Genworth already using potential new mortgage rule

Genworth already using potential new mortgage rule

The federal government is considering a new mortgage rule where clients who take out variable rate mortgages must be qualified based on a higher interest rate, according to the Globe and Mail - a practice Genworth Financial already has in place.

"We're approving people at [a rate of] about four per cent now," said Peter Vukanovich, Genworth president and COO, at a recent Finance Summit that was telecast to select groups across the country. He said the measure would prevent mass foreclosures were rates to go up a few per cent, but "if rates go up from two to five or six per cent, then it's that pay shock that might affect more people."

The Globe and Mail, which has been following the government's discussions around mortgage rules closely, said although Finance Minister Jim Flaherty is being urged by some senior banking officials to raise down payment requirements and shorten amortization, qualifying variable-rate borrowers at a higher rate would be a less extreme and more politically favourable option.

It's also something broker Mark Herman suggested in a story here, and while some banks already qualify borrowers on this basis, government rules would be a method of standardization across financial institutions.There is a general weariness towards the government becoming to actively involved in regulating a way out of a potential bubble, and this could be seen as a middle of the road option. 

"The pendulum will swing to over-regulation [of the mortgage industry]," said Vukanovich. "It's something we need to watch for."

  • Finn Larsen managing broker 2010-02-12 4:45:36 AM
    I think that he government should steer clear of imposing more regulations on the mortgage lenders, One must remember that people must take responsiblity for their own actions, There is other ways that the government can be there for the citizens, If they continue on this type of path they will cripple home ownership as we know it today. Maybe then CMHC will fund mortgages again at prime, just some thoughts
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  • zoubeida varsanyi 2010-02-12 4:53:20 AM
    I am afraid the Government new rule toward obtaining a mortgage is harsh for the new couples starting a family and new home. They are making it hard to obtain a mortgage by shortning the amortization period and qualifying on higher interest rate. Also, making it hard to own a home can stop the industry from growing by blocking whole sector from expending based on buying a home. In other countries amortization years can stretch to 200 yrs. Government should assist people in owning a home not stop them from buying a home by introducing lower rates and longer amortization years and that will help many business to grow and the whole country to flourish.

    Mortgage & Loan Consultant
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  • AB mortgage broker 2010-02-12 5:32:50 AM
    This will make it even more difficult for brokers to obtain approvals for clients. Banks will always bend the rules for their favourite clients.
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