Mortgage Broker

CMB MAGAZINE cmba-achc.ca winter 2017 | 29 which now require all borrowers of insured mortgages to be stress-tested, have become a reality. For instance, various branches of the federal government – including the Department of Defence and the RCMP, as well as private companies – oen require their employees to relocate. Mortgage brokers have witnessed firsthand the impact of the new stress-test qualifying rate on military members and others who need to sell their home at their last post, but have been unable to purchase a home at their new post. Under the new qualifying rules, these individuals are unable to qualify for a mortgage large enough to purchase a home in the vicinity of their relocation. is inability to buy means they have no choice but to become a tenant. Paying high rents at a time of record-low vacancy rates means they will be challenged to save the necessary funds for a down payment for a future home purchase. In addition, relocation benefits, such as funding assistance for closing costs, will simply expire and have no value to the employee. Other unintended consequences have been the impact of lender appetite for the provision of mortgage financing in rural markets. With many lenders reducing their geographical boundaries for lending and/or withdrawing from these markets entirely, mortgage consumers now have fewer options and potentially higher rates to offset the perceived risk of lending in these areas. Recommendations for Improving Access to Home Ownership e CMBA urges the government to take action to remove barriers to housing affordability. However, it should be recognized that mortgage lending practices in Canada are among the best in the world, qualification criteria is already strong, mortgage defaults are at all-time lows, and insured portfolios (both high-ratio and conventional) attract investors, which creates competition, choice and, ultimately, is a win for Canadian Mortgage Consumers. Specifically, the CMBA makes the following recommendations: n Exempt all insured mortgages with fixed interest-rate terms of five years or greater from the requirement to qualify borrowers at the Bank of Canada's benchmark rate and permit qualification at the true contract rate associated with the term. n Permit first-time homebuyers to amortize insured mortgages over 30 years instead of 25 years. n Modify the requirement of limiting amortizations on insured mortgages to 25 years by enabling borrowers with a loan-to-value ratio of 80 per cent or less to amortize up to 30 years. n Exempt all insured mortgages with principal amounts of $499,000 or less from the requirement to qualify borrowers at the Bank of Canada's benchmark rate, and permit qualification at the true contract rate associated with a fixed term of five years or more. n e Bank of Canada benchmark rate should be the mode average of the five-year posted rate of all federally regulated lenders, not just the "Big Six." n Find ways to require and encourage all levels of government to remove red tape, excessive costs and delays in approving housing development. In its 2016 budget, the federal government provided an unprecedented level of funding to municipalities for infrastructure improvements, housing and transit. Consider tying municipal funding grants and investment to a municipality only if it has a comprehensive red-tape-reduction strategy in place to efficiently deliver services to the public. Work with the Federation of Canadian Municipalities to make a local government's red-tape reduction a priority. As a corollary, all levels of government need to look at the supply side of housing, rather than just regulations to curb demand. n Reduce high-ratio insurance premiums so they are revenue neutral. n Recognize that housing becomes more affordable when consumers can better afford mortgage costs due to having less unsecured credit. Focus efforts to curb Canadians from overextending unsecured credit, such as credit-card debt, by prohibiting collateral mortgages to be default insured. Collateral charges limit consumer options at time of term maturity and also permit, with ease, the transfer of lender unsecured debt to the collateral charge. n Ensure that lenders of unsecured credit qualify borrowers on income and reasonable debt ratios, not just based on credit scores and complementary product matches to existing portfolios, such as an unsecured line of credit or a credit card with mortgage. CMBA RECOGNIZED ON PARLIAMENT HILL FEBRUARY 1 WAS AN HISTORIC DAY for the Canadian Mortgage Brokers Association. On this day, I was privileged and proud to speak on behalf of the CMBA to the Parliamentary Standing Committee on Finance. Less than two years after it was formed, it became officially recognized by the government as an Association – and one that has something to say. I was joined by CMBA Atlantic President Nick Hamblin and CMBA Ontario Director Kim McKenney. Committee Chair Wayne Easter started the session asking to "hear from the Canadian Mortgage Brokers Association." We were questioned by committee members about various issues. The opposition MPs and Liberal MPs sat on opposite sides of the room. It soon became apparent that the opposition parties sided with us and were in agreement with our assessment of issues, but the Liberals, on the other hand, were in a defensive mode, and tried to poke holes in our analyses. It presented a very interesting view of democracy in action. The CMBA made it clear to the Committee that the mortgage broker industry should be consulted before any housing or mortgage policy changes are made. We pointed out that we are experts in the mortgage field, and that our expertise is necessary to shape mortgage and housing policy. We ensured that the Committee was aware of the expansive scope of mortgage brokerage activities across Canada, with mortgage brokers funding over $70 billion annually. —Ajay Soni, CMBA National President

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