Real Estate

The Official Mortgage Rates Thread

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Aug 8, 2012
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boyohboy wrote:
valuemortgage wrote: The majority of monoline lenders insure all their mortgages, while banks dont always do that to low ratio mortgages. Technically speaking, lenders could still offer 30y amortization and qualify on the contract rate (as opposed to the stress test rate) those conventional deals, but in real life, monoline lenders simply cant do that as they must insure those mortgages. This could potentially create a scenario where banks could benefit from the new regulations, as a large portion of the market could now have very little competition, if indeed monoline lenders cant compete. For instance, monoline lenders could still keep operating just like they do now, but they would always have to enforce those rules (max 25y amortization, qualifying on the 4.64% rate, etc) while clients that needed/wanted 30y amortization and a lower qualifying rate could still get those mortgages with the banks, if the banks were willing to keep those loans in their books and uninsured.
As mentioned before, it is too early to see the full effect these new rules will have. At this point, it is all speculation.
Why must monoline lenders insure the loans while banks can do either way?
It's not a matter of "must" or not. It's a choice.

They must meet regulations though (for capital ratios, etc).

So a bank with billions of customer deposits can keep a mortgage in-house funding it internally, while a non-bank without access to funds wants to originate the mortgage and then package them off and resell them (MBS = mortgage-backed securities).

If those mortgages are insured they are a safe investment and easy to sell, if they are uninsured who wants them? LOL
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ace604 wrote: It's not a matter of "must" or not. It's a choice.

They must meet regulations though (for capital ratios, etc).

So a bank with billions of customer deposits can keep a mortgage in-house funding it internally, while a non-bank without access to funds wants to originate the mortgage and then package them off and resell them (MBS = mortgage-backed securities).

If those mortgages are insured they are a safe investment and easy to sell, if they are uninsured who wants them? LOL
Beat me to it! You're right, companies like First National (FN) don't actually have to insure their loans, they just do because it reduces their cost of funding and reduces the risk they carry on their balance sheet. Banks don't have to do it as much because their deposit taking business supports their capital position.

Andre was spot on in his comment: non-bank lenders will suffer because of these rules and that will cause all of us stress (less competition = higher rates). If anyone doesn't believe that these rules will have a severe impact, go have a look at FN and Genworth (MIC) stock prices since the announcement: they are getting pounded. Incidentally, RBC put out a research note and one of their conclusions was that "these changes could see mortgage industry originations decline by 12.5% and mortgage loan growth slow to +2.3% (from +6.0% today)". Choke off the funding which in part is fueling the housing market and you'll certainly cool it off.
Nikola Alaica, CPA, CA | Tax, Accounting, Mortgages
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Okay, this is long overdue but I just want to say thanks to valuemortgage (Andre) for helping us get our first mortgage setup back in April. He was super awesome to deal with and very easy to talk to and answer all my questions. Really made the first time home buying experience less stressful. I would not hesitate to use him again once our term is up. Thanks again Andre!
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RSXPrem wrote: Okay, this is long overdue but I just want to say thanks to valuemortgage (Andre) for helping us get our first mortgage setup back in April. He was super awesome to deal with and very easy to talk to and answer all my questions. Really made the first time home buying experience less stressful. I would not hesitate to use him again once our term is up. Thanks again Andre!
Thanks for your kind words. It was a pleasure working with you.
Andre Oliveira - Mortgage Agent at Valuemortgage
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ace604 wrote:
PaulMeredith wrote:
ace604 wrote:

How is that the case at all when the rule applies to all insured mortgages?
I was referring to conventional mortgages (20% or more down payment). On high-ratio mortgages it applies to all lenders equally.
Poor choice of words? The rule applies to everyone equally and they all have to follow the rule.

Do you mean perhaps "banks can avoid the new rule by choosing to not insure a low-ratio mortgage"?

That is very different than saying that "banks don't have to follow the new rule"
No, I meant it exactly as I said it. Banks do not insure their conventional (low ratio) mortgages and the new rules apply to insured mortgages.

