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Monday, 28 May 2012

Why is the government decides for you

Debt poll challenges OSFI proposals                                  
By Vernon Clement Jones | 27/05/2012 7:00:00 PM | 0 comments
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Canadians are using their extra cash to more quickly chip away at credit card and lines of credit debt, according to a new bank survey, backing up broker concerns about the dangers of unsecured credit.
“Among Canadians with debt, 49 per cent have made at least one lump sum payment to their debt sometime in the last year,” according to CIBC’s latest consumer debt poll, released Monday.

And while 62 per cent of those making extra payments directed those funds to credit card balances, followed by 46 per cent for line of credit, only 22 per cent of respondents used that extra money to speed up the pace of mortgage repayment.

That kind of priority list backs up broker concerns about credit card debt and the challenge it poses Canadian households. They worry the federal banking regulator has erred in focusing on mortgage lending rules instead of tightening up underwriting standards for credit card lending.

Last week the Official Opposition joined mortgage broker associations in voicing concerns around key aspects of OSFI’s proposed guideline, specifically re-qualifying requirements for renewing mortgagors.
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"We just need to make sure that people are protected in some of these temporary situations (where they may have lost a job),” said Peggy Nash, the federal NDP’s finance critic, “if they have a good credit record and have never had a problem making their payment."
OSFI has floated the idea of forcing mortgage-holders to re-qualify at renewal, although exactly what that involves remains unclear.
Broker, and their professional associations,were among the first to balk at the suggestion, arguing it could create the kind of market crisis the proposals aim to overt.
Nash appears to agree, with her party most worried Canadians temporarily out of work could possibly lose their homes. She’s asking the Harper government to back off.
OSFI has suggested it has little intention of backing down, Its manager of policy developing expressing concern about the country’s ability to meet a significant housing correction head on.
“Are the banks equipped to handle a 40 percent drop (in property values)?” writes Vlasios Melessanakis, the manager of policy development for the Office of the Superintendent of Financial Institutions, in an internal document responding to broker Rob McLister and an article posted to his website in March.
"Canada is not immune. Just because nothing happened in Canada in 2008 (a U.S.-centered crisis), does not mean that Canada is not vulnerable to a housing correction now.”