More Changes from CMHC

[TimLacroix]

CMHC has announced some more changes... More CMHC Changes (http://cgymortgage.com/blog/More+changes+from+CMHC)

Effective July 31 CMHC will:

1- not be providing mortgage insurance for homes that are worth $1 million or more.

2- implemented a maximum amortization period of 25 years on all mortgages (including conventional mortgage - more than 20% down payment/ equity)

3- no longer offer mortgage insurance to condo developers.
NOTE: This change will not affect homebuyers wanting to purchase a condo.

More CMHC Changes (http://cgymortgage.com/blog/More+changes+from+CMHC)

[BerserkerCatSplat]

Originally posted by TimLacroix

2- implemented a maximum amortization period of 25 years on all mortgages (including conventional mortgage - more than 20% down payment/ equity)


Wasn't this already the case for CMHC-backed mortgages?

[dr_jared88]

I have to say I support all of this. The whole point of CMHC is to help people get into the housing market. As a tax payer I don't believe I should be supporting insurance on condo builders or people buying million dollar houses.

[Disoblige]

^^word.
Makes sense on all of these changes.
I support.

[TimLacroix]

Originally posted by BerserkerCatSplat


Wasn't this already the case for CMHC-backed mortgages?

Correct, the maximum amortization for insured mortgages (less than 20%) is 25 years. They have not changed this to 25 years for all mortgages with CMHC.

Genworth and Canada Guaranty have not made these changes and have no plans to do so in the near future.

[flipstah]

I didn't even think million $ houses were eligible for CMHC haha. I thought there was a price ceiling for the 5% down option.

[dirtsniffer]

Originally posted by dr_jared88
I have to say I support all of this. The whole point of CMHC is to help people get into the housing market. As a tax payer I don't believe I should be supporting insurance on condo builders or people buying million dollar houses.
you think you support CMHC? you are crazy

[TimLacroix]

Originally posted by flipstah
I didn't even think million $ houses were eligible for CMHC haha. I thought there was a price ceiling for the 5% down option.

There was a maximums or restrictions for mortgages over a $1M... each lender is different

But in general there is a sliding scale for Home Purchases over $1M. The better of the scales is 80% on the first $1M and 50% on the balance.

Example: $2M purchase would be $800,000 + $500,000 = $1.3M mortgage.
NOTE: There are exceptions to this rule but it is a general guideline. The exceptions come depending on the overall strength of the clients income, networth, etc.

[Xtrema]

1 is still too high. Knock another 30% off that is where CMHC should play.


Originally posted by dirtsniffer

you think you support CMHC? you are crazy

Until CMHC stop being a government corporation, we support it and has to bail it out when it fails.

[BerserkerCatSplat]

Originally posted by Xtrema

Until CMHC stop being a government corporation, we support it and has to bail it out when it fails.

Hasn't CMHC been consistently profitable? It seems to be generating money for the country, not sucking up taxpayer dollars.

I agree that $1M is still too high, $750K max IMO.

[dirtsniffer]

Originally posted by Xtrema


Until CMHC stop being a government corporation, we support it and has to bail it out when it fails.

Uhh, pretty sure CMCH generates about 1 billion a year for the country.

[Xtrema]

Originally posted by BerserkerCatSplat


Hasn't CMHC been consistently profitable? It seems to be generating money for the country, not sucking up taxpayer dollars.

I agree that $1M is still too high, $750K max IMO.

So a profitable organization will never, ever go bankrupt in human history?


Originally posted by dirtsniffer


Uhh, pretty sure CMCH generates about 1 billion a year for the country.

Off $562B of coverage.

I don't think I have to tell you what happen if we go thru a US style adjustment.

[CapnCrunch]

Originally posted by Xtrema


So a profitable organization will never, ever go bankrupt in human history?



Off $562B of coverage.

A 15% adjustment of the market will wipe out 84 years of profit from CMHC.

A 15% adjustment won't do a thing to CMHC unless you assume that every single insured mortgage will suddenly default.

The US market dropped 30% and didn't even hit a 3% default rate.

Take your head out of your ass.

[Xtrema]

Originally posted by CapnCrunch


A 15% adjustment won't do a thing to CMHC unless you assume that every single insured mortgage will suddenly default.

The US market dropped 30% and didn't even hit a 3% default rate.

Take your head out of your ass.

So 17 years?

Don't get me wrong, I think CMHC should exist. And it's a great organization to have when interest was in 7-8% and help people build equity starting out.

