Category Archives: Uncategorized

HOUSE HUNTING IN THE MIDST OF A GLOBAL PANDEMIC

Raymond C. McMillan, BA., Mortgage and Real Estate Advisor – June 27, 2020

I read somewhere many years ago that “where there is a crisis, there is always opportunity”. You may be wondering where to find this opportunity. Covid 19, completely obliterated the spring housing market and will probably do the same for the summer market. These are possibly the two busiest period for homebuyers and sellers. With the recent physical and social distancing guidelines introduced and enforced by all levels of government, it has certainly crippled the real estate sector and change the way sellers and buyers engage each other. However, all is not lost as we discover new ways to house hunt and view homes.

Savvy realtors have quickly figured out how to market homes online and are doing virtual tours that allow potential home buyers to get a real life feeling of homes they are interested in viewing or purchasing. New home builders have also quickly adapted and have also made the virtual home buying experience very user friendly and interactive. Many of the floor plans can be configured by you to show the placement of furniture and appliances to get a sense of the available space. With resale homes, you can use the placement of furniture and appliances by the current owner and occupant as a guide. In the event the home is empty, it could be a bit more challenging to get a good sense of the space as a first-time home buyer, but a good realtor should be able to help you with this.

In areas where home showings are still permitted, and if you are comfortable doing them, you mayt want to exercise extreme caution when visiting homes for sale to avoid being exposed or infected by Covid 19. A few of my recommendations to keep yourself safe and reduce exposure are:

  1. Always wear a mask and gloves.
  2. If you have a pre-existing health condition, I would recommend avoid doing in-house viewings
  3. Only visit homes where the current owners or occupants have vacated the homes to allow for the viewing.
  4. Avoid touching personal items and appliances as much as possible.
  5. Do not under any circumstances view a home at the same time with another individual or family not connected to you
  6. Ensure your realtor is also wearing personal protective equipment and maintaining physical and social distancing guidelines.
  7. Practice the necessary hygiene once you have completed your viewing and returned home to eradicate any potential exposure.

If you are uncomfortable with doing in-house viewings stick to virtual viewings. There are many homes being offered that way, and you are sure to find one in your preferred neighborhood, at your desired price that you absolutely love. So be patient and enjoy the home buying journey.

The writer: Raymond McMillan is a mortgage broker and real estate consultant who has been in the banking, mortgage and real estate industry since 1994. He has been licensed as a mortgage broker since 1999 and has helped many people purchase their homes and invest in real estate. You can reach him at 1-866-883-0885 or visit www.TheMcMillanGroupInc.com

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Wave of homes could hit market when support programs end: RBC

Photo: James Bombales

Toronto, Vancouver and many other major markets across Canada began the year in seller’s market territory with high demand for housing and tight supply giving home sellers the upper hand in transactions.

The COVID-19 pandemic abruptly changed that, shifting the national market away from favouring sellers and into balanced territory. And more changes are coming, according to RBC, which published a housing report this week that predicted more listings will be coming online in the months ahead, potentially tilting the supply-demand balance into buyer’s market conditions.

In a note titled “Canada’s Housing Market Woke up in May,” RBC Senior Economist Robert Hogue wrote that, to date, listings supply and buyer demand have mostly ebbed in lockstep during the pandemic. This alignment has allowed the market to maintain balance and prices to remain steady, so far.

There were hints that this was shifting in national home sales data for May published by the Canadian Real Estate Association (CREA) this week. New listings spiked 69 percent in May from their April lowpoint while sales rose 57 percent. While this may not appear to be a significant mismatch, Hogue believes there’s further supply and demand “decoupling” ahead for the market.

“The delay in spring listings will likely boost supply during the summer at a time when homebuyer demand will still be soft — albeit recovering. The eventual winding down of financial support programs is also poised to bring more supply to market later this year,” Hogue wrote.

“Economic hardship is no doubt taking a toll on a number of current homeowners — including investors,” the economist continued. “Some of them could be running out of options once government support programs and mortgage payment deferrals end, and may be compelled to sell their property.”

The federal government announced this week that the Canadian Emergency Relief Benefit (CERB) would be extended for another two months, with the scheduled end date now pushed back to early September. The maximum period that one can receive CERB payments was increased from 16 weeks to 24 weeks. Mortgage deferral programs being run by Canada’s large banks are also set to end in the fall.

In commentary published yesterday, Capital Economics’ Senior Canada Economist Stephen Brown wrote that the huge sums paid out through CERB since March have seemingly offset the losses to household income suffered during the same period. This will allow for a stronger economic recovery than was previously anticipated, he wrote.

But even in his relatively upbeat take, Brown said that household income is likely to still fall eventually as employment will remain lower than its pre-pandemic level even when CERB ends in September. He went on to point out that high-earners who lost jobs during the pandemic and are now receiving CERB will have certainly taken a hit to household income, which will bode poorly for the housing market.

When it comes to the anticipated shift from balanced conditions to a buyer’s market for Canadian real estate, Hogue predicted that the timing will be different depending on the market.

“We expect the increase in supply to tip the scale in favour of buyers in many markets across Canada, some sooner than others,” Hogue wrote.

“Vancouver and other BC markets, for example, could see buyers calling the shots as early as this summer. It could take a little longer in Ontario, Quebec and parts of the Atlantic Provinces. Buyers already rule in Alberta and Newfoundland and Labrador.”

Nationally, Hogue predicted a seven percent decline in benchmark home prices from pre-pandemic levels by mid-2021. However, he wrote, “a widespread collapse in property values is unlikely.”

Source: Livabl.com – Sean MacKay Jun 17, 20200

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“We wanted to do the impossible—fit three families under one roof”: How one big brood is weathering the pandemic in their Markham home

Top from left to right: Pak Hung Ho, Roger How Cho Hee, and Christine How Cho Hee Bottom from left to right: Eric How Cho Hee, Charlotte How-Fang and Li Wen Fang

Before Covid-19, Eric How Cho Hee, an IT consultant, and Li Wen Fang, a social worker and psychotherapist, ambitiously decided to build a grand family home in Markham for themselves, their parents and an uncle. Their friends thought the well-meaning but wacky idea would never work. But as it happens, living in one giant 7,000-square-foot household bubble is smart when you need each other most.

