If there ever was a word to describe the mortgage industry it would be ‘change’ and it seems this is the new norm. From the government, to the banks and lenders to the telecom companies, the mortgage world is changing at an ever increasing pace.
As anyone who’s gotten a mortgage since 2009, you will know that the government has made painstaking changes to the rules since that time, on an annual basis. From direct changes within Canada Mortgage and Housing Corp (CMHC) to making back end changes with the ‘Office of the Superintendant of Financial Institutions Canada’ (OFSI), Finance Minister Jim Flaherty has had his hands all over the banking world to protect our economy from bad mortgages. Do I agree with his sweeping changes? Some, but most are over reaching. Globally, our economy has one of the lowest default mortgage rates on the planet at less than half a per cent, while the westernized world sits closer to double or triple that amount. This tells us that we have an extremely strong housing economy, and that Canadians can afford their homes. I do understand preparing (in the governments world it’s more of forcing) consumers to be prepared for the eventuality that rates are going to rise. It still amazes me that people ask, do you really think rates will go back to the 5-6% range? It’s not a matter of ‘if’ it’s a matter of ‘when’.
Lenders have had a tough go here, not that anyone really feels sorry for banks and lenders, but they have been forced to take almost all risk out of their portfolios, making it more difficult to be profitable and competitive. It makes sense to be prudent in your under writing guidelines, but what the government has done is made some rules so tight on seemingly non-existent issues that the lenders now have to fight to get exceptions on. Exceptions are a tough game for everyone involved, from the mortgage professional requesting, to the underwriter at the bank asking the mortgage insurers to grant one can be a time consuming nightmare. And with more rule tightening comes more exceptions slowing down the entire process for everyone involved.
Here’s one of the stranger ones. Credit bureau agencies are merely reporting agencies – that’s it. It is that simple, but there is a perceived notion out there that it’s the credit bureaus that are the bad guys. Well ‘tis not so. Banks, lenders, finance companies, credit unions, collection agencies and most credit providing companies along with the government report their consumers’ history of payment, balance and timeline of the consumers’ granted loan/line of credit or whatever credit history to the credit bureau. In the summer of 2012, I remember posting that mobile phone companies were reporting their consumer’s payment history to the credit bureau which was only for a couple of months, it strangely resembled a mere glitch in the reporting system as they went away, until this past July. So today, a normal credit bureau has your phone company reporting your payment history to the credit bureaus, and they can affect credit scores drastically as we humans didn’t really pay that much attention to them. Well, now more than ever, your phone paying history is affecting your mortgage qualifications.
There’s nothing wrong with change, as humans we’ve altered the earth so much because of change that it’s become a normality in our way of living – it’s just that we were never used to so much so often in the lending world ever before that it sometimes it catches you off guard, and all we can do is prepare for the eventuality of more.
Jean-Guy Turcotte is a mortgage broker with Dominion Lending Centres-Regional Mortgage Group.