No mortgage rule changes

The Government of Canada threatened to tighten mortgage rules this spring as they have during the past two years. However, at the end of the day, they decided to make no mortgage rule changes. Even though they decided not to make any changes at this time there are still two large issues looming in the lending arena.

The first are stated income mortgages for self-employed people. These are mortgages where lenders will look at waiving the income requirements for self-employed people that have good credit history and a solid track in business. The government is making it more and more difficult for self-employed people by demanding that the banks tighten up the rules in these programs. Some lenders have even gone as far as to completely remove these programs from their portfolios. This will make it very difficult for self-employed people to borrow money down the road. In a sense they will be forced to declare more net income to try and qualify for the loans/mortgages that they need.

The other major item on the books is the involvement of CMHC in insuring mortgages that have less than 20% down. CMHC is approaching the ceiling of what it is allowed to insure and the government has decided not to increase this ceiling. If they hit their insurance ceiling then Genworth and Canada Guaranty, Canada’s two private mortgage insurers, will be forced to pick up the slack and insure more mortgages. If they are unwilling to do this then we could see contraction in lending of high ratio mortgages in Canada.