Heloc LTV going to 65%?

Canadian Mortgage Trends is saying that changes to HELOC loan to value (LTV) limits are a done deal.

If so this means the maximum HELOC you’ll be able will move from 80% to 65% of the total value of the property.

Read the original link for full details. Many commenters there seem to think this is too big a move.

Appraiser said…
65% is too much of a leap all at once.

I can’t understand why OSFI doesn’t ratchet the LTV ratio down a little more slowly (i.e., 5% at at a time and sit back to observe the consequences).

As has been noted lately, the previous three sets of mortgage tightening guidelines have been gradually working their way through the credit markets effectively.

You can kill an ant with a hand grenade, but it usually makes a hell of a mess.

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VMD
Member

New court-ordered sale in Coquitlam today:
2295 Parkway Blvd, Coquitlam MLS® V953759
Listing price: $595,000
Assessed: $1,139,000
2008 sale price: $1,450,000
7 Bedroom, 4 Full Bath, 1 Half Bath
3,894 Sq Ft. 10,010 Sq Ft Lot. Built 2001

Grow-op? Haunted? Full water damage?

“BUILDER’S, RENOVATER’S SPECIAL! Here’s your chance to redo the interior of this 3 level, 3900 sq ft home. This home offers 7 bedrooms, 5 bathrooms, 3 fireplaces, 3 decks, covered patio and 2 kitchens (legal suite). Large 10,010 sq ft lot has green belt on 2 sides and faces the Golf course. ”

http://www.ecorealtyinc.ca/listing?id=259517450
(repost from last post yesterday)

Anonymous
Guest
Anonymous

The heloc changes are a whole lot of nothing. They can be converted to amortizing loans, providing a smooth transition, with some savings on top. Appraiser knows this.

registered
Member
registered

“I can’t understand why OSFI doesn’t ratchet the LTV ratio down a little more slowly (i.e., 5% at at a time and sit back to observe the consequences)….
You can kill an ant with a hand grenade, but it usually makes a hell of a mess.”

The same old self-serving tact of positioning the current environment as a normal in order to argue for minimal change. The mortgage industry has centuries of determining ‘what works’, new experiments aren’t required. The OSFI is just instituting old knowledge and practice, my guess is still laxly. It’s only a grenade in the context of the horrendous market distortion created by a decade of historically unprecedented government stimulus to one industry. They’ve benefited enough at the country’s expense, time to pull the plug.

Boombust
Guest
Boombust

re: New court-ordered sale in Coquitlam today:
2295 Parkway Blvd, Coquitlam MLS® V953759
Listing price: $595,000

Well, at least they’re coming $50k off their original price from a few months ago…

AG Sage
Member

Given that the market is 30% overvalued and it will cost the bank another 5% to process things and pay lawyers and such, 65% seems blindingly prudent as a limit.

Anonymous
Guest
Anonymous

@VMD:

Large downpayment, maybe? The bank only has to recover what they lent.

boogeybear
Guest
boogeybear

I don’t think reducing the HELOC by 15% will have any significant affect on the public. But it will reduce the impact of the public running up their debt before declaring bankruptcy. Yet, the public still have their credit cards and unsecured lines of credit to run through as well. In my opinion reducing the HELOC by 15%, should be followed by another 15% reduction later on. In otherwords, OSFI may be ratcheting the HELOC down as the appraiser said. That the amount of reduction seems so large is likely because the credit problem is so large.

Anonymous
Guest
Anonymous

Canadian construction employment is surging to a record amid public works projects, energy investment and homebuilding, even as U.S. building jobs fall to the least in more than 65 years.

http://www.bloomberg.com/news/2012-05-31/canadian-building-jobs-boom-while-u-s-busts-chart-of-the-day.html

You would think that the spread between the two would have to close soon!

rv
Guest

@VMD #1
It was for sale back in 2008. A bit too upscale for a grow-op:
http://afsidashti.com/mylistings.html/photos-4243126

rv
Guest

From the comments:

“…on the personal Balance Sheets of hundreds of thousands of well intentioned, fully qualified Canadian families. These honest, hard-working Taxpayers use a HELOC as the cornerstone of a well thought out retirement financial plan. Why should they suffer?”

I wonder if she was serious. Or was it sarcasm?

“HELOC as the cornerstone of a well thought out retirement financial plan” sounds like an oxymoron to me.

b5baxter
Member

New inventory graph at: http://vancouverpeak.com/groups/inventory-graph/forum/topic/may-graphs/?#post-2427

Inventory has reached another milestone. It is at the highest point in the past ten years for this time of year. It has also passed the 2010 peak for the year. Only 2008 peaked higher out of the last ten years.

Over the last month the average daily increase was:
55
At this rate we will reach 19,000 in 2 days
At this rate we will reach 20,000 in 20 days (Jun-20-12)
and 25,000 by September 19, 2012

Patiently Waiting
Member
Patiently Waiting

@rv: Houses like that in that area, regardless of how upscale they may appear, are known for being grow-ops.