As mentioned before, it's a little early to tell exactly what the banks are going to do. All anyone can do at this point is speculate.
Paul Meredith
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OK, these new rules have really thrown me for a loop. My existing mortgage comes up for renewal in may. I had planned on refinancing at 80 LTV. The property is a rental triplex. Now I'm hearing that some lenders are no longer willing to do this. I have one lender that might still. In my situation would you break your mortgage and pay a penalty worth $3k to get the 80% refinance today or wait to see how it all plays out? I'm worried that in may rates will be higher and lenders might no longer want to finance the deal.....
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PaulMeredith wrote:
ace604 wrote:
PaulMeredith wrote:
I was referring to conventional mortgages (20% or more down payment). On high-ratio mortgages it applies to all lenders equally.
Poor choice of words? The rule applies to everyone equally and they all have to follow the rule.

Do you mean perhaps "banks can avoid the new rule by choosing to not insure a low-ratio mortgage"?

That is very different than saying that "banks don't have to follow the new rule"
No, I meant it exactly as I said it. Banks do not insure their conventional (low ratio) mortgages and the new rules apply to insured mortgages.

As mentioned before, it's a little early to tell exactly what the banks are going to do. All anyone can do at this point is speculate.
It's not accurate at all to blanket-statement say "banks do not insure their low-ratio mortgages"
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This Dec. 2015 report at the bank of canada: http://www.bankofcanada.ca/wp-content/u ... mordel.pdf
shows $424B in mortgage-backed securities in Canada, $305B of which are from the big-6 banks.
(see "box 1" on page 3 of the PDF, page "41" of the report)

Are you suggesting that all $305B of that is high-ratio?
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http://www.fin.gc.ca/n16/data/16-117_2-eng.asp
Changes to Low-Ratio Mortgage Insurance Eligibility Requirements
The Government also announced today changes to the eligibility rules for newly insured low-ratio government-backed insured mortgages. These new eligibility criteria will help target the funding support provided by government-backed low-ratio mortgage insurance towards safer forms of lending.

Effective November 30, 2016, mortgage loans that lenders insure using portfolio insurance and other discretionary low loan-to-value ratio mortgage insurance must meet the eligibility criteria that previously only applied to high-ratio insured mortgages. New criteria for low-ratio mortgages to be insured will include the following requirements:

A loan whose purpose includes the purchase of a property or subsequent renewal of such a loan;
A maximum amortization length of 25 years;
A maximum property purchase price below $1,000,000 at the time the loan is approved;
For variable-rate loans that allow fluctuations in the amortization period, loan payments that are recalculated at least once every five years to conform to the original amortization schedule;
A minimum credit score of 600 at the time the loan is approved;
A maximum Gross Debt Service ratio of 39 per cent and a maximum Total Debt Service ratio of 44 per cent at the time the loan is approved, calculated by applying the greater of the mortgage contract rate or the Bank of Canada conventional five-year fixed posted rate; and,
A property that will be owner-occupied.
These changes will apply to low-ratio mortgage loans insured on November 30, 2016 or later. Low-ratio loans for which mortgage insurance applications were submitted prior to October 3, 2016 will not be affected. These new criteria will also not apply to loans for which mortgage insurance applications were submitted between October 3, 2016 and November 30, 2016, provided that the loans are insured by November 30, 2016.
What is low portfolio insurance? insurance small lender uses?
And what about mortgages on property over 1M for small lenders? They won't be able to insure it thus won't want to offer it?

This means lenders can only offer uninsured conventional mortgages on properties over 1m?
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silvermist99 wrote: http://www.fin.gc.ca/n16/data/16-117_2-eng.asp
Changes to Low-Ratio Mortgage Insurance Eligibility Requirements
The Government also announced today changes to the eligibility rules for newly insured low-ratio government-backed insured mortgages. These new eligibility criteria will help target the funding support provided by government-backed low-ratio mortgage insurance towards safer forms of lending.

