Canada’s Minister of Finance, Flaherty, surprised many today by tabling a budget bill with a major legislation change. The bill would move Canada Mortgage and Housing Corporation (CMHC) under the control of the Office of the Superintendent of Financial Institutions (OSFI). This would also give the Minister of Finance even more control over CMHC. Here’s an article in the Globe and Mail.
So let’s think about the impact of this proposed legislative change… Over the past 4 years, we have seen numerous changes to CMHC lending policies…
- Maximum amortization has dropped from 40 to 30 years.
- interest-only payment mortgages came and went in 2 years.
- 100% loan to value or no money down mortgages came and went over a 2 year period….. you must now put at least 5% down payment.
- rental property mortgages could be had for up to 100% loan to value and are now not being insured at all.
- Business for self could get mortgages up to 95% for purchases but are now capped at 90% ltv.
- You could Refinance your mortgage for up to 100% ltv and now it’s capped at 85% ltv.
- Variable rate borrowers have to qualify at BIG SIX Bank posted 5 yr rate, compared with discounted 5 yr rate or 3 yr fixed rate. A clear move to force you into the higher 5 yr fixed rate…. supposedly it’s safer to be in a 5 yr fixed rate…(guess the govt has looked at any rate comparison charts for the last 20 yrs).
- Secured lines of credit could be had for up to 90% ltv CMHC insured, then CMHC pulled out altogether leaving the max at 80% ltv and now OSFI wants to cut them back to 65% ltv (this move has everyone confused and puzzled).
Aren’t all these changes enough? How much tighter does the govt need to make it? And all these changes have come prior to Julie Dickson, head of OSFI, being involved…. What scares me and should scare you, is that OSFI has come out and stated they want to cap the amount of equity you can access in your home…. That’s right… OSFI wants to limit your secured line of credit to 65% loan to value. This proposed change is beyond my understanding. It’s so out of line that it defies any common sense. For the first time that I can remember, the govt is telling Lenders and Banks how much they can lend to you for uninsured loans. If you don’t like this, then stand and up and have your say… write to OSFI and tell them you don’t agree…
I can tell you that within my own base of clients, this will affect a great number of people… the professionals, the business for self, the investor that wants to borrow to invest… remember, these are everyday people that want to do better but will now be handicapped by your govt because they can’t access the equity in their homes.. It won’t stop them, it will just cost them more to borrow as they seek other, higher interest credit products…. (Banks will win yet again).
If OSFI does gain control over CMHC, then lookout… we can only imagine the possible changes that they are conceiving.