Mortgage Industry Regulation has Changed

 The Federal Government has changed regulations that affect the mortgage  industry.  On Monday 17 January, 2011 Finance Minister Jim Flaherty announced new rules that will:

 1.)    Reduce the amortization to 30 years from 35 years for government backed insured mortgages.  This amount was previously reduced from 40 years to 35 years in April 2010.

2.)    Ottawa will lower the maximum amount that Canadians can borrow when refinancing their mortgage to 85% from 90% of the value of their home.  15% equity in the home will be required for government backed insured mortgages.

3.)    Ottawa will withdraw government insurance backing on lines of credit secured by homes.

 These new rules do little to address the growing consumer balances of credit card debt or the loosely regulated auto finance industry.  Particularly troubling is the increased equity required for a home refinance.  While household financial prudence should be encouraged, this legislation may hurt many Canadian households.  To note would be the households who secured a mortgage within the last 4 years with a lender that is no longer in the business.  Lenders such as Xceed Mortgage Corp, Wells Fargo, N-Brook, Accredited Home Lenders, GMAC, GE Money and Household Finance to name a few.

 These households find themselves with an “orphaned” mortgage because their lender is no longer doing business in Canada and they are not being given a renewal option by the lender.  Under these new mortgage rules, this household now needs 15% equity in order to find a new mortgage lender.  Therefore the options available to them are; to put money down in order to refinance (and keep their home), sell the home or face foreclosure.  This portion of the mortgage market may notice the mortgage changes the greatest.

 Mr. Flaherty said at a new conference in Ottawa that the new measures will encourage Canadians to save more though home ownership and will reduce the exposure of Canadians to financial risks.

 If you have any questions about the information contained in the release, please do not hesitate to call Martin Krell – your Prince George Mortgage Broker at: 250-562-8622.