Eric: In early 2017, my father was diagnosed with Alzheimer’s so I thought it would be best to move in with my parents. I owned the house where they lived in Markham, and we were going back-and-forth frequently to visit each other every week, anyway.

Li Wen: We wanted to do what seemed like the impossible: fit three families under one roof. My parents spend most of their time in Australia with my brother, but they would visit Canada occasionally for long periods before the pandemic, so we wanted to include space for them, too.

Li Wen’s home office is directly across from the front door

Eric: At the time, Li Wen and I lived in an 1,800-square-foot side-split nearby for six years. We liked the area, but the house was nowhere near big enough for our new needs. In September 2017, we sold the mortgage-free house my parents were living in for more than what we paid for and used the money to raze our place and build a new multi-generational home. We rented a house while our new one was being built. The 7,000 square-foot update by Solares Architecture would have enough room for us, our two year old, Charlotte, our four parents and Li Wen’s 70-year-old uncle, Pak Hung Ho.

Li Wen: My uncle Pak took care of me when I immigrated to Canada in 2001, and now that he’s getting older, I wanted to return the favour. My friends weren’t optimistic about the idea—most people choose to live apart from their extended family. But we ignored the naysayers and plunged right in.

The dining room, living room and kitchen were designed as one large space, so the family can hang out and enjoy meals together. The quirky fireplace is by Stûv
The double-height loft space is one half floor up from the main level. It’s also Charlotte’s preferred play area

Eric: When plans were submitted to the committee of adjustment to apply for variances, one neighbour speaking against our application suggested we needed such a big home to run an Airbnb business. Our architects decided to submit a finished plan and it was available for everyone to see.

Li Wen: Our trick to making it work was to ensure everyone has their own private space carved into the plan. We wanted each area to feel like its own cushy apartment—with a staircase and elevator connecting the halves. We asked for heated floors and shower benches for the older set. And a 17-foot-long pool and sauna in the basement.

Charlotte is a regular at the basement swim spa. She’s a natural at wading in the water

Eric: Li Wen, Charlotte and I moved in in October 2019 while other areas of the house were still being worked on. The rest of the household joined us in November, once the house was in a more finished state.

Li Wen: We hired Renee Godin of Interiors by Renee, who sourced all of the furniture and oversaw the decor, which was helpful in such a large, segmented home. She suggested adding colours and patterns because the house felt too white and sterile. But the bright orange Blue Star oven in the kitchen is Eric’s doing. He’s the cook in the family and he wanted something nice.

Uncle Pak is set up to host morning tea in his section of the home

Eric: My wife and I pay for all of the utilities, housekeeping and property taxes. Before the pandemic, my parents and Li Wen’s uncle would buy the additional items or other foods they needed. But we all share. We don’t divvy up the bills and we don’t charge them any rent. I go buy all groceries, and everyone takes turns cooking the various meals. I used to browse and see what’s on sale when I went to the store. Now it’s more focused. I grab and go. I’m out in less than an hour.

Li Wen: Uncle Pak’s area is dubbed “the tea room” because that’s where the family starts the day, with a tea ritual. My parents have an amazing wing on the other side of our bedroom; they are living in Australia now but that could change. Despite the endless space to wander, we mostly kick back together in the kitchen. A wall of large patio doors bring a lot of natural light into the kitchen, and they slide open easily for the seniors to access the patio and backyard. The 17,000-square-foot backyard has allowed the seniors to get fresh air in safe surroundings as the weather has gotten better.

A floor-to-ceiling window looks out at a portion of the expansive backyard
Patio doors slide open for easy access from the main level

Eric: The house isn’t complete yet. Since November 2019, we have slowly been adding finishing touches, like window coverings and missing cranks plus drywall touch ups. But we consider ourselves very lucky to be living in our new home. The combination of common space and private space has allowed us to weather the pandemic rather well. That’s not to say there is no tension, but that’s to be expected even during the best of times.

Li Wen and Eric’s master suite has a windsor bedframe and wallcovering, which gives it a woodsy cabin vibe
A view of Eric and Li Wen’s balcony from the backyard

Li Wen: One of my friends hasn’t seen her mom in two months because they didn’t allow visitors in her long-term care facility. I feel lucky everyone is together and safe at home. Eric and I are both working from here. My home office is directly across from the front door. It doesn’t have a separate entrance, and I haven’t seen patients here, but I do talk to them over video conference. Before the nice weather, in the early days of the lockdown, Charlotte would constantly knock on my home-office door during my calls with clients. That was tricky, but despite the disturbances, I’m happy to not have to commute to Scarborough every day like I used to.

Eric: I had negotiated working from home twice a week before the pandemic, so shifting my routine to full-time at home hasn’t changed too much professionally. Our built-in babysitter brigade takes turns watching Charlotte as she sprints around the backyard, where she collects branches and plays with her new mini-kitchen. She also has a small slide and a water and sand station.

Li Wen: Charlotte has become the main source of entertainment for all the adults. Before this, she was in daycare most days and we didn’t have that much time with her.

Charlotte’s bedroom has mini midcentury-modern furniture and a toddler-size trundle bed

Eric: The different areas of the house have helped us keep our daughter entertained, too. She uses the swim spa regularly. She has become pretty good and comfortable at wading in the water.

Li Wen: Eric has nurtured a love of baking, churning out four to five loaves a week. He makes farmer bread and baguettes. We used to buy bread from Longo’s, but nothing is fresher than this.Sign up for our newsletterFor the latest on Toronto during the reopening, subscribe to This CitySign me up!

Eric: Every two weeks, we also get a box of produce and meat delivered from a farm. Still, the seniors really miss going for dim sum each Sunday. And they have a touch of cabin fever, despite all the room to move about and the indoor pool.

Li Wen: To combat the boredom, my father-in-law, Roger, does weekly Zoom meetings with his geriatric day program. They exercise for 20 minutes and then talk about the news, but it’s hard because he can’t hear very well. Other seniors have attempted to boldly escape. One day, I found my mother-in-law, Christine, sneaking out. She said she was going for a walk, and that she wanted to start the car so the battery wouldn’t die. I think she might have been headed to one of her favourite spots: the supermarket. They are not as nervous as us—they’ve seen so much in their lives.

