A few days ago Canada Mortgage Trends announced that they had been told by the Office of the Superintendent of Financial Institutions (OSFI) that all mortgages in Canada could be capped at a 25 year amortization. Not surprisingly, this news has spurred lots of conversation around the country, and the potential impacts this move could make have been at the heart of every discussion. Now, one mortgage broker is saying that the move will be good for a certain type of lender. The question is, will it?
“Of course it’s going to benefit subprime lenders,” said Adam Hale, a mortgage broker in Hamilton. “The B-lenders must be licking their chops at this.”
The question is, why would they? To begin with, there are only a very few subprime lenders left in Canada; most of those went out with the 40-year amortization. So even if this move is going to benefit them, we’re still talking about only a handful in a move that would be detrimental to everyone else.
But you have to figure that if moves are going to be made to tighten up mortgages in general, moves will also be made to tighten the subprime market. If this rule were to go through for instance, the chances that insured mortgages would still be capped at 25 years is unlikely, as the government wants these mortgages to be shorter than conventional mortgages that came with a full down payment.
So how short would insured mortgages be then? 20 years? 15 years? No one really knows, because other than talking about this proposed change, the OSFI and Canada Mortgage Trends haven’t really said what other changes would be made.
And it’s still unclear as to how the move would benefit subprime lenders. Hale seems to believe that with the new changes, those subprime lenders are going to be calling on mortgage brokers once again – and this time, probably more often. But still, doesn’t that benefit mainly the broker, and not the lender?
“Brokers once again are going to be valuable to the lender,” Hale says. “I have people phoning me saying ‘The bank told my TDS is too high.’ They don’t know understand what a TDS is, but they know that I will explain it to them and help them find a mortgage loan.”
What do you think? Do you see Hale’s point about how the new OSFI rules could benefit subprime lenders? If so, how; and do you think it’s worth it, considering how many people would again be shut out of the market should they go through?