Patiently Waiting
Member
Patiently Waiting

Banks will often max the allowable limit on HELOCs. Thankfully, most people have the sense not to just use it up. However, many will notice their limit reduced which could have some sort of affect on the attitudes of the borrowers. eg. Someone with an $800K line of credit will now have $650K instead, and most likely it will decline in the future.

Rubi
Guest
Rubi

For me, a 65% LTV at today’s assessed value would provide a larger HELOC limit than the one currently available to me. My HELOC is based on 75% of my home’s 2006 appraised value.

In either case, my household earnings are no where near sufficient to make payments on a maxed out HELOC. Truthfully, payments on anything more than 25% of the home’s value would be difficult. NOTE: This is not my first home.

Patiently Waiting
Member
Patiently Waiting

@Rubi: “For me, a 65% LTV at today’s assessed value would provide a larger HELOC limit than the one currently available to me.”

True, but for those who get a HELOC near a peak, the opposite effect could happen as it declines. I think banks will now be less likely to max HELOCS because it will mean constant checks of home values.

Simple
Guest
Simple

Attention passengers, the inventory flightpath has now cleared the 2010 “mountain”. However, we may have scraped off the landing gear in the process. Brace yourselves – the option of a soft landing may no longer be available.

Anonymous
Guest
Anonymous

@VMD: “2008 sale price: $1,450,000”

This looks like a scam of some sort. There is no way that house was worth $1,450,000 in 2008 and then only $595,000 today even if the interior is trashed. It must of been some type of mortgage scam where a place is sold way over its true market value to a friend, mortgaging it to the max with the plan of defaulting. The friend has his cash maybe $500,000 over what he should and the other guy goes bankrupt. It was probably used as a grow op in the mean time.

rv
Guest

@Anonymous: #17
“This looks like a scam of some sort”

Why would they do it through a realtor than? With all those pictures, staging and stuff?

Yalie
Guest
Yalie
@Anonymous: It must of been some type of mortgage scam where a place is sold way over its true market value to a friend, mortgaging it to the max with the plan of defaulting. The friend has his cash maybe $500,000 over what he should and the other guy goes bankrupt. It’s hard to say if this was a case of fraud or not, but this kind of thing is exactly what went on in the US before it’s bubble burst. A group of scammers buying and selling the same houses to each other at ever-higher values, propping up comp values, and mortgaging to the max. Then when the bubble burst, they disappeared and left the bank with the bill. This may or may not be what’s happened with the above house, but I guarantee it’s been happening in Vancouver.… Read more »
Skeptic
Guest
Skeptic
Now I am the most ardent bear, but I am starting to believe that all these “changes” to mortgages really will have no impact. This is yet another tweak to the mortgage/lending system, first initiated with the elimination of the 0 down/40 year mortgage and then supposed profound changes of last March around second properties and amounts that you can pull out of your house. While I would like these changes to have an impact, I think it is just another minor tweak. As bears, we can do all the calculations we want as to how significant the changes will be, but those same calculations done with each mortgage rule change in the past has yielded no change. I know there is no such thing as an engineered soft landing, and that Harper’s people are not economic geniuses, but this… Read more »
mac
Member
mac

@Skeptic: I’m doubting too. Just talked to a friend who is looking for a house near the Drive. Their limit is 1.2M. You’d think that would do it, esp. in this allegedly slow environment but they’ve been outbid on four separate houses. Here on the westside, not much has changed. People are holding onto their prices and some are still adding 100K to 200K on what they paid for their condos three years ago.

mac
Member
mac

@Skeptic: No interest rate changes. No impactful price declines.

Anonymous
Guest
Anonymous

@rv: “Why would they do it through a realtor than? With all those pictures, staging and stuff?”

The realtor may be part of this scam who knows. Do you think that house had a market value of 1.45 Mil in 2008? I don’t think so. If it did, then it is a steal at 595k today even if it has to be gutted. If you spent 300K on renos which you can do a lot you could resell it for a 550K profit. Someone would have bought it by now. Remember prices have gone up since 2008. It doesn’t add up.

Anonymous
Guest
Anonymous

http://vancouverpeak.com/wp-content/uploads/ubpfattach/bear-bull-dragon.jpg

Sales Pair Chart – Teranet data – show just how much of a drop off in volume there has been

Patiently Waiting
Member
Patiently Waiting

I don’t think this particular change is designed to lower house prices. But think it shows TPTB are worried about declining prices and are doing this to lessen the impact.

I notice in Turner’s Greater Fool blog he is saying HELOC dollars are half the consumer spending in Canada. So prices of home improvements and big-ticket iteme will likely go down IMHO. In a few months, when I go car shopping, I look forward to competing with less home equity.

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