Source: Toronto Life – BY IRIS BENAROIA |

PHOTOGRAPHY BY RENEE GODIN |  JUNE 19, 2020

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CMHC Acknowledges Its Role In Forced Resettlement Of Black Canadians

The Africville Museum is seen on the site of the former community of Africville in Halifax, M.S., Tues....
The Africville Museum is seen on the site of the former community of Africville in Halifax, M.S., Tues. Feb. 24, 2015. Canada Mortgage and Housing Corp. has acknolwedged its role in the forced resettlement of Africville residents as well as a lack of diversity in its ranks today.

“We reject racism, white supremacy and wish to atone for our past racism and insensitivity,” the mortgage insurer said.

Canada Mortgage and Housing Corp. acknowledged a lack of diversity in its ranks and its role in past acts of racism on Friday as it pledged to overhaul how it does business.

The federal housing agency said it will re-assess all of its practices through a racialized lens to an effort to eliminate discrimination.

It also used the statement to acknowledge its role in funding the forced resettlement of Black people, most notably from Halifax’s historic Africville and Hogan’s Alley in Vancouver.

CMHC’s decision was prompted by anti-Black racism demonstrations held across Canada and the U.S. after the death of George Floyd, a handcuffed Black man in Minneapolis who pleaded for air as a white police officer pressed his knee against Floyd’s neck for nearly nine minutes.

Watch: Trudeau addresses racism, systemic discrimination in Canada. Story continues below.

“We haven’t done nearly enough. CMHC must set a high standard,″ the agency said in a statement.

“We must all stand together with our Black co-workers and the victims of murder, oppression and the systemic racism that exists everywhere.”

Black people make up 3.5 per cent of Canada’s population and 5.2 per cent of CMHC employees.

Those who are Indigenous amount to 4.9 per cent of the national population and 2.4 per cent of the CMHC workforce.

“At CMHC, we would once have congratulated ourselves for our diversity,” CMHC said.

“This is however no achievement when too few of our people leaders are Black or Indigenous ― none among senior management. And diversity isn’t enough: it’s where we start.”

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Kike Ojo-Thompson, who runs diversity, inclusion and equity consultancy Kojo Institute, said CMHC’s statement seemed like it was written in the voice of someone who really understands the moment the country had been plunged into.

She found it interesting that CMHC was so forthcoming with data around their Black and Indigenous employees, “particularly because their numbers are so low.”

“The first step to an accountability framework and accountability approach is to actually show your data, so that you as well as the community can know what the target is,” she said. “If you’re low, we know you’ve got to get from zero to three, or three to five, and we’re not going to expect 10 tomorrow… so exposing the data is very helpful.”

Among the measures announced Friday, CMHC said it will create specific targets for adding Black and racialized people to its leadership and senior management ranks.

Evan Siddall, president and CEO of Canada Mortgage and Housing Corp in an interview on June 16,
Evan Siddall, president and CEO of Canada Mortgage and Housing Corp in an interview on June 16, 2014.

It will offer leadership training and professional development to support the progress of Black and racialized employees and provide mandatory anti-racism training for all staff.

People with lived experience of racism will now be involved in a re-assessment of CMHC’s recruiting, evaluation and promotion processes and its diversity and inclusion efforts.

“We reject racism, white supremacy and wish to atone for our past racism and insensitivity,″ CMHC said.

“Racism has been built up and reinforced for centuries, whether against Black, Indigenous people or people of colour. Only a sustained and focused effort will eliminate it.”

Ojo-Thompson said there were some measures missing from the statement.

She would have liked to see CMHC mention an external advisory body.

Such a group must be external, she said, because it offers protection and accountability in organizations that may otherwise punish people who speak out.

She also wanted more clarity around who exactly came up with the new policies and promises CMHC made and how much flexibility they offer if people suggest further ideas.

“What you’ve told me is, ‘This is what I’m going to do,’ so my question is, ’If I say that there’s something missing, will you do that or is this all?‴⁣

Source: Tara Deschamps Canadian Press Updated 06/14/2020 10:19 EDT

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Genworth and Canada Guaranty Won’t Adopt CMHC’s New Mortgage Rules


Following the announcement of CMHC’s new mortgage rules last week, Canada’s other two mortgage insurers, Genworth Canada and Canada Guaranty, confirmed today they will not be following CMHC’s lead.

“Genworth MI Canada Inc….confirms that it has no plans to change its underwriting policy related to debt service ratio limits, minimum credit score and down payment requirements,” the company said in a release.

Similarly, Canada Guaranty said it “confirms that no changes to underwriting policy are contemplated as a result of recent industry announcements.”

To recap CMHC’s mortgage rule changes, the following will apply to insured mortgages (those with less than 20% down payment) as of July 1, 2020:

  • Maximum Gross Debt Service (GDS) ratios will be lowered to 35% (from 39%)
  • Maximum Total Debt Service (TDS) ratios will be lowered to 42% (from 44%)
  • The minimum credit score needed to qualify will rise to 680 (from 600) for at least one household borrower
  • Many non-traditional sources of down payment that “increase indebtedness” will be banned
    • It has been confirmed, however, that borrowers will continue to be able to use a loan from their RRSP through the Home Buyers Plan, a home equity line of credit (HELOC) on one of their second properties, or a HELOC on a property owned by their parents if the money is gifted.

“We acknowledge the potential ‘pro-cyclical’ negative impacts on housing markets of CMHC’s decision to tighten underwriting,” CMHC CEO Evan Siddall wrote on Twitter in response to criticism. “However, the benefits of preventing over-borrowing far exceed these costs. Not acting also exposes young families to the tragic prospect of foreclosure.”

Why the Other Insurers Won’t Adopt the New Rules

In explaining its decision, Genworth Canada President and CEO Stuart Levings said the company’s current underwriting policies for insured mortgages already allow it to “prudently” manage its risk exposure.

“Genworth Canada believes that its risk management framework, its dynamic underwriting policies and processes and its ongoing monitoring of conditions and market developments allow it to prudently adjudicate and manage its mortgage insurance exposure,” Levings noted, “including its exposure to this segment of borrowers with lower credit scores or higher debt service ratios.”

