From the Financial Post OSFI lays mortgage rules finalized mortgage rules; mortgage brokers not so happy
Canada’s banking regulator announced finalized guidelines for mortgage lending that along with other measures unveiled today by Finance Minister Jim Flaherty are aimed at cooling the country’s frothy housing market.
The Office of the Superintendent of Financial Institutions first proposed the guidelines back on March 19, as part of an international initiative spearheaded by the Financial Stability Board in Basel, Switzerland.
The new guidelines, which come after much discussion with industry, are designed to compel lenders to look more closely at the credit history of borrowers even when mortgages are backed by the federal government and to limit the level of risk exposure.
Among the major changes:
— The maximum loan to value on home equity lines of credit (HELOCs) is cut to 65% from 80%
— The loan to value should be re-calculated upon any refinancing and whenever the lender deems prudent
—HELOCs will continue to as revolving lines of credit with no specific amortization period. However, OSFI says lenders must now expect borrowers to have the ability to fully repay HELOCs over time.
All this on the heels of Mark Carney saying from the Financial Post "Canada’s relatively healthy economy has been largely based on borrowed money, but the situation cannot go on indefinitely", Bank of Canada governor Mark Carney warned Thursday.I will be adding to this list, green =mortgage loosening, red = mortgage tightening
1954-1990- Somewhere along this time, 10% became minimum down payment.
1990- 5% was introduced as a trial run, then officially accepted in 1999.
2001 – Genworth (GE Capital) enters the Canadian mortgage insurance market
2001 – CIBC offered below-prime mortgages.
Pre-2003 – CMHC: 5% down with price limit depending on area, 25 yr amortizations, no price limit if 10% or more down
Sep 2003 – CMHC: 5% down, 25 yr amortizations, removed all price ceiling limitations. Now any mortgage would be insured regardless of the cost.
Mar 2004 – CMHC: Flex-Down product allows 5% down to be borrowed and 1.5% closing costs to be borrowed (essentially zero down, but 95% insured)
Mar 2006 – AIG enters the Canadian mortgage insurance market
Mar 2006 – CMHC: 0% down, 30 yr amortizations (Genworth announces 35 yr amortizations)
Jun 2006 – CMHC: 0% down, 35 yr amortizations, interest only payments allowed for 10 years
Nov 2006 – CMHC: 0% down, 40 yr amortizations, interest only payments allowed for 10 years
Oct 2008 – CMHC: 5% down, 35 yr amortizations, investors need 5% down.
April 2010- CMHC did some minor tightening of their guidelines, investors need 20% down.
March 2011- CMHC only allows 30 yr amortizations, restrictions on pulling equity out
2012 - CMHC only allows 25 yr amortizations, insured mortgages limited to $1 million, home equity refinance drops from 85% to 80%.