Now, in this heated market, we should scale back it's exposure. It doesn't directly contribute to the bubble but it's not stopping it either.

If a house averages @ $500K, $700K is still 40% above average and reasonable. Not $1M.

[ercchry]

i also want to say if you default, cmhc will still try and collect from you

[BerserkerCatSplat]

Originally posted by ercchry
i also want to say if you default, cmhc will still try and collect from you

Exactly, CMHC isn't some get-out-of-jail-free card. It does essentially nothing for the buyer but allow them to qualify for a mortgage earlier than usual - it insures the bank, not the homeowner.

[CapnCrunch]

Originally posted by Xtrema


So 17 years?

I'd prefer it if you took it out of your ass now, but I'll accept 17 years.

[Xtrema]

Originally posted by BerserkerCatSplat


Exactly, CMHC isn't some get-out-of-jail-free card. It does essentially nothing for the buyer but allow them to qualify for a mortgage earlier than usual - it insures the bank, not the homeowner.

You can't squeeze blood out of stone. If someone defaults, he's on the streets and living off other social programs. CMHC will never see a dime.

[BerserkerCatSplat]

Originally posted by Xtrema


You can't squeeze blood out of stone. If someone defaults, he's on the streets and living off other social programs. CMHC will never see a dime.

CMHC would only try to recover the difference between sale price and outstanding loan, they're not out the entire mortgage value. That's no different than how it works with a mortgage where the CMHC is uninvolved.

[Xtrema]

Originally posted by BerserkerCatSplat


CMHC would only try to recover the difference between sale price and outstanding loan, they're not out the entire mortgage value. That's no different than how it works with a mortgage where the CMHC is uninvolved.

I think we went down this road many times before and in many threads. The risk isn't a random Joe lost their jobs and defaults. The risk is a huge 2008 style recession and we have no more tools to get of it and have European style unemployment rate which lead to massive amount of defaults.

The sale price and the outstanding loans gap will widen as problem cascades. Pushing CMHC and Canadian government further into debt, loan rating degraded, interests increases.

[BerserkerCatSplat]

Originally posted by Xtrema


I think we went down this road many times before and in many threads. The risk isn't a random Joe lost their jobs and defaults. The risk is a huge 2008 style recession and we have no more tools to get of it and have European style unemployment rate which lead to massive amount of defaults.

The sale price and the outstanding loans gap will widen as problem cascades. Pushing CMHC and Canadian government further into debt, loan rating degraded, interests increases.

In the States, they had far riskier mortgages and lending practices, a massive recession, and yet default rates were far from disastrous. What makes you think Canada is at the brink on an even worse situation, considering our much tighter mortgage and lending rules?

[Xtrema]

Originally posted by BerserkerCatSplat


In the States, they had far riskier mortgages and lending practices, a massive recession, and yet default rates were far from disastrous. What makes you think Canada is at the brink on an even worse situation, considering our much tighter mortgage and lending rules?

You don't skip on condoms because HIV infection rate is low and the disease is manageable.

I'm not saying skip sex all together, but let's lower the exposure. There is no reason for CMHC to cover over average prices of homes in an particular area.

Last I check, family of 4 can survived in a $400K, 1200 sqft apartment. That's CMHC's goal. Anything above that is just luxury and why is a crown corp supporting luxury.

[dirtsniffer]

To make more money?

[Sugarphreak]

...

[rage2]

Realistically CMHC should have a different max for different regions. $1M here will buy you a mansion but in Vancouver you'll barely get a shack. Drop it down to 750k might be good for Calgary, but you'll still have a mansion in Winnipeg.

[BerserkerCatSplat]

Originally posted by Xtrema


You don't skip on condoms because HIV infection rate is low and the disease is manageable.

I'm not saying skip sex all together, but let's lower the exposure. There is no reason for CMHC to cover over average prices of homes in an particular area.

Last I check, family of 4 can survived in a $400K, 1200 sqft apartment. That's CMHC's goal. Anything above that is just luxury and why is a crown corp supporting luxury.

I'm not arguing about the cap rate, I agree it needs to be matched to average housing price rather than an arbitrary $1M, I just disagree with your assertion it should not be a government entity and will need bailing out at some point.



Originally posted by Sugarphreak
I hate CMHC... I made sure to save 20% minimum for all of my homes so I wouldn't have to pay that fucking BS fee... All it does is take a huge chunk of money from people and put it in government hands. Here is a crazy idea... Banks should take the risk themselves.... If somebody is high risk, don't lend them money, dur....

