Home loans soon to be under stricter regulation

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The Canadian Mortgage and Housing Corporation (CMHC) recently issued new guidelines for the use of debt ratios and confirmation of income documents in their mortgage calculators. Set to take effect on December 31, 2013, many lenders are already adhering to the stipulations, while others, like Genworth Canada, are in the process of reviewing them, and may not completely implement the guidelines by the end of the year.

What the new debt ratio rules mean for borrowers
Last year, the Department of Finance issued its fourth round of rules tightening mortgage insurance practices. Those rules, intended to shield the Canadian economy from the brunt of the worldwide debt crisis, set restrictions on mortgage applications for new borrowers with less than 20 percent equity. The long-term repercussions of last year's moves, along with this newest set of rules from the CMHC, should serve to further cement mortgage standards and close existing loopholes. Continue reading

Canada’s housing market to slowly rise by the end of 2013 and into 2014

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The Canada Mortgage and Housing Corporation (CMHC) said that the housing market will pick up momentum in the later part of this year and into 2014.

David George-Cosh said in a blog for The Wall Street Journal that if this prediction sounds familiar, it's because it's similar to the outlook of an agency report in February, but with revisions downward for 2013 and 2014.

What are the current predictions?
The CMHC now forecasts starts of 182,900 units this year, down from the first quarter unit estimate of 190,300. In 2014, housing starts are expected to be at 188,900 units. The CMHC predicts resales will be at 443,400 in 2013 and 468,600 in 2014. Continue reading

CMHC changes homebuilding forecast

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Canada Mortgage and Housing Corporation has changed its forecast for homebuilding for 2013.

Citing slower economic growth and job gains, the CMHC has said demand for new homes will decline, leading to less homebuilding.

"CMHC expects housing construction activity will trend lower in the first half of 2013, before gaining more momentum by the end of the year as economic and employment growth remain supportive of the Canadian housing market," CMHC Deputy Chief Economist Mathieu Laberge said. "In 2014, improving economic conditions may be partially offset by a slight moderation in the number of first-time home buyers, and potential small and steady increases in mortgage interest rates."

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Home renovation programs

While renovating an existing property can be a costly proposition, there are programs available for qualified Canadian homeowners that help with expenses. Taking advantage of home renovation programs can ease financial strain and ensure that your home is in peak condition.

Homeowner Residential Rehabilitation Assistance Program (RRAP)
This program is offered by the Canada Mortgage and Housing Corporation to low income homeowners looking to make vital repairs to their property but can’t afford to pay for them. Homeowners looking to apply for the RRAP should make sure that their property is eligible.

Eligible properties must be valued below a certain amount, be at least five years old and need major repairs for either heating, structural, electrical, plumbing or fire safety issues. In addition, the RRAP may be available to homeowners who need help to reduce overcrowding in their property. However, in order to qualify, homeowners must have a total household income at or below the CMHC’s income threshold.

The Homeowner Residential Rehabilitation Assistance Program will assist homeowners with a fully forgivable loan. The loan does not have to be repaid as long as homeowners agree to continue owning and living in the property during the earning period of the loan. Continue reading

Housing market holds steady despite cool-down

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While financial analysts love to exalt the health of the market one minute and beat the drum for doom and gloom the next, the truth usually falls somewhere in the middle. It doesn’t make for as exciting newspaper copy, but all markets work in cycles and waves, growing and shrinking based on any number of economic factors. Despite the amount of ink being devoted to Canada’s cooling housing market, consumers should feel safe in the knowledge that while there may be some financial belt-tightening on the horizon, it’s not the end of the world.

At least, that’s the takeaway from the new forecast by the Canada Mortgage and Housing Corporation.

