There’s been an awful lot of changes to mortgages in the last year or so. At the beginning of 2011 the federal government imposed stricter regulations on both amortization periods and then HELOCs and most recently, they’ve changed the oversight of the Canada Mortgage and Housing Corporation (CMHC.) This new governance of the Crown corporation brings many of its own changes and it’s those changes, says one analyst, that’s going to benefit Toronto mortgage brokers the most.
Because CMHC is now being overseen by the Office of the Superintendent of Financial Institutions (OSFI,) the banks can no longer sell insured mortgages to the government in exchange for covered bonds; or at the very least, this practice is going to be lessened considerably. And while that may not be great for the banks, it’s going to be a huge plus for mortgage brokers. At least, according to Stephen Boland, an analyst at GMP Securities.
In a recent letter to his clients, Mr. Boland spoke about the new changes saying, “We believe that the increased lending restrictions on the use of CMHC will provide the alternative mortgage lenders with additional products which will help them continue to grow their loan books.”
That may very well be true. The fewer covered bonds the bank can use as collateral for short-term loans with the government, the less capital they show on their books. This means that they can’t give out as many loans, and they’ll become much pickier with those they choose to give a loan to. Homebuyers who are on the brink of not being approved for a mortgage, most likely will not be by the big banks. And that’s not only good news for brokers, but good news for homebuyers, too, who are seeking other options and want to get the best deal on their mortgage.
But it’s not just the fact that CMHC’s oversight has been changed. Mr. Boland also points to the fact that many of the big banks have withdrawn from the mortgage broker market and sub-prime market. As borrowers see that more doors are closing, they’re going to be even more eager to find ones that are not – such as those to a broker’s office.
In short, the new changes are good for just about everyone but the Big Six banks, says Mr. Boland. “We believe that certain borrowers may not qualify for lending at the large financial institutions due to new restrictive constraints and alternative mortgage businesses will likely benefit at the margin.”
