The Office of the Superintendent of Financial Institutions has been very busy lately, trying to come up with new mortgage rules to implement with lenders across the country, all in an effort to keep our bubble from popping and to keep Canadians from taking on more debt than they can afford. While stricter rules and policies aren’t generally something the public gets too excited about, the opposite may be true in this case, with just about every Canadian seeing how hot the housing market is – and only getting hotter every day. So if that’s the case, why then is Macleans saying that there will be “fierce opposition” to these rules – especially from Ottawa and Toronto mortgage brokers?
First, let’s review the rules. Up until this point the OSFI has been pretty vague about what exactly their proposed new rules are, although they are up for discussion until May 1. Macleans however, did a great job of breaking down what the new rules include. In addition to the new HELOC rules the OSFI wants to impose, they also have recommendations to the conventional mortgages currently being taken out by Canadian homeowners, as well.
The first rule change would make banks responsible for making sure the borrower didn’t borrow their down payment. This isn’t a lot different than the rule we have today, in which banks typically need to see three months of bank statements to verify that the down payment has been saved and not borrowed. In addition to this, the OSFI also wants banks to tighten some of their conventional lending standards, especially for stated income mortgages; and they want the bank to provide “more conservative property appraisals.”
Thank you, Macleans for breaking down something that was only talked about in pretty vague ways before. However, the magazine also says that these changes can be expected to be met with some “fierce opposition,” according to the magazine, and they even go on to say “particularly among mortgage brokers.” We just want to take a minute to clear that up.
Mortgage brokers work for the homebuyer, that’s true enough. So it makes sense that anything that makes it harder for the buyer would also make it harder for the mortgage broker – but it’s really a two-sided coin.
While mortgage brokers work very hard for the client and try to help them in any way they can, a broker is really there to help individuals understand their current financial situation, and what kind of mortgage they could get with that situation. Of course, mortgage brokers also have a huge network of lenders available to them, which is one of the biggest reasons so many Canadians seek their services every year. But in addition to that network, brokers are really just trying to help homebuyers understand their situation and work within it, not around it.
It’s because of this that we disagree with Macleans argument that these rules would be met with “fierce opposition” from mortgage brokers. We want to make it as easy as possible for qualified homebuyers to obtain mortgages, sure. But we also realize that banks and lenders have a responsibility to both the Canadian economy and the borrowers they’re giving out loans to, to make sure that those loans can be repaid. It’s the only way to make sure that the homeowner can live happily (and with manageable debt) in their new home.
And when it comes to our “housing bubble,” isn’t that all any of us really want?
