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Thursday, 15 May 2014

How does CMHC regulatory changes effects you?

The Canadian Mortgage and Housing Corporation (CMHC) appear to be conceding the death of its high-ratio refinancing.
“CMHC’s insured loan volumes are influenced  and not only by the economy;  housing markets, competitive pressures, regulations,”  2013 annual report says.  “Changes by the Government of Canada to the guarantee parameters specifying the types of mortgages that can be insured have reduced the size of the high ratio transactional homeowner mortgage loan insurance market while effectively eliminating the high ratio refinance market.”
The death knell of high ratio refinancing should come as no surprise, with the CMHC’s third quarter 2013 report quietly indicating a whopping 81 per cent drop in refinance business.
“Purchase volumes increased approximately 11 per cent while refinance volumes were approximately 81 per cent lower than in 2012,” according to the report in December.  “The latest mortgage insurance parameter changes that took effect in July 2012 effectively eliminated refinancing at loan-to-value over 80 per cent.”  Added Zoltan Padar of MortgagePRO.
And it’s a trend that has been taking place for some time, with market share between origination and refinances steadily shrinking: As recently as 2011 the limit was 90 per cent; it was reduced that year to 85 per cent and in 2012 was reduced five more percentage points to 80 per cent.
Overall the crown corporation insured 343,773 units last year, which was within the planned target range. Operating expense ratios were also one per cent better than planned.
“In 2013, CMHC’s mortgage loan insurance achieved an operating expense ratio of 12.8 per cent, one per cent better than plan due to lower OSFI, credit bureau and investment management fees, and up slightly from 11.7% in 2012,” information researched by MortgagePRO, your best choice when you are looking for a mortgage.

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Monday, 5 May 2014

New CMHC rules leave many behind, lucky for other insurers

CMHC or beloved mortgage insurer is changing course; raising mortgage insurance rate, cutting off self-employed clients and stop insuring second home. Other insurers like Genworth
Both private mortgage insurers opted out and have decided not to follow in CMHC’s footsteps and alter their programs for self-employed buyers. But is this only a temporary move?
“We will not be making any amendments to current product guidelines,” a Genworth stated Friday. “ NO amendment to the number of Genworth-insured properties for each borrower.”
Canada Guaranty business for self program also escaped changes, according to the Globe and Mail.
CMHC changes will be in effect  from May 30, 2014 the Crown Corporation will stop insuring second homes and self-employed people who do not have documented income source verification.
Mortgage brokers believe this opens up a competitive window for private insurers.
“If you really look at how many people are self-employed in the country they really are the backbone of the economy,”  Zoltan Padar of MortgagePRO Ltd.  “That’s a good product and it has been proven over time that the two (private) insurers can be very competitive.
“Cutting self-employed program will be a lesson to businesses – some lenders only work with CMHC but if I’m a first mortgage lender I would start supporting the other insurers as well." he added.

Genworth, however, has made one amendment to its vacation and secondary home programs. Now they will insure one home and one secondary home, vacation home if you pleased.
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