Similarly, Canada Guaranty said it has been well-served by its existing underwriting criteria over the years and sees no need to make adjustments now.

“Canada Guaranty utilizes a dynamic underwriting process where our underwriting policies are consistently updated to reflect evolving economic environments and emerging mortgage default patterns,” Mary Putnam, VP, Sales and Marketing of Canada Guaranty, said in a release, adding this has resulted in the lowest loss ratio in the industry.

“Recent insurer announcements relating to down payment and minimum credit score represent a very small component of Canada Guaranty’s business, and we will continue to be prudent in these areas,” she said. “Given implementation of the qualifying stress test and historic default patterns, Canada Guaranty does not anticipate borrower debt service ratios at time of origination to be a significant predictor of mortgage defaults.”

Observers saw the announcements as a positive for borrowers who will continue to have some options in the markets should they not be able to meet CMHC’s stricter qualification standards.

“We like this decision,” noted National Bank of Canada analyst Jaeme Gloyn. “The decision will help soften potential negative impacts to the housing/mortgage market as we argued against tinkering with mortgage underwriting criteria in light of the COVID-driven housing market slowdown.”

NBC had estimated that CMHC’s new rules relating to debt service ratios and credit scores could have impacted up to 20% of CMHC-insured borrowers.

Impact of CMHC’s New Mortgage Rules

So what are the impacts of CMHC’s new rules on borrowers shopping for high-ratio mortgages?

CIBC’s Benjamin Tal estimates the change will mean about 5% of homebuyers will no longer be able to qualify for a mortgage.

For those who can, it will mean a reduction in their buying power.

“Fewer people will qualify for a mortgage, and if they do, the maximum they can borrow will be around 10% or more less than it is right now, ” wrote Ross Taylor, a mortgage agent with Concierge Mortgage Group.

Taylor notes that a household earning $120,000 would currently qualify for a mortgage of around $565,000 plus insurance. With CMHC’s stricter rules, that same household would only qualify for a mortgage of approximately $502,000 plus insurance costs.

“…keeping good credit hygiene is more important than ever if you want to buy a home, especially if you need mortgage insurance,” Taylor adds.

Source: Steve Huebl· News Mortgage Regulations·June 8, 2020

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Genworth and Canada Guaranty Won’t Adopt CMHC’s New Mortgage Rules


Following the announcement of CMHC’s new mortgage rules last week, Canada’s other two mortgage insurers, Genworth Canada and Canada Guaranty, confirmed today they will not be following CMHC’s lead.

“Genworth MI Canada Inc….confirms that it has no plans to change its underwriting policy related to debt service ratio limits, minimum credit score and down payment requirements,” the company said in a release.

Similarly, Canada Guaranty said it “confirms that no changes to underwriting policy are contemplated as a result of recent industry announcements.”

To recap CMHC’s mortgage rule changes, the following will apply to insured mortgages (those with less than 20% down payment) as of July 1, 2020:

  • Maximum Gross Debt Service (GDS) ratios will be lowered to 35% (from 39%)
  • Maximum Total Debt Service (TDS) ratios will be lowered to 42% (from 44%)
  • The minimum credit score needed to qualify will rise to 680 (from 600) for at least one household borrower
  • Many non-traditional sources of down payment that “increase indebtedness” will be banned
    • It has been confirmed, however, that borrowers will continue to be able to use a loan from their RRSP through the Home Buyers Plan, a home equity line of credit (HELOC) on one of their second properties, or a HELOC on a property owned by their parents if the money is gifted.

“We acknowledge the potential ‘pro-cyclical’ negative impacts on housing markets of CMHC’s decision to tighten underwriting,” CMHC CEO Evan Siddall wrote on Twitter in response to criticism. “However, the benefits of preventing over-borrowing far exceed these costs. Not acting also exposes young families to the tragic prospect of foreclosure.”

Why the Other Insurers Won’t Adopt the New Rules

In explaining its decision, Genworth Canada President and CEO Stuart Levings said the company’s current underwriting policies for insured mortgages already allow it to “prudently” manage its risk exposure.

“Genworth Canada believes that its risk management framework, its dynamic underwriting policies and processes and its ongoing monitoring of conditions and market developments allow it to prudently adjudicate and manage its mortgage insurance exposure,” Levings noted, “including its exposure to this segment of borrowers with lower credit scores or higher debt service ratios.”

Similarly, Canada Guaranty said it has been well-served by its existing underwriting criteria over the years and sees no need to make adjustments now.

“Canada Guaranty utilizes a dynamic underwriting process where our underwriting policies are consistently updated to reflect evolving economic environments and emerging mortgage default patterns,” Mary Putnam, VP, Sales and Marketing of Canada Guaranty, said in a release, adding this has resulted in the lowest loss ratio in the industry.

“Recent insurer announcements relating to down payment and minimum credit score represent a very small component of Canada Guaranty’s business, and we will continue to be prudent in these areas,” she said. “Given implementation of the qualifying stress test and historic default patterns, Canada Guaranty does not anticipate borrower debt service ratios at time of origination to be a significant predictor of mortgage defaults.”

Observers saw the announcements as a positive for borrowers who will continue to have some options in the markets should they not be able to meet CMHC’s stricter qualification standards.

“We like this decision,” noted National Bank of Canada analyst Jaeme Gloyn. “The decision will help soften potential negative impacts to the housing/mortgage market as we argued against tinkering with mortgage underwriting criteria in light of the COVID-driven housing market slowdown.”

NBC had estimated that CMHC’s new rules relating to debt service ratios and credit scores could have impacted up to 20% of CMHC-insured borrowers.

Impact of CMHC’s New Mortgage Rules

So what are the impacts of CMHC’s new rules on borrowers shopping for high-ratio mortgages?

CIBC’s Benjamin Tal estimates the change will mean about 5% of homebuyers will no longer be able to qualify for a mortgage.

For those who can, it will mean a reduction in their buying power.

“Fewer people will qualify for a mortgage, and if they do, the maximum they can borrow will be around 10% or more less than it is right now, ” wrote Ross Taylor, a mortgage agent with Concierge Mortgage Group.

