Tag Archive for: Genworth

Rules, Rules, Rules

Here is the information regarding the new mortgage rules that will come into effect on April 19th of this year. The changes are not as bad as some were predicting. This is the summary, and the text is below.
Starting April 19th
1. Borrowers need to qualify using the 5 year fixed rate
2. Refinances maxed out at 90% LTV
3. 20% downpayment for mortgages tied to non-owner occupied properties bought for speculation.
Canada will bring in new mortgage rules to cool the country’s red-hot housing sector, but does not think the market has entered into bubble territory, Finance Minister Jim Flaherty said on Tuesday.Concerned that new homebuyers may overextend themselves, the government said it is implementing three changes to mortgage rules that will help prevent the problems seen in other countries that helped trigger the global financial crisis.

“Today’s measures are part of a larger picture. We will continue to closely monitor developments in the housing sector in Canada,” said Flaherty at a news conference in Ottawa.

“There is no compelling evidence of a housing bubble, but we’re taking proactive, prudent, measured and cautious steps today to help prevent a housing bubble.”

Changes to Canada’s mortgage insurance guarantee framework that come into effect on April 19 include the requirement that borrowers will need to qualify for a five-year fixed-rate mortgage even if they go with a lower variable rate.

The government will also lower maximum amounts that can be withdrawn when borrowers refinancing mortgages. And it will require a minimum downpayment of 20 percent for insured mortgages tied to non-owner occupied properties bought for speculation.

Flaherty described the housing market as “healthy and stable” and said that the government’s early action can help prevent negative trends from happening.

The government has been concerned that some borrowers who are taking out variable-rate mortgages will struggle with their monthly payments when interest rates rise.

Bank of Montreal, while noting it did not believe the country faced a housing bubble, said it supported the government’s actions.

Feel free to contact me if you have any questions, and I look forward to hearing from you.
Cheers,

Pat

p.s- You can find me on Twitter,Linkedin, Facebookand friendfeed.

Setting the record straight!

This post is in response to an article in the business section of today’s Chronicle Herald newspaper. While I admire and respect the broker quoted in the story, I believe that some of the message can easily be taken out of context and I just want to set the record straight. 

I have been a mortgage broker for just over 6 years now. During this time a lot has happened and a lot has changed in the Canadian mortgage market. Canada started off with only one true sub prime mortgage lender, several had entered the market and now we are back to only one again. With the advent of rampant sub prime lending here in Canada; we were introduced to 100% financing, stated income products, interest only mortgages and products for clients with less than perfect credit. While 95% of Canadian mortgage holders are unaffected, the 5% who have a mortgage from a sub prime lender should have a game plan (to prepare them) for renewal time. 

The main reason that I place clients with sub prime or alternative lenders is to get them financing until such a time that they could qualify for a main stream insured lender. I look at the sub prime lender as a bridge lender, who will give the clients time to improve their credit and or pay off debt before qualifying for better rates and terms. It would be a disservice if I expected any client to renew their mortgage with their sub prime lender. 

Would I tell all my clients who hold mortgages with sub prime lenders to sell their properties? No I would not. We would have to look at the reasons why they are with these lenders, how much time before renewal and help them develop the proper exit strategy. I do plenty of private loans and this is not any different. Just as with any private loan, you should also know your exit strategy. 

If you are someone who has a mortgage with a sub prime lender (such as Xceed, and others), don’t panic! There are still things that can be done prior to your renewal time. Please call my office so we can look at your options. 

Cheers,

Pat

 

p.s- You can find me on Twitter,Linkedin, Facebookand friendfeed.
Stumble it!

Mortgage insurers push to keep zero-down loans!

Garry Marr, Financial Post Published: Tuesday, July 15, 2008

Private mortgage insurers are pushing for ways to keep no-money-down mortgages alive and are set to meet with Department of Finance officials in the next two weeks to discuss possible options, sources indicate.

The move comes after Ottawa cracked down on mortgage practices that allowed consumers to enter the housing market with no money down and amortize their loans over 40 years. New rules that come into effect on Oct. 15 would demand a 5% repayment and shorten the length of amortization from 40 years to 35 years.

Sources indicate the country’s major private insurers, which control about 30% of the market, have told mortgage brokers they are working on a solution which would keep the zero-down option alive and even the 40-year amortization.

One insurer, PMI Canada, which has been in the market for about a year, indicated it hopes to come up with some alternatives.

“PMI Canada is still in the process of reviewing and analyzing the new mortgage insurance measures for industry and market impact. PMI Canada looks forward to meeting with the Department of Finance at the end of the month to better understand the new measures, after which we will be better able to make an informed strategic business decision as to whether or not we are able to continue to offer the 40-year mortgage insurance option,” said Janet Martin, chief executive of PMI Canada, in an email to the Financial Post.

An industry source said the private mortgage insurers are looking into creating a product in which the first 95% of a mortgage is backed by the government with the last 5% securitized independently by the private mortgage insurers.

The new rules from finance appear aimed as much at Canada Mortgage and Housing Corp., a Crown corporation that controls 70% of the mortgage insurance market, as its private sector competitors.

In the hotly competitive mortgage insurance market, CMHC has often been the aggressor in the marketplace. For years, the entire market was CMHC and Genworth Financial Canada which has controlled the other 30% of the multi-billion mortgage industry. In the last two years AIG United Guaranty, a subsidiary of American International Group Inc., and PMI have been trying to crack the market.

CMHC and Genworth both responded to the intrusion by insuring products with longer amortizations. CMHC’s decision to insure mortgages with zero money down ended up incurring the wrath of former Bank of Canada governor David Dodge two years ago.

Mr. Dodge feared interest-only mortgages were fueling the housing market and demanded a meeting with CMHC. Some industry observers say new rules put in place last week are the long awaited response to Mr. Dodge’s concerns, coming after months of consultation.

Now, the private sector is suggesting it wants to be excluded from the new rules. “It’s still a little early. We know the government won’t back the 100% program but will the private insurers do it themselves,” said Gary Siegle, Calgary regional manager with Invis Inc., a mortgage consultant firm.

“The [private firms] are looking at trying to do the 100% insurance themselves. Brokers have been told to wait a week for more news before they can find out how to proceed.”