Canada, CMHC, economy, mortgage, rates

CMHC tightens mortgage rules (again)

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Ottawa must really want to see more of a downturn in the Canadian housing market.

This week saw a new limit to CMHC largesse. The latest change limits guarantees on Mortgage Backed Securities which will slightly increase lending costs.

In the financial post Mortgage Brokers and Bankers differ on their opinion of the latest move, some think it’s too much too soon, others think it’s a minor tweak that will have no real effect.

Doug Porter, chief economist with Bank of Montreal, wonders if housing statistics over the last couple of months showing sales and prices rebounding might have spooked the CMHC.

“I think this step is being taken because we have seen some signs in recent weeks that the market is not cooling as much as had been expected,” said Mr. Porter. “All the debate has been whether we will have a soft or hard landing and I would question whether the market had any landing whatsoever.”

Read the full article in the Financial Post.

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Mortgageslave
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New Listings 301
Price Changes 137
Sold Listings 118

So to sum up the previous thread, we are seeing a trend of higher listings, slightly higher sales but for less than asking. More prices reductions. This is how it goes in a falling market, the race is on. List lower than all other units in the area and hopefully get out. Its clear as the sky in Vancouver for the month of July!

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4 years 10 months ago
No Noise
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Headlines say that we are all paying more for a home now (due to higher mortgage rates) – what they miss is that home prices will of course drop due to the CMHC rule changes. There’s also rumours that this is leading towards the privatization of CMHC alla Fannie and Freddie in the US – and that’s when we’ll see the biggest correction.

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4 years 10 months ago
jesse
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As Ben Rabidoux pointed out this isn’t a tightening, at least not any change in policy. The MBS cap for this year is unchanged at $85 Billion. They have gone through $66 Billion so far, meaning $19 Billion left for the rest of the year. I think that’s the problem, but correct me if I’m wrong.

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4 years 10 months ago
Aggregator
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“As Ben Rabidoux pointed out this isn’t a tightening”

It’s tightening if you’re RBC or TD who just hoarded all the MBS insurance like two little piggies. http://i.cubeupload.com/uG03YD.png

The two banks were a big chunk of the $66B, leaving a measly $19B for the rest. CMHC imposed an equal weighted cap of $350M for August only, after which they will decide how to allocate $19B to all MBS participants. The $350M cap must have been derived from dividing $19B by 61 MBS participants ($311M), plus whatever excess is gained from closing mortgages that free up insurance.

CMHC acted to level the playing field to restore competitiveness. There would have serious complaints by non-big six lenders if the major banks ended up breaching the limit before year end.

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4 years 10 months ago
frank
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Jesse is right. as I put in a comment on Fish’s site, the reason for the ‘tightening’ is that the bozo’s at the CMHC ran through their allotment twice as fast as they should have.

Maybe they played chicken with the Feds and thought if they ran through it quickly the Fed would blink and raise the cap. They didn’t (so far) and so it will take some air out of this balloon.

I have no respect for the CMHC, neither it seems do half the commentators on the net.

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4 years 10 months ago
jesse
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It might be that sales after the rate spike in June caused a surge in issuance that caught banks and CMHC off guard. Also I think the national market is doing better than the government was expecting. All speculation on my part.

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4 years 10 months ago
someguy
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Wow. I was fairly certain that people in Calgary suffer a severe disconnect from reality. Now I am sure

http://www.cbc.ca/news/canada/calgary/story/2013/08/07/calgary-real-estate-cmhc-sales-ec.html

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4 years 10 months ago
Bull! Bull! Bull!
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surely this will finally be the straw to break the back of vancouver real estate. realturds and specuvestors must be cowering in fear.

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4 years 10 months ago
Turkey
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I don’t want to pick too easy a target, but I *would* like to see these hunted to extinction.

Trophy bagged!

Trophy: Ingenious schoolyard pun (Realturd, Turd Somerville, Scam Good) (Genus: Bear)
Spotted: http://vancouvercondo.info/2013/08/cmhc-tightens-mortgage-rules-again.html#comment-212001
Last Bagged: (None)

Scoreboard/Rules: http://piratepad.net/ep/pad/view/ro.SXqM61It83r/latest

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4 years 10 months ago
Heineken
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Interesting comment on Garth Turner’s blog by Smartalox:

“Boy, I bet the real estate cartels are kicking themselves: one day after they paint a glowing picture (though thoroughly debunked) of the state of the major real estate markets in Canada, F turns around and says ‘Not so fast!’.

Makes me wonder: if the cartels had been a little more ‘balanced’ in their reporting, would the finance minister have moved so quickly? If the cartels’ spin had been a little less rosy, might a case be made to hold off trimming CHMC?”

http://www.greaterfool.ca/2013/08/06/f-bomb-2/#comment-255448

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4 years 10 months ago
Skook
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I think PaulB will be reporting a big drop in Total Inventory today.