Taylor notes that a household earning $120,000 would currently qualify for a mortgage of around $565,000 plus insurance. With CMHC’s stricter rules, that same household would only qualify for a mortgage of approximately $502,000 plus insurance costs.

“…keeping good credit hygiene is more important than ever if you want to buy a home, especially if you need mortgage insurance,” Taylor adds.

Source: Steve Huebl

Mortgage Broker NewsMortgage Regulations·June 8, 2020

Industry Reaction to CMHC’s New Mortgage Rules


Obtaining mortgage insurance for a home purchase is about to become more challenging on July 1, particularly for first-time buyers.

The Canada Mortgage and Housing Corporation (CMHC), Canada’s national mortgage insurance provider, unveiled stricter underwriting policies on Thursday for insured mortgages. The measures include:

  • Limiting Gross Debt Service (GDS) ratios to 35% (from 39%)
  • Limiting Total Debt Service (TDS) ratios to 42% (from 44%)
  • Raising the minimum credit score to 680 (from 600) for at least one borrower
  • Banning non-traditional sources of down payment that “increase indebtedness”

“COVID-19 has exposed long-standing vulnerabilities in our financial markets, and we must act now to protect the economic futures of Canadians,” said CMHC CEO Evan Siddall in a statement.

“These actions will protect homebuyers, reduce government and taxpayer risk and support the stability of housing markets while curtailing excessive demand and unsustainable house price growth.”

What do the Changes Mean for Buyers?

CMHC’s changes will effectively reduce homebuyers’ purchasing power by up to 11%, according to RateSpy.com.

“Someone earning $60,000 with no other debt and 5% down could afford approximately 10.9% less home under CMHC’s new rules,” the site noted. “That’s like jacking up the minimum stress test rate from 4.94% (where it lies today) to 6.30%!”

Roughly 18% of CMHC’s high loan-to-value originations had a Gross Debt Ratio of more than 35%, according to a report from RBC Economics.

And about 5% of CMHC’s originations had credit scores of less than 680, according to data from Mortgage Professionals Canada.

CMHC Going It Alone?

One of the biggest questions since a leak of the new rules made the rounds on Thursday has been whether CMHC’s competitors, Canada Guaranty and Genworth Canada, would have to adopt the stricter underwriting measures as well.

According to the RBC Economics report, they won’t, at least not for now.

“Genworth Canada (MIC) and Canada Guaranty (CG) confirmed to us that they have not been told to adopt any or all of the same underwriting changes,” the report notes. “…although we would not be surprised if they were to eventually adopt some (e.g., down payment sources, credit score) or even all of the changes.”

For what it’s worth, that same report notes that it’s “interesting” that CMHC delivered the announcement, since mortgage insurance market changes have historically been announced by the Department of Finance.

Mortgage Industry Reaction

The announcement elicited wide-ranging opinions from throughout the mortgage industry. Here are some of them…

“I think the changes are well-intentioned, but poorly timed. I understand the rationale, but the people most at risk of default are already in their first home and insured. Disqualifying purchasers now won’t improve the quality of the portfolio already at risk,” Mortgage Professionals Canada CEO Paul Taylor told CMT.

“If house prices do soften, from a public policy perspective, that’s precisely the time to bolster support for first-time buyers. Making homes more difficult to finance will, once again, reserve properties for purchase by the already well-capitalized.”

Taylor added that the timing of the announcement, in the midst of a global pandemic, could further slow the market, on top of the 9-18% home price reductions forecast by CMHC.

“The Federal government is spending billions of dollars to support a struggling economy,” Taylor said. “These changes actively suppress activity.”

Ron Butler of Butler Mortgages Inc. also understands CMHC’s motive, acting essentially as an insurance company.

“They must be prudent in the face of an economic disaster,” he said. “It’s hard to argue against better credit scores when you’re insuring a $940K mortgage. (And) 680 is simply a proper credit score.”

And while first-time buyers may face the brunt of this policy change, Butler noted they can easily choose a lower-cost property, which may be easier in certain regions compared to others.

“Ultimately, I’ll  take these changes over a 10% minimum down payment any day,” Butler said, referring to the policy change floated by Siddall several weeks ago.

Wrong Time to “Tinker” With Policy

While many understand where the policy adjustments are coming from, others are adamant that now is the worst time to implement such changes.

“I would argue against tinkering with mortgage underwriting criteria in light of the pandemic-driven housing market slowdown,” True North Mortgage Founder and CEO Dan Eisner told CMT. “Some of these changes may be needed, but the timing is questionable…it’s as silly as buying an umbrella after a flood. Now is the time to be encouraging economic activity.”

Asked which measure will be the most restrictive for first-time buyers, Eisner said first-time buyers will be most-impacted by the increased income requirements.

“Keep in mind, this change arrives not too long after the Department of Finance implemented the qualifying rate stress test, which already pushed many homebuyers out of the market.”

Responding to critics, CMHC CEO Evan Siddall wrote on Twitter: “We acknowledge the potential ‘pro-cyclical’ negative impacts on housing markets of CMHC’s decision to tighten underwriting. However, the benefits of preventing over-borrowing far exceed these costs. Not acting also exposes young families to the tragic prospect of foreclosure.”

Some, including Butler, foresee a brief increase in home-buying as people rush to purchase before the new rules take effect.

“There will be a minor spike in sales based on this change, and then comes the September Cliff,” Butler said, referring to an expected drop in activity once the widespread mortgage deferral programs come to an end this fall.


Source: Steve Huebl · Mortgage Broker News · June 5, 2020

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Reaction to CMHC’s New Restrictions on Insured Mortgages

Obtaining mortgage insurance for a home purchase is about to become more challenging on July 1, particularly for first-time buyers.

The Canada Mortgage and Housing Corporation (CMHC), Canada’s national mortgage insurance provider, unveiled stricter underwriting policies on Thursday for insured mortgages. The measures include:

  • Limiting Gross Debt Service (GDS) ratios to 35% (from 39%)
  • Limiting Total Debt Service (TDS) ratios to 42% (from 44%)
  • Raising the minimum credit score to 680 (from 600) for at least one borrower
  • Banning non-traditional sources of down payment that “increase indebtedness”

“COVID-19 has exposed long-standing vulnerabilities in our financial markets, and we must act now to protect the economic futures of Canadians,” said CMHC CEO Evan Siddall in a statement.

