One year later: Marking Flaherty’s mortgage rule changes

One year later: Marking Flaherty’s mortgage rule changes

One year later: Marking Flaherty’s mortgage rule changes
Happy anniversary? It’s been a year since the mortgage rule changes took effect, and brokers have felt the impact not only on their business, but especially their clients.
“We are finding a lot of people no longer qualify based on 25 years amortization or have to cut the purchase price back, which is easier said than done, depending on the market where you intend to purchase,” says Nicole Drummond, a mortgage broker with DLC The Mortgage Source. “The new regulations have impacted the consumers who are purchasing and do not have the 20 per cent down payment.”
Another broker agrees that Finance Minister Jim Flaherty’s amortization restrictions have had an impact.
“If Flaherty’s intention was to push some of these first-time buyers to the sidelines, he has succeeded,” says Ron Butler, of Verico Butler Mortgage. “The self-employed Canadian has taken it on the chin in the last 12 months as the original rule changes and subsequent OSFI changes have tightened the screws on those in business for themselves.”
Although sales and volume may be up, brokerages are working a lot harder for less pay, Butler points out. 
“In our own business our unit sales are massively up year on year, 39 per cent, and our overall loan volume is way up as well but due to our rate-discount strategy our income is flat year on year,” Butler told “So the net effect is we are working much harder for less pay as our salaried staffing increased to handle the unit volume surge.”
The major restrictions put in place by Finance Minister Jim Flaherty were to cap amortizations at 25 years, and limiting refinancing from 85 to 80 per cent of LTV.
Andrew Galea, a mortgage agent with Calum Ross Mortgage, has seen many clients moving to fixed rates to qualify for a mortgage.
“The new rules have limited the various opportunities for the consumer, that is, they have forced many of them to take a fixed rate term of 5 years or longer so they can avoid the dreaded MQR (mortgage qualifier rate)  currently at 5.14%, which limits the total credit available to the first-time homebuyer by 25% or more,” says Galea. “The major impact of the new rules have affected the self-employed as the insurers are asking for more supporting documents  to substantiate their stated income—CMHC requires proof of income for BFS clients that have been in business for two years or longer, whereas Genworth doesn’t have this requirement but the income must be reasonable for their particular profession.” 
Brokers and agents immediately saw the effect on first-time buyers, even before the rules came into effect.


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  • Russ Cameron Cameron Mortgages 2013-07-09 10:31:28 AM
    I've been in this business for 33 yrs either as a banker or broker..this is the worst irresponsiblity I've seen with CMHC..they don't understand what being cautious means anyway the Fed's should stop agian and think credit card debt is where we need controls . A $50m visa acct at 19.9% unsecured or a secured mortgage of $200m at 3.5%.. where do we think the problems could arise?
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  • M. Robertson 2013-07-09 10:45:25 AM
    Mortgage brokers have this idea that the lenders should change their policies to suit the needs of the borrower and the broker. They try to justify the argument saying that it is unfair to consumers, etc. Give it a rest. It is the lenders money, not yours – you want to make the rules – open your wallet. The old saying applies – the guy who is lending the money gets to decide who can borrow it.

    Who do you think you are fooling Mr. Broker? We ALL know that the only reason why you do not like the rule changes is because it means that there is less money for YOU.

    5 year amortization change should not break a deal, if it does – then guess what – they can NOT afford that house! So they have two options – buy within their means, wait and save some more money, pay down your other debt, or get a job that pays you more. The same applies to debt service ratios. This is how it has been done since the advent of home ownership – if you do not like it – then change industries.

    OH and stop churning your books and enticing borrowers to refinance every time there is a blip in rate. You are NOT doing it for your customers, you are doing it to get more deals done and to make more money. I have seen several pieces of marketing of late from a lot of brokers (including ones on here that profess to be looking out for their clients interests only) that promote refinancing NOW before rates go up to lock in the lower rate – even if you have as much as 3.5 years remaining on your term. So extend the term by 1.5 years, pay a penalty, etc? If you think that is being a professional advisor you need to get your head out of the sand.
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  • Russ Cameron 2013-07-09 11:08:15 AM
    Wow! are u talking to me..I am a retired cautious banker I don't need the money I just love common sense..25 yrs is ok it has been most of my career....but did u figure out the two financial props I suggested ? the $200m mortgage is less costly,than a $50m credit card... that's common sense...u have to understand this first..ya and I don't need to money because I've been cautious about credit//Thanks Russ
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