comment | 01 Sep 2011, 04:52 AM Agree 0
    The IRD penalty is irrevelant in this matter.

    It only comes into effect if you are refinancing to a "lower" interest rate. If you are simply moving houses and your mortgage was done properly it should be "portable" which allows you to move or "port" the mortgage to the new house without any significant cost and without incurring an IRD penalty.

    It sounds like you've had some experience with IRD's and I understand they're not fun, however, if you are refinancing your mortgage you will either be paying 3 months interest or the IRD and it all depends on what interest rates are doing (assuming your mortgage was written this way). The IRD is designed to protect the lenders (who are lending to make money) against falling interest rates. As I've opined in my previous post, I believe the future direction of interest rates will be reasonably flat for the next 2 years and moving higher thereafter for a substantial period of time. As such, the IRD should not be an issue for the vast majority of refinancers from this point forward as they will not be voluntarily refinancing to a "higher" interest rate.

    Furthermore, as I suggested in my previous post, one should do a mortgage calculation to see what their monthly mortgage payment will be upon renewal at a higher rate. It is absolutely not unreasonable to expect 5 year fixed rates to be back between 6% - 7% in 5 years time. Believe me, if your interest rate moves from 3.5% to 6.5% you'll be cursing the fact this Country doesn't offer borrowers a long term product that protects against rising interest rates by fixing their interest rate (monthly payment) until the mortgage is paid out. And by the way, the IRD in this coming environment won't be applicable, it'll be a 3 month interest penalty.

    By the way, even if you dissagree with me, think of the amount of money one would save if they could lock their mortgage in for 30 years at todays interest rate. An IRD penalty should be the least of your concerns at this time.

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