“These actions will protect homebuyers, reduce government and taxpayer risk and support the stability of housing markets while curtailing excessive demand and unsustainable house price growth.”

What do the Changes Mean for Buyers?

CMHC’s changes will effectively reduce homebuyers’ purchasing power by up to 11%, according to RateSpy.com.

“Someone earning $60,000 with no other debt and 5% down could afford approximately 10.9% less home under CMHC’s new rules,” the site noted. “That’s like jacking up the minimum stress test rate from 4.94% (where it lies today) to 6.30%!”

Roughly 18% of CMHC’s high loan-to-value originations had a Gross Debt Ratio of more than 35%, according to a report from RBC Economics.

And about 5% of CMHC’s originations had credit scores of less than 680, according to data from Mortgage Professionals Canada.

CMHC Going It Alone?

One of the biggest questions since a leak of the new rules made the rounds on Thursday has been whether CMHC’s competitors, Canada Guaranty and Genworth Canada, would have to adopt the stricter underwriting measures as well.

According to the RBC Economics report, they won’t, at least not for now.

“Genworth Canada (MIC) and Canada Guaranty (CG) confirmed to us that they have not been told to adopt any or all of the same underwriting changes,” the report notes. “…although we would not be surprised if they were to eventually adopt some (e.g., down payment sources, credit score) or even all of the changes.”

For what it’s worth, that same report notes that it’s “interesting” that CMHC delivered the announcement, since mortgage insurance market changes have historically been announced by the Department of Finance.

Mortgage Industry Reaction

The announcement elicited wide-ranging opinions from throughout the mortgage industry. Here are some of them…

“I think the changes are well-intentioned, but poorly timed. I understand the rationale, but the people most at risk of default are already in their first home and insured. Disqualifying purchasers now won’t improve the quality of the portfolio already at risk,” Mortgage Professionals Canada CEO Paul Taylor told CMT.

“If house prices do soften, from a public policy perspective, that’s precisely the time to bolster support for first-time buyers. Making homes more difficult to finance will, once again, reserve properties for purchase by the already well-capitalized.”

Taylor added that the timing of the announcement, in the midst of a global pandemic, could further slow the market, on top of the 9-18% home price reductions forecast by CMHC.

“The Federal government is spending billions of dollars to support a struggling economy,” Taylor said. “These changes actively suppress activity.”

Ron Butler of Butler Mortgages Inc. also understands CMHC’s motive, acting essentially as an insurance company.

“They must be prudent in the face of an economic disaster,” he said. “It’s hard to argue against better credit scores when you’re insuring a $940K mortgage. (And) 680 is simply a proper credit score.”

And while first-time buyers may face the brunt of this policy change, Butler noted they can easily choose a lower-cost property, which may be easier in certain regions compared to others.

“Ultimately, I’ll  take these change over a 10% minimum down payment any day,” Butler said, referring to the policy change floated by Siddall several weeks ago.

Wrong Time to “Tinker” With Policy

While many understand where the policy adjustments are coming from, others are adamant that now is the worst time to implement such changes.

“I would argue against tinkering with mortgage underwriting criteria in light of the pandemic-driven housing market slowdown,” True North Mortgage Founder and CEO Dan Eisner told CMT. “Some of these changes may be needed, but the timing is questionable…it’s as silly as buying an umbrella after a flood. Now is the time to be encouraging economic activity.”

Asked which measure will be the most restrictive for first-time buyers, Eisner said first-time buyers will be most-impacted by the increased income requirements.

“Keep in mind, this change arrives not too long after the Department of Finance implemented the qualifying rate stress test, which already pushed many homebuyers out of the market.”

Some, including Butler, foresee a brief increase in home-buying as people rush to purchase before the new rules take effect.

“There will be a minor spike in sales based on this change, and then comes the September Cliff,” Butler said, referring to an expected drop in activity once the widespread mortgage deferral programs come to an end this fall.

Source: Mortgage Broker NewsSteve Huebl – June 5, 2020

Common myths and misconceptions about reverse mortgages

Common myths and misconceptions about reverse mortgages

Though reverse mortgages have been available in Canada for many years, they remain a commonly misunderstood product. A reverse mortgage is unlike most traditional mortgage products; it’s a long-term financing solution that gives borrowers over 55 years old access to a portion of the equity that already exists in their home and turns it into payment free, tax-free cash.

By 2024, it is expected that one in five Canadians will be aged 65 and older. Proceeds from a reverse mortgage can be used to free-up cash flow by paying-out existing debts, to help finance in-home care services, to purchase a second home, or to provide early inheritance. In addition, payments are completely optional, proceeds are tax free and the borrower will never owe more than the value of the home.

Since the introduction of their reverse mortgage business in 2018, Equitable Bank has been on a mission to help brokers understand the benefits of the product in order to better serve their clients, starting with building trust.

“Clients need not only to trust their broker, but also trust the lender who is providing their financing,” said Paul von Martels, vice president of prime and reverse mortgage lending at Equitable Bank. “We have a reputation for providing excellent service and continue to invest in those capabilities, so everyone involved, from borrowers to brokers, lawyers and appraisers, have the utmost confidence in the process.” 

To help broaden the understanding of a reverse mortgage, von Martels shared some common myths and explained why they just aren’t true.

The process of getting a reverse mortgage is difficult
Prospective reverse mortgage clients may have different expectations of how they want to work with their mortgage broker. There may be mobility issues or maybe they just feel more comfortable communicating in-person or over the phone rather than chatting through a video call. In some cases, borrowers may be acting through a power of attorney or a family member.

The process is very similar to a standard mortgage – borrower needs analysis, application submission, adjudication and finally fulfillment. What is unique is the need for independent legal advice (ILA) for both title holding and non-title holding spouses. This is an important borrower safeguard designed to ensure borrowers understand the obligations and details of the mortgage.

