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How will the news about the OSFI overseeing CMHC affect my mortgage?

Q: Hi Kyle, I read in the Sun today that the OSFI is going to be watching over CMHC now and that there may be new changes to mortgage rules. What do you think will happen with mortgage rates? Will financing get tighter again? Thanks, Heather

 

A: Hi Heather and Harry,

It will be interesting to see what will come down the pipeline with the OSFI overseeing CMHC.

The inevitable change that occured is the way that mortgages are securitized. It will likely become more expensive for banks to securitize their loans the way way they had done in the past, and this cost may end up getting passed to the consumer. Economists predict this cost could be anywhere from 10 – 20 basis points (.1% – .2%).

Julie Dickson, Superintendant of Financial Institutions

With regards to financing product changes, the OSFI had made it clear that they do not want Canadians using HELOC’s (Home Equity Line of Credit) as an ATM machine, and are strongly suggesting that banks cut total financing down from 80% to 65% for these products. This would have a large impact on investors, as HELOC’s are an integral part of most investment strategies, but also on your average homeowner who wants to borrow money for improvements to their house or for debt consolidation. How much pull CMHC will have over the banks with the OSFI overseeing them is yet to be seen.

CMHC has already tightened up financing and although they haven’t changed your guidelines, it is becoming apparent that as they come closer to their $600 Billion cap, they are beginning to become much choosier with who they will insure. Clients with tight debt servicing (but still fall within guidelines) are beginning to get declined much more frequently than before. Self employed borrowers and clients relying heavily on rental income will continue to feel the squeeze.

Most of the tightening already began with CMHC’s realization in early February of this year that they were nearing their cap. That being said, don’t be surprised to see a few tweaks here and there to keep the OSFI happy.

About the Author

Kyle Green has been working with Mortgage Alliance Meridian Mortgage Services as a mortgage broker specializing in investment real estate for the past 4 years. Because of the volume of his franchise which has been ranked #6, #5 and most recently #4 in 2009 in CMP magazine in volume he has top status level with all of the lenders and can guarantee the best rates on the market. Kyle works closely with Ozzie Jurock’s REAG membership to specialize in financing for investors by creating a plan that has built many successful real estate portfolio’s. He has spoken in front of groups of investors as small as 10 people to over 700 people, including Ozzie’s semi-annual Outlook Land Rush conferences which he has spoken at for the past 3 years. It is important to work with a mortgage broker who specializes in portfolio financing; just as you wouldn’t use a residential broker for a commercial purchase, you should use a specialist for your residential investments. If you have any questions about real estate investment financing, he can be reached at 778-373-5441 or kgreen@mortgagealliance.com

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