I just checked the Sunshine Coast active listings and overnight single detached home listings went from 735 to 259 (the $1 mill+ listings went from 93 to 6). The condo/townhouse listings dropped only by 7 (175 to 168) and vacant land listings went up 2 (489 to 491).

We’ll have to see what happens over the next week – will some relist or have most pulled in their signs after yesterday’s CMHC announcement?

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4 years 10 months ago
VMD
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Global News promoting renting over buying?!
(Still misleading video title)

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4 years 10 months ago
mosesupposes
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To me, the CHMC news is just further evidence that a government can’t manufacture a “soft landing”. F tried with the the changes last year but it didn’t take (or didn’t take enough). Instead we’re going to see more and more pressure build on the market until it dramatically implodes. I may be a bear but I’m not really happy about this. A brutal real estate crash will cause a lot of short and medium term pain for most Canadians. But it’s unavoidable due to the stupidity and greed at both the government and private levels that caused the present state of affairs. Perhaps if it’s bad enough the government will step in with some increased oversight on realtors. I still don’t understand how you have to jump through a dozen legal and regulatory hoops to sell someone $10,000 worth… Read more »
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4 years 10 months ago
Softy
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“To me, the CHMC news is just further evidence that a government can’t manufacture a “soft landing”.”

Let’s talk evidence: condos have been flat for 5 years. Houses have been flat for two years. This is the result of mortgage credit tinkering by the government over the last 2-3 years.

All the evidence available tells you that the feds have engineered a soft landing with flat prices.

How does this in any way suggest that the feds are incompetent or ineffective?

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4 years 10 months ago
Softy
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“Instead we’re going to see more and more pressure build on the market until it dramatically implodes.”

Hope and dreams. Pie in the sky. Have faith! The day of deliverence from high prices will come some day!

Look at the reality of what prices have done.

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4 years 10 months ago
Best place on meth
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“All the evidence available tells you that the feds have engineered a soft landing with flat prices.”

Shifty, have you ever read a book from cover to cover, or do you usually quit reading after chapter 3 having already figured out how it’s going to end?

Children these days, no patience whatsoever.

I blame video games.

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4 years 10 months ago
logic
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meh, don’t feed the troll.

almost every comment this softly retard makes is disingenuous (I say almost, as even fools speak a grain of truth once in a while).

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4 years 10 months ago
Rent$385
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Does anyone have data on what percentage the MBS cap is of the total coverage CMHC provides? I gather that the total cap is currently $600 B. So this is ~14% of the total cap? Are banks allowed to securitize most of the CMHC mortgages they take then? Or, is the MBS cap calculated separately?
Thanks in advance!

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4 years 10 months ago
Son of Ponzi
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Softy,
Tell your clients to lower their asking prices.
Higher mortgage rates are just around the corner, which will make it harder for buyers to get financing.

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4 years 10 months ago
Son of Ponzi
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Are the banks still pre-approving mortgages?
In an environment where rates are going up quickly, that would be insane.

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4 years 10 months ago
Many Franks
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@Turkey: Welcome to the scoreboard.

http://piratepad.net/ep/pad/view/ro.SXqM61It83r/latest

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4 years 10 months ago
Skook
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Sorry,everyone, disregard my previous post (#11). The webmaster must have been fiddling with the data because SC listings are now back up – jeez. Changes aren’t usually made this late in the morning – he must have slept in.

SDH listings at 71O (drop of only 25), million+ listings are at 93. condo/townhome listings are at 174.

Nevermind, I will just go back into my little corner.

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4 years 10 months ago
jesse
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@Rent, a quick overview of the mortgage market can be found in CMHC’s Housing Observer
http://www.cmhc.ca/en/corp/about/cahoob/cahoob_001.cfm

Also try
http://www.caamp.org/meloncms/media/Report%20Fall%202012-11-15.pdf

These are from late 2012 but it gives you an idea of the channels through which mortgage financing comes.

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4 years 10 months ago
Many Franks
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CMT reports on the latest round of CMHC tightening. Both TD and National Bank are on record with the 20-65 basis points estimate. The fun part: All of the lender executives we spoke with today, however, were unaware that the $85-billion ceiling even existed. “It came out of left field,” said one capital markets professional who wished to be unnamed. In its latest corporate plan and annual/quarterly reports, CMHC only references its overall statutory $600-billion limit. And a Google search shows no other discussion of an $85-billion limit. As such, many will wonder why this important number was not disclosed more publicly before now. We don’t have the answer, but we’ll keep digging. WTF? You’d think a yearly guarantee cap would be something the banks were aware of. $85 billion is a big number — that’s $2500 *for each person… Read more »
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4 years 10 months ago
lololololololz
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I’m confused…

how could the CMHC be running out of financing room if the housing market is collapsing and the baby boomers are downsizing?

didn’t the bears say 50% declines are imminent 5 years ago?

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4 years 10 months ago