The CEO of the Canadian Mortgage and Housing Corporation has said that requiring new Canadians and the self employed to prove income is ‘discriminatory’ and they are looking to make mortgages easier to get:
“Right now, under our mortgage insurance policies, you have to be able to document income to get mortgage insurance, to a level of specificity that discriminates against new Canadians, because they can’t do that,” Evan Siddall, the CEO of the Canada Mortgage and Housing Corp., said in a wide-ranging interview with The Canadian Press.
“It discriminates against entrepreneurs, as well, because they can’t prove their income as well, so we’re looking at our own policies to try and make sure that there is more equity in our mortgage insurance programs,” he said.
Read the full article here.
At first glance the new CMHC rules sounds like a minor tweak rather than a major change, and it might be just that.
When the CMHC announced the change they specified that the products being eliminated made up less than 3% of their insured mortgage products by number of mortgages. What we haven’t seen anywhere are numbers in mortgage value, and BOM pointed this out yesterday:
“The Crown corporation has been offering insurance on second homes since 2005. It has been offering insurance to self-employed people without strong income validation since 2007.”
And then read this:
“CMHC says its second home program and its self-employed-without-third-party-income-validation programs combined account for less than 3 per cent of its insurance business volumes in term of the numbers of mortgages insured.”
CHMC has a pool of mortgages insured accumulated over the last 25 years. They have only offered the products they are cancelling for 7 to 9 years but they make up 3% of that pool. Simple math indicates over the last 7 years about 10% of mortgages would have been part of the program they are cancelling otherwise it could never reach 3% of the total pool which was already significant prior to the program starting.
So how much demand was there for insured mortgages on second homes and mortgages for the self employed without income verification? The numbers may be higher than we first thought.
The CMHC has just ‘tightened’ their mortgage regulations again.
You might not have know that the CMHC would provide mortgage insurance on second homes, but they won’t anymore:
Canada Mortgage and Housing Corp. is cutting the types of mortgage insurance it offers, meaning the era of tighter rules for home buyers hasn’t come to an end.
The Crown corporation said late Friday it will stop insuring mortgages on second homes, effective May 30. Anyone who has an insured mortgage will no longer be able to act as a co-borrower on another mortgage that CMHC insures. In addition, it will stop offering mortgage insurance to self-employed people who don’t have standard documents to prove their income.
Gotta love that first sentence: The era of tighter rules hasn’t come to an end? I guess by tighter rules they mean doing away with the most absurdist bubble policies in the form of zero down 40 year mortgages.
What’s next? Banks not being able to offload risk for mortgage lending?
Here’s the amazing bit for those just tuning in:
The Crown corporation has been offering insurance on second homes since 2005. It has been offering insurance to self-employed people without strong income validation since 2007.
Remember NINJA loans in the states? Good thing we never had those here!
It seems that more and more Canadians are self employed.
The self employed tend to have less steady income then full time employees and as a group it can be more difficult to get a mortgage or refinancing.
As a self-employed website developer who had recently restructured his business, Greg Schmidt knew that refinancing his mortgage wasn’t going to be a piece of cake.
“I had a little bit of a line of credit built up from shifting the focus of the business and my car lease had come up for being bought out, so I needed money to take care of that,” said Mr. Schmidt, a single 42-year-old who owns a home in Toronto that includes an apartment for income. “It turned out the best way to go was to do a new mortgage, increase the amount of the old one and take care of those costs.”
However, when he approached his bank, he was told “the numbers didn’t work for them.”
Read the full article in the Globe and Mail.