Thurs Post #1: The assault on Ottawa begins: CAAMP launches winter lobbying

You can imagine how hard it is for real estate agents right now as they deal with clients who have their home on the market.

Sellers have expectations skewed by a housing boom driven by almost 35 years of of unprecedented debt expansion, a boom which has gone parabolic in the last decade.

Declining prices?  Bite your tongue.

You can just imagine the conversations as agents patiently explain to perplexed sellers that November sales figures are 30.3% below the 10 year average. You just know those sellers aren't receptive to suggestions they should 'adjust their expectations' or 'price their home for the current market.'

So what to do?

Pull the listing, of course.

Massive inventory will be blamed (triggered by those repressive mortgage changes) and the industry associations are almost promoting the factors now.

It's leading to headings like yesterday's in the Province newspaper:Vancouver homeowners pulling properties off the market rather than settle for lower prices.

The free-falling Vancouver housing market shows no signs of reversing its slide with the latest figures showing November sales 30.3% below the 10-year average for the month.

The Real Estate Board of Greater Vancouver now says consumers have begun pulling their homes off the market rather than settle for a lower prices in what is still the country’s most expensive market to buy a home... Home sellers appear more inclined to remove their properties from the market today rather than lower prices to sell their properties.

Toss in supporting articles by industry 'experts' about how prices simply 'won't be coming down' and you can see the framework for yet another cunning media campaign to mould the mindset of homebuyers and particularly sellers.

"Everyone else is pulling their listing and not accepting less... why wouldn't you if you believe it's 'worth this much?"

But the clock is ticking on that strategy.  Come Spring those removed listings will come flooding back with a vengence with sellers anxiously expecting the market to have recovered.

But as we outlined yesterday, there is no government rescue plan being implemented which will facilitate a Spring recovery.

Yet.

Which is why CAAMP (the Canadian Association of Accredited Mortgage Professionals) is wheeling into action :

CAAMP leadership will be talking to bureaucrats and politicians in Ottawa early next week in yet another effort to raise the red flag on tighter mortgage and lending regimes.

“Our Chair, I and our chief economist will have a series of meetings in Ottawa on Wednesday with both public servants and politicians to discuss the findings of our most recent research,” Jim Murphy, president and CEO of CAAMP said. “We will obviously discuss the government’s recent changes along with the need to maintain a healthy housing and mortgage industry in Canada.” 

And what is that 'recent research'?

Last month, CAAMP released its Annual State of the Residential Mortgage Market in Canada report.

They produced surveys which indicated that most Canadians are dealing with the largest level of debt in history very well, thank you.

They have been handling their debts and paying down their mortgages “comfortably.”

More significantly the report raised concerns that the mortgage rule revamp implemented by the government has shut out many first time homebuyers from the market and caused a drop in housing market activity.

[Which is exactly what they were supposed to do]

(There) is a sentiment shared by many brokers who argue that the mortgage rule changes were ill-timed since the hot housing market was already moving towards a price correction.

Mortgage professionals also warned of a possible snowball effect wherein a reduction in activity at the entry level will create difficulty for those who wish to sell their homes and move up in the market, creating a slowdown in upper segments of the housing market as well.

“Our concern today is the number of growing first-time buyers who are now unable to get a mortgage. We worry that this is having a dampening effect on what was already a cooling market, we hope policymakers will give some thought to addressing the needs of this key sector.”

CAAMP is desperate to lobby government to make changes before the Spring market rolls around.  And the organization no doubt feels their chances may have improved with the looming departure of Bank of Canada Governor Mark Carney.

I suspect next week's efforts will be the first of a Winter long offensive.

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Thurs Post #1: Interesting Times

The third week of June, 2012 is rapidly turning into 'the week that was'.

Will we look back at this as a major turning point in our housing bubble?

It started off with the Vancouver Sun outlining upcoming changes for CMHC mortgages by the OSFI. A barrage of negativity hits the mainstream media telling people to prepare for changes like:

• Home Equity Line of Credit mortgages reduced from 80% financing to 65% financing.

• Lines of credit to be either amortized, or amortized after a specified period of time.

• More stringent income requirements for self-employed borrowers.

• All mortgages to be reviewed upon renewal (currently as long as payments are made, it is unlikely for a bank not to offer a renewal to a client).

• Funds from cashback mortgages are not allowed as a source of down payment

• Use of the five-year posted “benchmark” to qualify uninsured terms of one to four years and all variable terms (currently most lenders use a three-year posted or a lower rate to qualify uninsured mortgage).

• More limits on underwriting exceptions.

• Home insurance to be included in debt-servicing ratios (it is currently not included.)

• More public disclosure of statistics pertaining to institutions’ mortgage practices.

• More accountability from management to ensure lenders are adhering to their underwriting guidelines.

Egads.

These measures being discussed in the media are, by themselves, enough to create a stir. But that was just primer for the next round.

Canadian Mortgage Trends fired off a tweet earlier today which proclaimed: "What the industry didn't want to happen, happened"

And what are they referring to? What is the dire news they didn't want to happen?

CMT announced that the former No. 1 lender in the mortgage broker market announced that they are closing their doors to new business as of July 31, 2012.

FirstLine, a broker lending subsidiary division of CIBC, was put up for sale earlier this year but a deal could not be closed.

A source familiar with the discussions told CMT: “The buyer struggled to come to a deal that made sense so CIBC chose to let FirstLine die a natural death on its own."

This was a development CMT says marks "a moment of truth for the broker market."

But if that weren't enough, press reports last night confirmed what we alluded to yesterday. Specifically Ottawa is tightening up on mortgage rules.

"The country’s biggest banks were caught off guard on Wednesday night as the Department of Finance prepared to clamp down on mortgages by reducing the maximum amortization for a government-insured mortgage to 25 years from 30.

Ottawa will also limit the amount of equity that can be borrowed against a home to 80 per cent of the property’s value, down from 85 per cent.

Ottawa will announce two other changes, according to a source. It will no longer allow high-ratio mortgages over $1-million, and it will cap the gross debt service (which looks at a consumer’s total debt payments as a percentage of their income) at 39 per cent.”

The third week of June 2012.

I suspect we will be looking back on this as a significant signpost on the road that was the Canadian Housing Bubble.

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New Mortgage Rules as explained on Global TV

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