- First Time Buyers and Affordable Housing at Risk
NEW WESTMINSTER, B.C.,
The proposed OSFI changes will significantly decrease access to affordable mortgage loans for first time Canadian home-buyers and apartment investors as the
CMHC's current securitization program supports affordable housing by enabling banks and financial institutions to issue more Government guaranteed loan products, thus making it possible for these institutions to provide credit to Canadians at lower interest rates as the securitization frees up space on their balance sheets. This allows these institutions to meet the demand for more mortgage loans than they otherwise could if they had to hold all the loans on their balance sheets, which are subject to several restrictive regulatory capital leverage ratios.
The OSFI's proposed policy will effectively tighten the capital governance rules and reduce an institutions capacity to generate these government backed mortgages.
"These are exactly the consequences that most of the academics, industry and political parties have openly said they do not want as they are all supportive of retaining the CMHC programs (supporting over 900,000 housing units worth
"CIBC senior economist, Benjamin Tal describes CMHC as the "secret weapon" and he credits CMHC's ability to provide inexpensive credit as one of the reasons Canadian banks did not need a bailout during the recent recession. (Globe and Mail, Report on Business October 17)"
John McCallum, Liberal Finance critic stated (Globe and Mail, Report on Business
Also, the Finance Minister's office of the Federal Conservative Government reported that the "Canadian financial sector and housing market have remained sound throughout the recent crisis largely due to the effectiveness of the roles played by the federal institutions including CMHC in supporting markets, backstopping risks and sustaining the availability of credit." (Globe and Mail, Report on Business
In his letter to the Minister, Paul states: "Urgent action is needed to review the OSFI Draft Advisory on Conversion to International Financial Reporting Standards. The implication of this Draft Advisory is that it will impede the recovery and growth of Canada's economy as well as restrict Canadian's access to home buying.
"It would be extremely ironic if the Canadian public efforts to protect our major banks resulted in the large banks obtaining a predatory position over smaller banks, trust companies and other competing financial institutions and thus increase their market share, reduce competition and increase loan pricing for all of us" said Paul.
Here is the letter sent to the Hon James Flaherty: http://files.newswire.ca/840/Letter1_v6.doc
For further information: Elbert K. Paul, (778) 991-7756, [email protected]
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