“We recognize the unique needs of the borrower and have designed processes to support. We are patient, flexible and allow clients and their brokers to move at the pace and manner that they feel most comfortable in. We can move fast too, closing these deals from start to finish in 1 week’s time. “

The bank will take my home
Equitable Bank registers a mortgage charge at 55% and provided the borrower continues to meet the ongoing mortgage obligations, he will never owe more than the fair market value of the home. This is commonly referred to as a no negative equity guarantee, meaning if the mortgage value ever exceeds the value of the property, Equitable Bank can only collect on fair market value, no more.

Reverse mortgages are considered a limited recourse loan which means lenders have recourse to the property only; equity shortfalls at the time of sale are not the client’s responsibility.

Reverse mortgages are a product of last resort      
More and more, this product is being used as a financial planning solution where borrowers are accessing home equity, at very competitive interest rates, to optimize investment portfolio strategies, participate in government tax programs, or add to their nest egg for next generation family members. Clients and brokers are also utilizing the various features of the product to lower the borrowing cost such as using Equitable Bank’s Lump Sum product or setting up scheduled advances.

The narrative of reverse mortgages is changing, and people are taking notice. The product is improved, the rates lower, and more than ever, it serves a critical financial planning need – aging in place.

Borrowers are locked in for life with a reverse mortgage
A borrower should never feel trapped or tied into a product. That said, its important for borrowers to understand the prepayment options.  Reverse mortgages are a longer-term product and might not be the best option for clients who want to pay-out in a few years.

Equitable Bank understands that its reverse mortgage clients need flexibility in this regard and have made significant enhancements to the prepayment charges and allowances offered.

“One example is if a borrower is moving into a long-term care facility, 50% of the charge is waived, likewise if the last surviving borrower passes, its entirely waived” said Joe Flor, director of national sales at Equitable Bank. “In general, Equitable Bank’s prepayment features allow clients to repay sizable amounts of interest and principal without incurring any charges. It’s the flexibility people need and expect.”

Rates are too high
For those less familiar with reverse mortgages, there’s a belief that rates are sky-high and more like private lending rates, closer to 10% for example. This certainly isn’t the case.

“Our fixed rates range from 3.84% to 4.84%. Much lower than people think,” said von Martels. “One-time setup fees, appraisals and legal support range between $2,500 to $4,000. Accrued interest compounds, but for borrowers with other sources of cash flow, there are options to minimize the interest cost with partial or full monthly interest repayment.”

On the other end of credit-pricing spectrum, reverse mortgages are commonly compared to HELOCs.  Unfortunately for those without a HELOC already in-place, the income qualification standards can be quite difficult to meet on a retirement income and they don’t offer many of the favourable borrower safeguards that reverse mortgages do.

At the end of the day, von Martels says it’s about building trust and knowledge with industry partners. Equitable Bank is long established, managing more than $30 billion in assets.

“We have a reputation as being a disciplined lender with a strong commitment to its mortgage broker partners. Our reverse mortgage business is no different.  We’re in this for the long term and will continue learning and improving. That’s our commitment to our broker partners.”

Source: Mortgage Broker News – by Kasi Johnston 01 Jun 2020

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How to Cancel a Credit Card Without Hurting Your Credit Score

It’s not as simple as just closing the card.

The act of canceling a credit card is easy. You just call your credit card company, ignore its pleas for your continued business, and tell it you don’t want its card anymore. But if things were really that simple, I wouldn’t need to write an article about it. Closing credit cards can have a significant impact on your credit score, so you need to know how to cancel your credit card in the right way. 

Sometimes the best decision is not to close the credit card at all, even if you’re not using it, while other times, you’re better off canceling it, though it may adversely affect your score. It’s an individual decision for every person with each credit card. Here’s what you need to know in order to make the right choice.Woman Cutting Credit Card

Image source: Getty Images

Does canceling a credit card hurt your credit score?

Let’s get this question out of the way upfront. Canceling a credit card will likely hurt your credit score, but how much depends on a few factors, like what your credit limit is, how much you charge to the card, and how long you’ve had it. You probably won’t be able to stop your score from taking a hit if you’re determined to cancel the card, but if you plan carefully, you can minimize how much it drops.

What happens when you cancel a credit card

Canceling a credit card raises your credit utilization ratio and it could also lower your average account age, both of which can hurt your credit score. Your credit utilization ratio is the ratio between the amount of credit you are using and the amount you have available to you. So for example, if you have a $1,000 limit and you carry a $200 balance one month, your credit utilization ratio is 20% on that card ($200/$1,000 x 100 = 20%). 

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Your credit utilization ratio across all of your cards matters too. So if you have two cards with a $1,000 limit and one card with a $5,000 limit and you cancel the card with the $5,000 limit, you’ll be bringing your total down credit limit from $7,000 to $2,000, which could have a big impact on your credit utilization.

Credit scoring models like to see a credit utilization ratio under 30% and the lower, the better, as long as it’s above zero. This indicates that you’re living comfortably within your means while a higher credit utilization ratio suggests you need a lot of credit to sustain your lifestyle and that you might be at a higher risk of default. When you cancel a credit card, you’re reducing your available credit, which will automatically drive your credit utilization ratio higher. It’s a pretty big deal because your credit utilization ratio makes up 30% of your credit score

Average account age is another factor in your credit score. It’s the average age of all the credit accounts, including loans and credit cards, in your name. Lenders like to see an older average account age because it indicates that you have more experience dealing with credit and it enables them to better predict how you’ll manage new credit. Canceling a credit card you only opened a few months ago may not have much of an impact on your average account age, but if you cancel the first credit card you ever got, your average account age will probably drop quite a bit and your credit score will drop accordingly.

Canceling a credit card does not absolve you of your responsibility to pay any outstanding debt and it doesn’t mean that any negative marks associated with that account, like late payments, just disappear. Derogatory marks like these stay on your credit report for seven years, even if you’ve closed the account.

