PHEW!Yup, no problem, even though we owe more than we make, 'let's keep the party going' say mortgage brokers.
Brokers are breathing a sigh of relief after the Finance Minister rejected calls to tinker with mortgage insurance rules, offering a budget that leaves the maximum amortization cap at 30 years and the minimum down payment at 5 per cent.
With today's budget announcement, Flaherty effectively rejected a chorus of banker calls for a 25-year amortization cap, down from the 30 years the government now allows. Some economists also wanted the government to increase down payment requires to a minimum 7- or 10-per cent.
Both suggestions were billed as a way of cutting record levels of household debt and slow down the consumer rush to buy homes.
Ottawa to toughen CMHC legislation"
After earlier voicing concern over the activities of the country’s dominant mortgage insurer the federal government is toughening its oversight of the massive and economically vital organization.You know the OSFI, right?
The federal budget took aim at Canada Mortgage and Housing Corp., the Crown corporation that controls about 75% of the mortgage default insurance market. CMHC is backstopped by the federal government but is coming close to breaching its mandated limit of $600-billion because of the red-hot housing market and so-called portfolio insurance for the banks.
“The government will introduce enhancements to the governance and oversight framework of Canada Mortgage and Housing Corp.,” according to the budget.
They are the guys who have poured over the books of Canadian banks and found that "Canadian Housing Market Beginning To Resemble U.S.'s Subprime Mess
Canada’s financial regulator is growing worried that Canadian banks are following their American counterparts into the “subprime” mortgage market that blew up the financial system in 2008.
According to documents obtained by Bloomberg under access to information laws, the Office of the Superintendent of Financial Institutions (OSFI) is concerned Canadian banks are becoming less strict in their issuance of mortgages, handing out house loans to people who can’t prove their income and to recent immigrants.
These loans “have some similarities to non-prime loans in the U.S. retail lending market,” the OSFI reportedly wrote.
“It just speaks to the general easing in lending standards, which has contributed to a booming housing market,” economist David Madani of Capital Economics told Bloomberg.And this was released just over a week ago.
Financial Post More mortgage transparency needed to combat high household debt: OSFI
OTTAWA – Canada’s banking regulator wants lenders to be more transparent about their mortgage businesses as it seeks to minimize the risk to the economy from record-high levels of household debt.
Draft guidelines from the regulator released on Monday called for increased disclosure by banks on their exposure to certain mortgage products and markets, enhanced risk-management practices and treating home equity lines of credit (HELOCs) the same way as mortgages.
The Office of the Superintendent of Financial Institutions has been reviewing bank’s residential mortgage portfolios for over a year and the draft guidelines reflect some of its findings.