Our House

36 >> OUR HOUSE SUMMER 2017 DoMinion LEnDing CEntRES TOOLBOX C ody has given his life and career to serve Canada in the military. That devotion has also meant a life of moving around to different parts of the country when duty calls. While he knew that was the case going in, he still decided to take the plunge and buy a home in Cold Lake, Alta., where he was stationed at the Canadian Forces Base. But as life in the military would have it, earlier this year he was posted to Ontario. It's hard enough to drop everything and move across the country. So he didn't think much when it came time to obtain the mortgage on his new house. He looked into porting his mortgage (switching it from one property to the other), but he ran into a problem. Cody, who prefers not to use his last name, was approved two years ago at the contract rate, and under mortgage rule changes brought in last fall by the federal government, he had to qualify at a new rate. Unfortunately, this reduced his purchase price to the point where he couldn't afford to purchase a home at his new posting. Making matters worse, he had to pay a penalty for getting out of his old mortgage. He's been forced to rent and wait possibly years before buying another home. His story is just one of hundreds, if not thousands, from people around the country caught in the middle of changes made to the mortgage industry. For mortgage brokers, oct. 3, 2016, was like Black tuesday in 1929. While no one was jumping out of buildings, the surprise announcement sent shockwaves through the industry. it was the day the government intro- duced a number of changes including a "stress test" that all new mortgages needed to qualify at the greater of either the Bank of Canada posted rate for mortgages (4.64 per cent) or the contract rate. Portfolio (bulk) insurance on low loan- to-value mortgages (with at least 20% down payments), used predominantly by monoline lenders, would have to meet the same criteria as high-ratio mortgages (less than 20 per cent down). Additionally, mortgages with amortizations of more than 25 years, refinancings, mortgages on homes valued at more than $1 million, and property that is not owner-occupied can no longer qualify for portfolio insurance. The industry fights back While the changes were meant to avoid a housing crash similar to that which afflicted the U.S. in 2008, hobbling the economy, the mortgage industry doesn't see it that way. instead, leaders in the industry believe the new rules have hurt ordinary Canadians, making getting into a home—and keeping it—more expensive. But they've been fighting back, and not all that quietly. For months, Mortgage Professionals Canada (MPC), a national association that represents the mortgage industry, has been meeting Members of Parliament and officials in the finance ministry to make the case against the changes. MPC president and CEo Paul taylor says his organization has been doing its best to coordinate as many meetings as possible with MPs in ottawa and educate them on the effects of the changes. "We are seeing, and our members are telling us, there's quite a significant reduction in volumes obviously for the folks who were more reliant on securitization then others," he says. "So that's definitely reducing competition and increasing prices for consumers in the marketplace, which we don't think is good for average Canadians." So far, taylor notes, the federal government hasn't budged on the issue. the feds feel the changes they made were the right ones, he suggests, and are waiting until the effects are seen and felt through market data before making any adjustments. in April, the Standing Committee on Finance released a report looking into the changes, making a number of recommendations. But rolling back the new rules from the fall of 2016 didn't make the list. instead, the report, "Canada's Housing Markets: Benefits, Barriers and Bringing Balance," offered five recommendations. these included having the government examine increased support for first-time homebuyers, using Statistics Canada to address gaps in housing-related data, ensuring further changes to mortgage ChAngIng The ruLes

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