By this point, we are all aware that our industry has experienced dynamic changes since October of 2016. As a result of these changes, industry stakeholders (i.e. lenders & insurers) and borrowers share in the challenge of gaining clarity and a full understanding about all of the short term and long term implications.
This update is not aimed at rehashing these changes but to highlight some of the proactive actions VERICO has taken to voice our concerns at the parliamentary level, to help our brokers understand the implications of these changes and our strategies to continue the discussion with Government on your behalf.
In terms of our involvement at the parliamentary level, here are some highlights:
- Jared Dreyer, Lionel Lewko, Diane MacPherson and, I have been very involved with Mortgage Professionals Canada at the Board level. MPC and the Board have been immensely involved with submitting documented views and opinions regarding these changes. The MPC voice is very pronounced and succinct at parliament.
- VERICO has been actively in communication with Ron Liepert, Gerard Deltell, and Dan Albas who are Official Opposition Members of Parliament Standing Committee of Finance
- VERICO executive team have been invited to participate with Government Advocacy initiatives in March
- VERICO submitted a brief to the Standing Committee on Finance outlining our concerns. Summary below:
- have reduced choice when they shop for a mortgage
- have up to 20% less buying power due to the stress test
- experience difficulty buying their first home
- experience difficulty refinancing their home
- experience penalty payments if they have to break a mortgage because they can no longer port their mortgage to another property
- experience erosion in the equity they have built into their homes due to market downturn
- pay more for their mortgage
- pay more for Mortgage Insurance due to the rate hike announced by CMHC effective March 17, 2017.
Impacts on the Economy
- Canada already has a sound home financing system with prudent rules. The suite of regulations do not solve a problem that doesn’t exist.
- face uncertainty because rates have already gone up materially
- Housing market activity could be reduced by 6 – 10% or more in some markets
- Real estate is the top industry in 7 out of 10 provinces and with an estimated 8% drop in activity due to the new regulations, how many bruises can the Canadian economy sustain?
Impacts on Non-Bank Lenders
- Non-bank lenders will face an uneven playing field where Big banks can continue to operate outside of the suite of regulations
- Non-bank lenders face not only increasing cost of doing business but also inability to serve certain populations of Canadians
- experience shrinkage of client base and market share
- no longer be viable competition for the big banks
- no longer be able to work with clients who need to refinance
- no longer be able to work with clients who need to port their mortgage because they are moving to another property
- essentially be excluded from doing business in Vancouver and Toronto because they cannot fund mortgages where the property valued at over $1 Million
- essentially be excluded from smaller regions in Canada where there is economic weakness and higher rates of unemployment because they have to lend at higher rates
- source other or additional capital for loans that no longer qualify for portfolio insurance (which would include all conventional mortgages with over 20% down payment, refinances, etc.)
- face tighter margins because the cost of funding non-insured portfolios will increase while opportunities to grow market share will decrease
VERICO will continue to play an active role as we move through these changes together. We are committed to being the driving voice of advocacy and to drive education at all levels which will be made very evident at our inaugural NVEST events in the spring. We hope to see you all there (details coming soon…)
VERICO Financial Group