Canadians remember with vivid clarity when Jim Flaherty tightened the rules on Canadian mortgages, and for anyone who wanted to get a HELOC. And while it was probably a good move, to keep us from getting in too deep like our neighbours south of the border, now an interesting proposition may be on the table. That is, to take the power out of the government’s hands and give it to the banks and other mortgage lenders. This is according to TD Bank CEO Ed Clark, who said that’s the exact situation the government is currently considering.
According to Mr. Clark, instead of major announcements from the government like we had last January, lenders could instead tweak their own mortgage lending rules when required. He says, “They’re worried that the Canadian economy is slowing down right now and major changes are akin to taking out a bazooka. We have seen the banks in a series of small moves say “Okay, why don’t we tweak here and tweak there and see if we can tighten the rules.”
Could Mr. Clark be referring to the recent move CIBC FirstLine made in eliminating stated income mortgages, and put a cap on the amount they’ll loan for a mortgage? Or could he be talking about the move TD Bank made themselves just recently, first offering greatly discounted mortgages only to pull out early? Or the changes TD has recently made to their own equity programs? Whatever “tweaks” he’s referring to, Mr. Clark also says that policymakers actually prefer that banks make the moves on their own, rather than wait for government mandates.
He also gives a nod to the potential housing market problem that many Canadians think we’re headed for, if not already in. He continued to say, “There’s nothing going on in Canada like what happened in the United States because the banks own the mortgages; we put them on our balance sheet. But it doesn’t mean we couldn’t have a problem.” While some argue, and have been arguing, that it is in fact true, will giving our banks and lenders the power instead of the government fix the problem?
What do you think? Would you rather the government put restrictions on lenders, or would you like to see how lenders would handle if they were suddenly given the responsibility?