What to know before you cancel a credit card

Canceling a credit card doesn’t always make sense because of the negative impacts the move can have on your credit. Here are a few factors you should look at to decide if it’s the right move for you:

  • Credit limit: Closing a card with a higher credit limit will have a more significant impact on your credit utilization ratio than canceling a card with a lower credit limit. 
  • Effect on credit utilization ratio: Look at your average spending across all of your credit cards for the last few months and compare this to your combined credit limits. Calculate your credit utilization ratio and then estimate how it’ll be impacted if you cancel a credit card. If canceling the card would push your credit utilization ratio over 30%, you might want to rethink the decision or plan to charge less to your credit cards going forward to keep your ratio within a desirable range. You could also open a new credit card to bring your credit utilization ratio back down again.
  • Account age: Canceling newer credit cards is safer than canceling older cards because it’ll have a smaller impact on your average account age.
  • Annual fee: It might still make sense to cancel your card if it charges an annual fee that you’re not recouping in rewards each year, even though doing so might temporarily hurt your credit score.
  • Rewards: You usually lose your rewards points once you cancel a credit card, so use any that you’ve accumulated before you close the account for good.
  • Balance: Canceling a card without a balance makes things a lot simpler, but you can still cancel most cards if you’re carrying a balance. You’ll have to decide if you want to continue making monthly payments to your issuer or transfer the balance elsewhere.
  • Your own attitude toward credit: If you’re someone who is easily tempted to spend more money than you have, canceling a credit card might still be the right play, despite the hit to your credit score. With less credit at your disposal, you’ll have a harder time running up costly debts you can’t pay back.

You should also know that some issuers will try to keep your business when you call to cancel by offering you better reward terms, a lower interest rate, or waived fees. Decide beforehand if any of these offers would convince you to stick with the card. If not, don’t let yourself be swayed by your card issuer’s pleas.

Should you cancel a credit card?

It’s usually best to leave your credit card accounts open even if you’re not using them. They’re there if you need them to make a purchase and they’ll help your credit utilization ratio and your average account age, which will, in turn, boost your credit score.

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You can take the card out of your wallet, but you shouldn’t lose track of it entirely. Keep it somewhere where others do not have easy access to it and continue to monitor your account at least once per month to ensure that someone isn’t running up fraudulent charges on it. A bill for a card you’re not using might also raise your suspicions. Your card issuer might decide to close your account for you after a period of inactivity. You can try contacting the company and asking them to keep your account open, but it doesn’t have to comply if you’re not using the card. Consider making a few small purchases with the card here and there if you want to keep your account active. You could also set up autopay with your credit card for a small bill and then pay your credit card bill automatically from your bank account every month.

Closing a credit card might make sense if it has an annual fee and it’s costing you money. But if you don’t want to do this, you might be able to call your card issuer and negotiate the annual fee. If you’re willing to downgrade your account, you might be able to get rid of it entirely. Canceling your card might also make sense if you’re trying to limit your access to credit to reduce the temptation to overspend. If either of these scenarios apply to you, you’ll just have to make peace with a slight drop in your credit score for the time being.

Whatever you do, don’t close multiple cards at once because this will have a much bigger impact on your score. Limit yourself to one credit card cancellation every six months at most. This will give you time to gradually adjust your spending so that you can keep your credit utilization ratio within a good range and it’ll give your remaining credit accounts time to age a little more, improving your score. 

You should also limit how often you apply for new credit or request credit limit increases. While not as severe as canceling a credit card, these requests result in hard inquiries on your credit report, which drop your score by a few points every time. 

How to cancel a credit card without hurting your score

The steps you’ll follow for closing your credit card depend on whether or not you have an outstanding balance.

With no balance

If you don’t have a credit card balance, canceling your card is pretty straightforward. Just do the following:

  1. Use up any rewards you’ve accumulated. 
  2. Switch any automatic payments currently set up under the card you intend to cancel over to a different credit card to avoid accidental late payments after the account has closed.
  3. Contact your credit card company and tell it you want to cancel your card. Some companies may allow you to cancel your card online, but you may need to call the company or send a letter. Your credit issuer’s website should provide you with instructions. Your card issuer should send you a written confirmation in the mail. Follow up if you don’t get one within a week or two of your cancellation request.
  4. Destroy the credit card. Even though the account is canceled, it’s better to be safe than sorry. Cut the card up or use a shredder. For metal cards, try contacting the card issuer to see if they offer disposal or recycling services.
  5. Monitor your credit account. It’s unlikely, but if your card issuer partially refunds your annual fee or you recently returned an item, a credit could show up on your account after you’ve closed the card. If this happens, contact the credit card company and request that they send you a check for the credited amount.
  6. Monitor your credit report. Check your report to make sure that the account is correctly reported as closed. You may want to wait a few weeks to check this because the card issuer may not report it to the credit bureaus immediately. You can check your credit reports once per year with each bureau for free through AnnualCreditReport.com.
  7. Adjust your spending. Make sure you’re not using more than 30% of your new, lower credit utilization ratio. If you are, try charging less to your remaining credit cards or consider requesting a credit limit increase on some of your other cards to lower your credit utilization ratio again. Note that if you do this, it may cause your score to drop by another few points because of the hard inquiry your card issuer will do on your credit report. But this won’t matter if you’re approved because your new, lower credit utilization ratio will have a larger impact on your score.

With a balance

The steps for closing a credit card with a balance are essentially the same as closing a card without a balance except you also have to figure out how you’re going to pay back your debt. Some issuers might enable you to continue making monthly payments to them just as you have been. You’ll keep your same interest rate and when your balance is finally gone, you and the card issuer will part ways for good.

Some people prefer to wash their hands of the credit card all at once. In that case, you’ll need to transfer your balance to another card or take out personal loans for debt consolidation and use these funds to pay off your debt before closing the card. 

You can apply for a new balance transfer card so your balance will temporarily stop growing, and you’ll have a chance to pay it back interest-free during the 0% APR intro period. But be aware that there are often fees associated with a balance transfer, so you may still end up paying back a larger amount. Personal loans give you a predictable monthly payment, but their interest rates can also be high, particularly for those with poor to fair credit.

Waiting to close your card is also an option if you have only a small balance. Evaluate all your choices before deciding which is right for you. If you decide to continue paying your card issuer for now, you can always decide to take out a personal loan later to get rid of your obligation to the credit card company.

Canceling a credit card is a simple activity, but it requires a lot of careful thought in order to minimize its impact on your credit score. Go through the information above to decide if it’s the correct decision for you, and if it is, follow the recommended steps to close your card with minimum impact to your score

Source: http://www.Fool.com – April 24, 2020

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