“A weaker outlook for global economic conditions and the waning of the effect of pre-sales from late 2010 and early 2011, which contributed to support multi-family starts this year, will bring moderation in housing starts next year,” said Mathieu Laberge, deputy chief economist at CMHC. “Nevertheless, employment growth and net migration will help support housing starts activity going forward.” Continue reading

Privatization comments spark debate

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Canadian Finance Minister Jim Flaherty can be a pretty divisive figure in certain circles, especially when it comes to Canada’s housing market. Flaherty made no bones about taking action when he suspected the market was unhealthy, leading him to tighten restrictions on mortgage insurance on four separate occasions. Some analysts saw this as a way to prevent a housing bubble in the Canadian market, part of a plan to cool things down in hopes of avoiding economic collapse like in the United States and Spain. Others, including industry professionals, saw it as interfering with a booming uptick in home sales and construction, neutering lenders, babying borrowers and restricting citizens from getting the mortgages they needed to buy homes.

No matter how you feel about the man and his policies, one thing is certain: The name Jim Flaherty has gotten just as much ink as interest rates when it comes to coverage of Canada’s housing market.

Well, Flaherty is in the news once again, riling up opponents and supporters alike with his views, only this time he’s calling for less government intervention. You’d be forgiven for wondering who this man is and what he’s done with the real Jim Flaherty. Continue reading

CHMC database sparks speculation

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A lot of negative attention is being directed toward Emili these days, but don’t feel too bad, her feelings won’t get hurt. You see, Emili’s not a human being.

Emili is an online mortgage loan insurance database launched by the Canada Housing and Mortgage Corporation (CHMC) in 1996. 

According to the CHMC, Emili “provides a consistent, comprehensive and objective risk-based analysis that considers the borrower, property, market and overall risk of each application.”

The organization may tout Emili as the current standard in “online mortgage loan insurance decisioning,” but troubling documents have begun to emerge that paint a different picture.

A report from the Office of the Superintendent of Financial Institutions (OSFI) quotes respondents as saying Emili produces inaccurate information, resulting in faulty home appraisals. Continue reading

Flaherty Tightens Canadian Mortgage Rules.

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In a statement Thursday, Finance Minister Jim Flaherty announced a number of new mortgage lending rules. Come July 9th, the CMHC will no longer insure mortgages with amortizations longer than 25 years, and will further limit the amount a homeowner can refinance their mortgage to 80%, down from 85%.

The Harper government has now reduced the maximum amortization three times. In 2008, they reduced the maximum amortization from 40 to 35 years, and in 2011 they reduced it again to 30 years. In July, it will be decreased once more to 25 years, eliminating the last vestiges of the extended amortizations introduced by the CMHC in 2006.
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Banks, national agencies prepare for oversight

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A plan to increase oversight of the Canadian Mortgage and Housing Corporation has received mixed reviews in Ottawa, but at least one major housing official has signaled his support for the measure: CMHC President Karen Kinsley.

Speaking before the senate banking committee May 17, Kinsley said the increased oversight would lead to stabilization of the country's housing market, according to The Wall Street Journal. Despite a lengthy testimony, the subject of a possible housing bubble did not come up. Rather, Kinsley highlighted the CMHC's current levels of capital, reiterating that the agency has a significant monetary buffer against insolvency. A CMHC report issued earlier this year showed the agency has twice the capital required under regulations set forth by the Office of the Superintendent of Financial Institutions, reported the Journal. Continue reading

Home loans easier to get through mortgage broker under new CMHC rules

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Lots of changes are coming for the Canadian Mortgage and Housing Corporation, starting with some new oversight from the Office of the Superintendent of Financial Institutions. But what will this mean for consumers looking for a mortgage? For many, the new rules will make home loans easier to get through an alternative mortgage broker.

More stringent oversight of the CMHC will mean the agency can back fewer mortgages. Ministers have already declined to raise the current $600 billion cap on mortgages backed by CMHC, and as the agency nears that limit, some mortgage lenders might become reluctant to issue new loans. In a note to clients obtained by the Financial Post, GMP Securities Analyst Stephen Boland said customers at bigger banks will feel the new restrictions most keenly. Continue reading