It is just stupid that CMHC takes the risk, while the banks still make a big profit on the product.

So the CHMC takes a fee in exchange for taking on what the banks view as unacceptable risk, profits a billion dollars a year for doing it, and that's a problem? Nobody is forcing anyone into a CMHC-backed mortgage - if it didn't exist those people wouldn't get a mortgage at all, but they agree to pay a fee to qualify for a mortgage sooner. That's a personal choice, and as you've demonstrated it's not one that everyone needs to make.


:dunno:

[Sugarphreak]

...

[ercchry]

Originally posted by Sugarphreak


I disagree, the banks would lend to home owners with a reasonable credit history regardless of amount down. Those people are the ones with the highest interest rates, and basically make them the most money. Even if they default, the bank gets the house. It is bread & butter, becides more rewards justifies more risk.

If somebody is too risky to lend money to, then don't.

Also AFAIK you are absolutely forced to get your mortgage backed for thousands of dollars on top if you don't have 20% down.

but you have to remember, it takes time to build up assets and credit history, if it wasnt for cmhc i would not be where i am today. 5% down is 4x more leverage than 20% down which results in an awesome ROI when young since you dont care if you have roommates or not, if you meet a pretty lady with a house too, then instant rental property at a young age also... basically a great kickstart to life

[Sugarphreak]

...

[CapnCrunch]

Originally posted by Sugarphreak


I disagree, the banks would lend to home owners with a reasonable credit history regardless of amount down. Those people are the ones with the highest interest rates, and basically make them the most money. Even if they default, the bank gets the house. It is bread & butter, becides more rewards justifies more risk.

If somebody is too risky to lend money to, then don't.

The current system is like if I started leveraging money on the stock market... and the government agreed to back only my penny stocks, but not blue chips. Fuck yeah, I'd be carelessly throwing money at stocks looking for a win... if I loose the money, who cares, the government would just say "Oh you poor thing, here is your money back". Maximum reward, no risk... what a deal!


Also AFAIK you are absolutely forced to get your mortgage backed for thousands of dollars on top if you don't have 20% down.

I disagree with you. I think if it wasn't for the CMHC, the banks would have gotten in deep just like the USA did with subprime mortgages and we would have suffered a similar meltdown.

It's narrow minded to only look at it from the risk side of things, and completely ignore the fact that the CMHC effectively regulates our entire mortgage industry. You can't seriously look at the USA mortgage banking industry and think to yourself "Yeah, they've got it all figured out".

It also takes a billion dollars a year off of the tax burden that lower income people, who can't afford to buy, would have to pitch in for.

[ercchry]

Originally posted by Sugarphreak


Not true at all... if there was no CMHC you wouldn't have to pay the thousands of dollars for the coverage, and at worst your interest rate might be a touch higher.

I am pretty confident the bank would still give you a mortgage and enjoy making tons of money off of you.


CMHC has probably made you worse off in the long run

but the bank would have wanted 4x the down payment... b-lender 7x...l which is a shitty ROI

no bank would take the risk of 5% down

[Sugarphreak]

...

[ercchry]

Originally posted by Sugarphreak


Which might not be such a bad thing, I don't agree that people can go out and buy a house with basically zero down.

think of it as trading on margin vs a cash account ;)

but thats why im saying its a great kickstart in life... only if you are producing revenue from it of course, if you are going to go the old house poor route, then yeah, you are fucked for the next 10+ years

[blownz]

High leverage is only good when values keep going up. And they won't always go up. Housing has roughly doubled in the last 10-12 years in Calgary and Edmonton while average wages have not doubled. That can't go on forever. And when it doesn't, those with little virtually no down payment will have a hard time sleeping at night. Not to mention interest rates will eventually go up and for people leveraged too much that combined with even a 5-10% drop in home prices could pose big problems.

I know a few people who work at banks and when they get someone in with say 25% downpayment and the bank is concerned they are too risky to lend to, they coach the person to only put 15% down to keep the extra cash for renos/trips/emergency so they will get CMHC insurance so the bank has no risk. They will often even tell those people that they can give them a better mortgage rate that will offset the insurance premium.

This is basically the same as what the banks did in the US. Give mortgages to people they don't think should have them and then offload the risk.

Don't get me wrong, I don't think we are going to have a US style crash, but I do think risky lending has been excessive and there are a lot of mortgage brokers out there that are definitely not looking out for the best interest of the banks or the borrowers, just their commission. I like that CMHC has been making changes. Let the other mortgage insurance companies take that risk.