CMHC eliminates mortgage programs – mortgage broker thoughts

Jeff Evans

Last week, we received the news that CMHC has decided to eliminate two of their mortgage lending programs, specifically the self-employed simplified (also more gengerally known as self-employed mortgage) and their second home program. At this time, the other two mortgage insurers in Canada, Genworth and Canada Guaranty, have not announced any similar measures.

CMHC has claimed that they made this decision, along with their decision to increase mortgage insurance premiums, to help reduce taxpayer exposure and contribute to the stability of the real estate market. (CMHC is a government corporation); The changes are due to come into effect on May 30th. They also state that eliminating these programs only affects less than 3% of their funded mortgage units.

How will CMHC’s decision impact the housing market and economy?

As a mortgage broker, I am often somewhat disappointed to hear of lender options, or lending programs disappear or be altered in a way that makes it more difficult for me to help my clients. Although sometimes I can understand the reasons behind it, and sometimes it may be for the best, it makes my job more difficult. When I read this news, I met it with an ironic laugh. CMHC says it all; the two programs only accounted for less than 3% of their lending. CMHC’s stated income program was poor, to put it politely. There are better options for such a program.

The second home program is only for the purchase of mortgaging vacation and recreational properties with less than 20% down-payment. This program is also seldom used, and I don’t think anyone is going to lament its loss, especially in light of other insurers continuing to offer similar programs. Many people looking at buying recreational properties will often have 20% down or more anyway.

Is eliminating this program really protecting taxpayers?

Although I am not that worried about these programs demise with CMHC, particularly if the programs continue to be offered through other insurers, I can’t help but feel that CMHC contradicts themselves in their reasoning about this decision. I feel this way for the following reasons:

  1. The self-employed program was CMHC’s most expensive program, with insurance premiums almost double a regular mortgage premium at the same down-payment level, so they did price the program to compensate for a higher level of risk.
  2. Less than 3% of their mortgage insurance policies issued were these two programs. This hardly seems like a looming threat that could destabilize the housing market, and has already been compensated for in the risk premiums charged.
  3. CMHC is not a charity case. They are not in business to lose money. The other insurers are not in business to lose money. Genworth Canada just announced earnings were up and insurance claims were down by over 36% from a year ago, despite having the same insurance premiums as CMHC. CMHC is profitable, and the program is profitable if two private enterprises offer a similar product.

Previously CMHC would say that their mandate as a crown corporation was to help Canadians in home ownership. Now, they seem to say that their mandate is to contribute to the stability of the real estate market. Although it is not a significant difference to me as a mortgage broker in this instance, they appear to me to be primarily depriving themselves of income. It is ironic considering most government enterprises lose money, and one that makes money is effectively trying to remove themselves from the business.




Author: Jeff Evans

I am a mortgage broker, hair salon owner, squash player, student, and husband, aspiring to do good for people.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Related Articles

Vancouver mortgage broker with “lower” fees
Jeff Evans
No Comments

I have had a in interesting case with a returning client who came to me recently for help with his mortgage.  As a mortgage broker in Vancouver, it is necessary to be creative in making solutions work for my clients, which currently can often involve secondary or private lending solutions.  This was a case where such creativity would be necessary.Read More

home buyer mortgage broker
First Time Home Buyers Mortgage Broker Tips And Tricks
Jeff Evans
No Comments

Among the services I provide to my clients, I consider myself to be a "first-time home buyer mortgage broker".  As a first time home buyer mortgage broker, I know how difficult it is to get into the real estate market, particularly in Vancouver, and it brings me a particular amount of job to help someone get past the challenges if being a first time home buyer.

I have recently completed an e-book and will be launching it soon.  I believe it will be very helpful for not just first-time home buyers, but for anyone who is not as knowledgeable in residential mortgage lending, about how to make your home buyer mortgage broker application appealing to a mortgage lender.

As a sneak preview, here are three tips on improving your mortgage application as a first-time home buyer.

3 Home Buyer Mortgage Broker Tips

  1. Take advantage of the home-buyers plan to fund your down-payment.  This program is not technically ONLY for first-time home buyers, but all first-time home buyers are eligible.  Under the plan, you can borrow up to $25,000 from your RRSP for the purchase of an owner-occupied residence.  If you and your spouse are both applying, then you can withdraw $25,000 each. It is a loan, so it has to be paid back over 15 years (or 1/15th of the loan will be added to income for that year).  However, there is no withholding when you withdraw it, it does not have to all be declared as income on any given year, and you don't even have to use all of it for down-payment!  You can use it for any purpose that you need it for. A good mortgage broker, like myself, can help you with some of the finer details and complex situations that often arise from these situations.
  2. Make sure you pay your bills on time. If you have a high balance on your loan, or you have a lot of debt, those also have a significant negative impact on your credit score, but you can get the bills down and there is no record of your high debt levels.  However, when you miss a bill payment, it stays on your credit bureau for 6-7 YEARS.  This not just negatively impacts your credit score, but lenders look at this when assessing risk, and they have been particularly uncompromising and (unreasonable, paranoid, strict...and other words that I cannot put in print) in the last few years.  While you likely do not have to wait 6-7 years to become bankable if you have had gone through a period of bad credit, the less negative credit on the bureau, the better. At least make the minimum required payments and you will go a long way to making yourself appealing to them.
  3. Having no credit is just as bad as having bad credit. Many people feel that not requiring credit should prove your ability to pay your bills and should be good evidence of credit-worthiness.  This is not how mortgage lenders think.  If you currently do not have any credit, then you do not have any documentation that you are an acceptable credit risk, and no matter how strong your income is, you will have difficulty obtaining a prime mortgage approval.  Make sure you have at least 3 different credit facilities in your name.  (Secondary credit cards in a spouses name are not considered acceptable for establishing your credit).

I am excited to launch my home buyer mortgage broker e-book soon, in which I go into much greater detail and give many different ideas to help home buyers prepare for home ownership, but as a mortgage broker in Vancouver, you are welcome to contact me in the meantime to discuss your circumstances and see if there are any options for you.

mortgage broker Vancouver BC
Good news regarding OSFI rule changes
Jeff Evans
No Comments

This is just a quick note to let viewers know that IF you are one of the people with 20% or more down-payment and are in a position that the new OSFI rule changes affect your pre-qualification, that I can extend the current guidelines into the new year by up to 120 days provided that I have an application and am able to get a pre-approval in place with a lender for you before January 1.Read More