TORONTO, April 25, 2017 /CNW/ - Today, Mortgage Professionals Canada launched a new web-based consumer advocacy campaign and website www.tellyourmp.ca to support its ongoing efforts to inform and educate Members of Parliament (MP) about the negative impacts of the federal government's changes to mortgage insurance and eligibility. The association has been very active in lobbying the federal government to make reasonable, common-sense changes to the new rules, and is now seeking assistance from middle- class Canadians to have their say by letting the government know how they have been affected by the changes.
"Our members are working with and seeing directly that many Canadians are frustrated by the impacts of these changes and are looking at ways to reach out to the government directly," said Paul Taylor, President and CEO, Mortgage Professionals Canada. "Our goal with this grassroots campaign is to make it incredibly easy for Canadians who have been disadvantaged by the changes to send a message to their local MP to build support for affordable homeownership."
Mortgage Professionals Canada encourages anyone who has been negatively impacted by these changes to visit www.tellyourmp.ca to send a letter to your MP. The association's members have been extremely active in lobbying local MPs about the negative impacts the changes are having on housing activity in Canada and the additional costs that are being placed on the Canadian middle class through higher rates and reduced purchasing power.
Many middle-class Canadians are already paying thousands more over their mortgage term in interest payments and many first-time buyers are unable to qualify for a mortgage. Real people are being detrimentally affected by these changes which is why Mortgage Professionals Canada is calling for the government to make some reasonable and common sense adjustments to the recent changes. Mortgage Professionals Canada has presented recommendations to government regarding the new rules which will help government meet their goals while softening the negative impacts on Canadians.
About Mortgage Professionals Canada
Mortgage Professionals Canada is the national mortgage industry association representing 11,500 individuals and 1,000 companies, including mortgage brokerages, lenders, insurers and industry service providers. Our members make up the largest and most respected network of mortgage professionals in the country whose interests we represent to government, regulators, media and consumers. Together with our members, we are dedicated to maintaining a high standard of industry ethics, consumer protection and best practices.
The mortgage broker channel we represent, originates 33% of all mortgages in Canada and nearly 50% of mortgages for first-time homebuyers, representing approximately $80 billion dollars in annual economic activity. With this diverse and strong membership, we are uniquely positioned to speak to issues impacting all aspects of the mortgage origination process.
Summary of New Mortgage Rules Changes
- All insured mortgages need to qualify at either the Bank of Canada benchmark rate (currently 4.64%) or the contract rate offered on the homebuyer's commitment, whichever is greater.
- Portfolio ('bulk') insurance must now meet the same criteria as mortgages that are high-ratio insured. This means that amortizations greater than 25 years, rental and investment properties, refinances, and homes with values greater than $1M can no longer be portfolio-insured.
- A proposed 'risk-sharing' model for lenders to share in losses of insured mortgage claims.
- New capital requirements as of January 1, 2017 that require mortgage insurers to increase the amount of capital they need to hold in reserve.
- An increase announced by CMHC for insurance premiums that consumers pay on unconventional mortgages. In some loan-to-value categories, premiums will increase by more than a whole percentage point of the value of the mortgage, effective March 17, 2017. This is the third increase in three years.
We are concerned with the negative economic impact that these changes are having on housing activity in Canada. We are also very concerned with the additional costs that these changes will place on the Canadian middle class by way of higher interest rates and reduced purchasing power. We have already seen banks increase their mortgage prime rates in part because of these changes, which will cost Canadians thousands more over the course of their mortgage term.
The reduction of portfolio mortgage insurance eligibility, in addition to the increase in premiums due to OSFI's recent increased requirements for capital adequacy is disproportionately affecting the competitive positioning of small- and mid-sized lenders. These changes are reducing mortgage competition and affordability for Canadian homeowners and would-be homeowners.
Our members has been vocal with their displeasure regarding the impacts that these changes are having, especially outside of the Toronto and Vancouver markets. There is a real and growing resentment that the activity in these two markets is negatively and unfairly impacting the rest of the country. Moving ahead with a risk-sharing provision would cause an additional burden on the market and further the divide between rural and urban areas.
The Canadian economy saw only modest growth in 2016, especially for the middle class, and the housing sector is one of the few strong performers that was a driver of that growth. We are concerned that these changes will hurt the economy as the Bank of Canada noted that the new rules will ultimately reduce economic growth, which in turn will hurt the middle class.
Recommendations for Government
- That in light of all of the significant changes already made, that the government hold back on any measures yet to be implemented, most specifically its proposed risk sharing provision. We believe it prudent for the government to take 12-18 months to examine and assess the impact of these changes.
- Adjust the November 302016 change to allow for refinances to be included in portfolio insurance. If 80% LTV is unpalatable, consider reducing the threshold to 75% or 70% rather than removing these products eligibility altogether
- Decouple the stress test rate from the posted Bank of Canada rate. Instead, set the stress test based on a market rate, either by looking at the Canadian ten-year bond yields or having the Bank of Canada set a rate that is independent of the average of the banks posted rates.
- For the sake of ensuring competition is maintained in as fair a manner as possible, OSFI should require all mortgages to qualify at the stress test rate, not just insured mortgages.
SOURCE Mortgage Professionals Canada
For further information: Paul Taylor, President and CEO, Mortgage Professionals Canada, O: 416-644-5465 / C: 905-334-1165, [email protected]