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Top Banking regulator stepping.. OSFI’s Julie Dickson leaving in 2014

Julie Dickson Julie Dickson, the head of OSFI (Office of the Superintendent of Financial Institutions) will not be back when her term expires in July 2014.  She’s decided to not to stick around after making more lending rule changes in 2012, than I have ever seen, during my entire 23 year career working in financial services.   OSFI is a regulatory body that provides regulation and supervision to 152 Banks, Trust companies and other Lenders.   In short, they are auditors.  Here’s a link to the major changes made just last year including putting CMHC under OSFI control.. more on that later..

Some say her claim to fame is that she was in charge during the worst banking and mortgage crises in history.  And that Canada came out of this global financial collapse way better than any other country.   It’s true, we did come out of this very well compared with the rest of the world…   But what does Ms. Dickson and OSFI have to do with it?  For me, this had more to do with luck, govt intervention and Canadians being our normal conservative selves.   We were a little slower to adapt to U.S. style lending policies… Ask any financial expert and they will tell you we were just a few years behind the U.S. with regards to their wild mortgage lending guidelines…

Did you know that our Federal govt approved and promoted $0 money down mortgages, with interest only payments?? and not just for owner occupied properties but for rental OSFIproperties, too?  Think about that… $0 money down with interest only payments on a rental property!!!  Wow!  Or how about the 35 and 40 year mortgage amortizations?  95% loan to value refinances?   We also had 107% mortgage financing in Canada… (not supported by govt of Cda but it was here)…   Remember, all these programs started to get introduced in 2006.. just 2 years before the October 2008 U.S. sub-prime mortgage crisis.

And now Ms. Dickson and Mr. Flaherty (federal minister of finance) have turned back the clock to 1993 with a knee jerk like reaction with their Bill B-20… This Bill affects anyone that borrows money.. yes.. ALL of US… Many of the newer lending rules are just like they were 20 years ago… Only it isn’t 1993 anymore… and times have changed..  Our needs have changed… We don’t have 8.00% and 9.00% mortgage rates… We need a govt for 2013, not 1993.

Ms. Dickson isn’t sticking around for the credit fallout that will come from the excessive changes she brought in last year… We have record low interest rates but the govt doesn’t want you to access them…   These rule changes have begun…the full effects won’t be felt for another year or two as mortgages come up for renewal or when you want to refinance, or buy an investment property or just borrow to invest.   This is when most Canadians will realize how much things have changed..

And to make matters worse, our federal govt decided to put CMHC (Canada Mortgage and Housing Corporation) under the control of OSFI.  Let’s remember that CMHC is a national housing agency that was created to make owning a home more affordable.  But now it’s under the control of an auditor??…  So how is that supposed to work?  That’s like taking the sales staff  and asking them to report to accounting department… We’re not gonna see much sales results….It just doesn’t work….  hence a change at the helm for CMHC.. more on that change in a future report…

Your best interest is my only interest.

As always, I welcome your comments, calls and questions.

Steve Garganis 416 224 0114 steve@mortgagenow.ca

Steve Garganis View All

As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.

5 thoughts on “Top Banking regulator stepping.. OSFI’s Julie Dickson leaving in 2014 Leave a comment

  1. CMHC has not been a social assistance program for years. It has morphed into an economic stimulus engine. Canadians are in no way being prudent. We’ve formed a debt bubble that’s overshadowing the housing bubble because of low rates.

    The reason they want to quash it is because the bubble is about to pop and the CMHC will be seen as the Canadian equivalent of AIG. Who was running one of Canada’s biggest financial institutions this whole time? The human resources directorate. At least now they are falling in line with other regulated banks.

    Perhaps house prices can double in ten years and we have no bubble. So where would there be a bubble? When houses triple? quadruple? All they had to do was double in the US before there was a pop so loud that it echoed around the world.

    Kill the CMHC and bring the free market back. Let house prices tank so that the average family doesn’t need to go into soul crushing debt to afford a house.

    Or perhaps, as you suggest, we should loosen the rules again. After all thinking that there is a bubble in Canada is unthinkable, the consequences too dire.

    • Hi, you make some good points.. except we shouldn’t forget the cause of the October 2008 recession was caused by U.S. sub-prime mortgages… mortgages were being given to people that didn’t qualify.. that couldn’t pay.. the mortgages has ridiculous teaser rates for the first year or two and then rate would go up and people couldn’t pay… People were allowed to borrow 115% of the value of their homes… And then these mortgages were being packaged and sold to investors as AAA credit quality..

      I think the difference in Canada is that we only started to enter that market.. Probably 5% of all mortgages in Canada were sub-prime.. and that’s probably a high estimate… But since that time, underwriting policies have become far too strict.. Our arrears levels are at record lows.. Canadians are paying mortgages off faster than ever before… I think the govt is making is to tough to qualify that they could create a ‘made in Canada’ recession…

      by the way.. I think house prices have increased too much too soon… Just raise interest rates and few people will qualify.. or raise the qualifying rate and you’ve accomplished the same thing..

      • The problem with raising rates is that it doesn’t just affect the housing market. The economic stimulus is required for growth. However we, as the BOC likes to call it, have an “imbalance in the housing sector”.

        If raising rates isn’t an option then you have to target the rules that allow more people to qualify. This is exactly what they are doing.

        You make the point that our arrears rates are low. However this is more of a trailing indicator than a leading indicator. People are able to get access to credit to pay off other loan obligations.

        I say raise the minimum down payment to 10%. This move would be too overt though. They are trying to reign in the housing market “behind the scenes”. They don’t want to get blamed for what comes next.

        I agree that they could trigger the made in Canada recession.

  2. Julie grew the organization from 300 to 700 leaving it in a mess. The underlying quality of material published and speeches written has declined signifcantly. Key people have left at all levels. Internally, Senior Directors are bringing in their friends. Others are getting promoted without ever having gone through an interview.
    Key areas lack technical skills, (Reinsurance, Supervision, Credit, Condo Group) Remember OSFI said that banks would fail when a barell of oil hit $80.00. Guess what, we are still doing very well. Thank-you

    • So true, their best staff has left. The Liberal government is looking to get Stats Canada back to the table to keep a tab on condo

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