Is the government guilty of facilitating anti-competitive practice?

Is the government guilty of facilitating anti-competitive practice?

Is the government guilty of facilitating anti-competitive practice? The Office of the Superintendent of Financial Institution’s new regulations governing underwriting practices — set to take effect at the beginning of next year — have been the source of much acrimony in the mortgage industry, and some are wondering if the federal government is deliberately sabotaging some lenders to benefit large banks.

Two industry veterans echoed each other in stating that certain lenders, like mortgage finance companies, will not be able to keep their heads above water.

Additionally, both not only questioned why credit card debt isn’t a topic of conversation if household debt is, indeed, reaching disquieting levels, but they both believe many first-time homebuyers will be precluded from entering the housing market.

Before the latest regulation amendment, the Department of Finance updated lending practices in October 2016.

“I thought last year’s changes were more than enough,” said Fisgard’s Senior Vice President of Residential Mortgage Investments & Broker Relations, Hali Strandlund-Noble. “The problem I have with that is I’m a believer that household debt being on a mortgage is something tangible. Why are they not dealing with unsecured lines of credit, credit cards at 19.99%-plus? There’s no talk about that, no talk about qualifying those people. That’s a big concern of mine. I’m okay with healthy mortgage debt.”

While Strandlund-Noble agrees that housing prices in Vancouver and Toronto need to come down, she’s confounded by the government’s one-size-fits-all policy because she sees small cities and first-time buyers being pilfered. Atlantic Canada and the Prairie provinces are among large swaths in which she sees trouble brewing.

“I would love to see [the federal competition bureau] step in and take a look,” she said. “I would have thought they would have stepped in by now, and if they don’t step in this time, especially with how it’s affecting monolines and mortgage finance companies, I don’t think they will. It’s very disappointing.”

Asked how precarious the rule changes will be for consumers, Strandlund-Noble said, “I don’t know if ‘precarious’ is the right word. It’s lack of opportunity to become a homeowner at this particular time in their life cycle of buying, selling or renting. Many will have to wait, save and maybe even get rid of some credit cards. There’s a lack of opportunity, definitely for first-time homebuyers. It’s hard enough for them to get in.”

David Mandel, president of First Source Mortgage, concurred with Strandlund-Noble about the government needing to rein in credit card companies “as opposed to telling Canadians how much they should spend on a home and where they should live.”

But Mandel also blames the government for the astronomical cost of housing because they did precious little to solve the supply issue. Given the government’s immigration policy, he believes they exacerbated the supply problem by not ensuring enough inventory was available in the marketplace.

“If you’re going to maintain a policy of steady immigration and bring in 300,000 people annually, most of whom will try to settle in the GTA, you need to deal with the supply of developable land and remove the red tape associated with change-of-use of existing lands so that builders and developers can readily convert or create infill projects to meet demand through higher density,” he said.

This can create more urban sprawl —which would be at odds with growth plans — he added.

Mandel ultimately believes lenders and consumers are getting fleeced by government policy that he says is convoluted enough to fly beneath the average Canadian’s radar.

“The banks are going to win huge at the expense of the monolines, and what we see, ultimately, that nobody is talking about, is further concentration in the banking industry in Canada,” he said. “There’s no competition for them.
Unfortunately, I think that’s anti-Canadian, anti-North American, and it’s anti-competitive — and that’s wrong. I think Canadians are getting a raw, raw deal and I think it’s a little too sophisticated and widespread for the average person to understand.”

Related stories:
Banks benefiting from anti-competitive practice, says industry vet
Government lying about reason for rule change implementation, claims industry veteran
  • KJL 2017-11-07 9:11:30 AM
    Cannot agree more with these 2 fine people. I have been barking about card debt for years. Pull your last 10 deals, especially if alt and have a look folks. Card after card after card ..... Has Haley says 19.9% and this is the cheapie cheapie .... Add in the annual fee and your yields on a 21 day billing cycle are large. Never mind the spot on the card statement that says if you pay the min - you will be paying for pretty much LIFE. The ol Feds are wrong in slapping us with mortgage BS, deal with the obvious and that is bank card and unsecured line debt. Put a halt on this and watch the bankers screech !!!
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  • RBosch 2017-11-07 9:47:05 AM
    Agree with both...I have said for years, the government needs to look at credit cards and the 'never, never' plans of the lines of credit. Delinquency has always been very low on mortgages so why keep attacking it. Just preventing people out from being able to refinance to better their situations(the ones with self-control)and new home buyers.
    Should also mention the people working within the industry whose incomes have decreased substantially and some even going for broke.
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  • dm 2017-11-07 2:24:15 PM
    I agree with both ! Let us look at the facts: Morneau Company manages Pension Funds , 99% or even 100% of all pension funds in Canada are invested in the Canadian Banks.The largest population in Canada today is over 55 and probably the last to have the cream of the crop pensions... Political for now... As we know Pension Funds are becoming less and less available to the average person. Manufacturing diminished.If you work for the Government, Teacher, Nurses ( fulltime), Police, Fire, Paramedics or provincial Long Term Care Facilities you have Pensions ....
    so both Morneau and Banks win! Who has more money to lobby the government, Banks! We have to educate more Canadians about what will happen to them and there children when they think it will be easy to borrow for a Line of Credit or a Mortgage for a home!Why has the reverse mortgage product just jumped in popularity????
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