Effective November 30, 2016, mortgage loans that lenders insure using portfolio insurance and other discretionary low loan-to-value ratio mortgage insurance must meet the eligibility criteria that previously only applied to high-ratio insured mortgages. New criteria for low-ratio mortgages to be insured will include the following requirements:

A loan whose purpose includes the purchase of a property or subsequent renewal of such a loan;
A maximum amortization length of 25 years;
A maximum property purchase price below $1,000,000 at the time the loan is approved;
For variable-rate loans that allow fluctuations in the amortization period, loan payments that are recalculated at least once every five years to conform to the original amortization schedule;
A minimum credit score of 600 at the time the loan is approved;
A maximum Gross Debt Service ratio of 39 per cent and a maximum Total Debt Service ratio of 44 per cent at the time the loan is approved, calculated by applying the greater of the mortgage contract rate or the Bank of Canada conventional five-year fixed posted rate; and,
A property that will be owner-occupied.
These changes will apply to low-ratio mortgage loans insured on November 30, 2016 or later. Low-ratio loans for which mortgage insurance applications were submitted prior to October 3, 2016 will not be affected. These new criteria will also not apply to loans for which mortgage insurance applications were submitted between October 3, 2016 and November 30, 2016, provided that the loans are insured by November 30, 2016.
What is low portfolio insurance? insurance small lender uses?
And what about mortgages on property over 1M for small lenders? They won't be able to insure it thus won't want to offer it?

This means lenders can only offer uninsured conventional mortgages on properties over 1m?
Most non-bank lenders insure all their mortgages (through CMHC, Genworth, or Canada Guaranty), regardless of how much you have available for down payment. Big banks and credit unions do not (in the vast majority of the mortgages they issue) providing the mortgage is conventional (meaning 20% or more down payment or equity). Most non-bank lenders do not deal in mortgages over $1MM, however there are some that will make exceptions... as long as it's not too much over a million. Anything over $1.3MM is really pushing it with a non-bank lender. Like I said, most don't exceed $1MM.

Some of these 'small lenders' are actually quite large. Also, some of these small lenders are also quite large. Industrial Alliance is a publicly traded company that has been around for over 133 years and has over 5,000 employees across Canada. They currently have over $150 billion in assets under their management. RMG Mortgages is owned by the much larger MCAP who is owned by BMO. MCAP currently has $53 billion in assets under their management. First National has a larger mortgage portfolio than National Bank and is a little less than BMO with over $90 billion in assets under administration.
Paul Meredith
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PaulMeredith wrote: While these new mortgage regulations start to take effect on October 17th, this does not necessarily mean you have until this time to submit applications. It would not surprise me at all if lenders started to cut off new applications for current regulations sooner than that. It's definitely happened before in this industry, and I can see it happening again here.

Another thing worth mentioning is that no one really knows what kind of an impact this will have at this point. Some lenders have not yet commented. Others have said that they are reviewing and will get back to us in a few days. Banks don't have to follow thees new rules, but that doesn't necessarily mean that they won't. No one knows for sure at this time. All we can do is wait and see.
Some bulk insurers have already discontinued their rental program.
Kevin Somnauth, CFA
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There are products that monline lenders do not bulk insure. It would be interesting to see if they expand this to remain competitive.
Kevin Somnauth, CFA
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So, Mcap just announced that they will add a hefty surcharge to their rates, as a result of these new regulations. Refinances after Nov 30th will be limited to 25y amortization, and the rate will be increased by 0.15%! Other transactions, when the client requests an amortization past 25y, will be subject to a 0.10% surcharge on the interest rate.
Andre Oliveira - Mortgage Agent at Valuemortgage
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valuemortgage wrote: So, Mcap just announced that they will add a hefty surcharge to their rates, as a result of these new regulations. Refinances after Nov 30th will be limited to 25y amortization, and the rate will be increased by 0.15%! Other transactions, when the client requests an amortization past 25y, will be subject to a 0.10% surcharge on the interest rate.
Including all fixed years and variable?

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