30 Apr

CMHC cutting back on what it covers with mortgage default insurance

General

Posted by: Jaime (James) Fleming

CMHC cutting back on what it covers with mortgage default insurance

CMHC said its second home and self-employed without third party income validation business account for less than 3% of CMHC’s insured business volumes in units.

Tyler Anderson/National PostCMHC said its second home and self-employed without third party income validation business account for less than 3% of CMHC’s insured business volumes in units.

Canada Mortgage and Housing Corp., the Crown corporation that controls the vast majority of mortgage default insurance in the country, says it plans to get out of the market for second homes and is adding restrictions for self-employed Canadians.

Effective May 30, CMHC said it will discontinue insuring second homes and will require self-employed Canadians to have third party income income validation.

The Crown corporation said the changes are being made as part of its review of its mortgage loan business. The organization has already said it is raising rates across the board May 1, a move that comes after the federal government last year appointed a new chair for CMHC and brought in a new chief executive.

“CMHC helps Canadians meet their housing needs and contributes to the stability of the housing market and finance system” said Steven Mennill, senior vice-president, insurance, in a release. “As part of the review of its mortgage loan insurance business, CMHC is evaluating its products and services to ensure they are aligned with these objectives.”

The agency said it’s the first set of changes resulting from the review of its operation. The Financial Post reported this month that Evan Siddall, a former investment banker brought in as CEO, has been asked about the possibility of a risk-based method of assessing mortgage default insurance. Sources say the new CEO has told people he doesn’t disagree with the principal of risk-based insurance.

The changes announced Friday affect a small portion of the market. CMHC said its second home and self-employed without third party income validation business account for less than 3% of CMHC’s insured business volumes in units.

“Given the limited use of these products, their discontinuation is not expected to have a material impact on the housing market,” the agency said in a release.

CMHC first introduced the program for self employed people in 2007 in response to “industry competition” which at its peak saw some U.S. players enter the market and encourage changes that created amortization lengths as long as 40 years. The government has since restricted loans to 25-year amortizations.

The second home product was introduced in 2005 and applied when purchasing an owner-occupied second home anywhere in Canada.

CMHC said it will limit the availability of homeowner mortgage loan insurance to only one property (one to four units) per borrower/co-borrower at any given time.

Benjamin Tal, deputy chief economist with CIBC, said the announcement was not “a big surprise given the mandate of providing more stability. That might not be the end of it. We might see more coming from CMHC.”

Finn Poschmann, vice-president of research at the C.D. Howe Institute, said the requirement for validation seems reasonable.

“What is interesting is the question of whether the change will tend to shift risk away from CMHC and toward the private insurers. Whether that is the outcome will be determined by the private insurers’ responses,” he said, in an email.

gmarr@nationalpost.com

29 Apr

Lawrence Park ‘fixer upper’ gets 72 offers, goes for 195 per cent of asking

General

Posted by: Jaime (James) Fleming

http://metronews.ca/news/toronto/1016235/lawrence-park-fixer-upper-gets-72-offers-goes-for-195-per-cent-of-asking/

As bidding wars go, it was the ultimate battle and a warning for frantic buyers bracing for spring market: A five-bedroom detached house in the Yonge and Lawrence area has sold for almost double its $699,000 list price with a record 72 offers.

“We expected in the $1.1 million range, but the market pushed it,” said listing agent Bradley Hutton, who sold the Glencairn Ave. house for $1.366 million, about 195 per cent of list price.

“There are a lot of buyers out there desperate to find a house. It’s definitely a sellers’ market.”

And there appears to be no let up in sight after what realtors say is now the worst spring on record for a shortage of listings coupled with intense pent-up demand.

More than 1,000 people booked appointments or toured the 1930s Glencairn Ave. fixer-upper over the last 10 days before the offer deluge Sunday night. About 80 per cent of the offers were for over $1 million, even though the house, on a 30 by 127.66 foot lot in prime Lawrence Park, was being sold in “as is” condition.

“Attention renovators & builders,” said the MLS listing which attracted dozens of callers, many asking if the extremely lowball $699,000 list price was a “typo.” “House is full of knob and tube (wiring), fireplace has not been used in years.”

Hutton openly acknowledges that nothing has sold on the prime, tree-lined street, just steps from Yonge St. and the subway station, for $699,000 for at least 10 to 15 years.

He priced it so extraordinarily low, he says, “mainly to create buzz” and force realtors to realize that their buyers weren’t walking into their dream home but, rather, a place needing $300,000 or more in renovations.

“Surprisingly enough, that’s how it works — it gets the agents calling,” said Hutton.

Even then, Hutton said he was shocked by the number of offers — so many that he insisted on having realtors just email them in or drop them off to his office for the 7 p.m. Sunday deadline.

Usually he prefers to meet face-to-face with bidding agents for 15 minutes or so to enable them time to make their spiel on behalf of their buyers.

“This house required a special buyer,” said Hutton, who has enraged many agents, because the winning bidder ended up being his client, a practice known in the real estate industry as “double ending.”

That’s because the listing realtor is paid commission by both the seller and buyer.

Hutton insisted he had a third party, an independent broker from his office, handle all the bids with the exception of the winning bid, which he brought to the table himself.

It belonged to an area resident who just saw the listing online last week and has lived in the area for years. They are planning to renovate and live in the house, he said.

25 Apr

CMHC Changes It Mortgage Insurance Product Offering

General

Posted by: Jaime (James) Fleming

CMHC Changes Its Mortgage Insurance Product Offering

OTTAWA, April 25, 2014 – As part of the review of its mortgage loan insurance business, CMHC is discontinuing its Second Home and Self-Employed Without 3rd Party Income Validation mortgage insurance products effective May 30, 2014. Self-employed Canadians can still qualify for CMHC insured financing through CMHC homeowner products with a validation of their income using traditional methods.

“CMHC helps Canadians meet their housing needs and contributes to the stability of the housing market and finance system” said Steven Mennill, Senior Vice-President, Insurance. “As part of the review of its mortgage loan insurance business, CMHC is evaluating its products and services to ensure they are aligned with these objectives.”

As a result of changes to CMHC’s mandate to contribute to the stability of the housing market, benefitting all Canadians, while effectively managing and reducing taxpayers’ exposure to risk, CMHC is undertaking a review of its mortgage loan insurance business. This is the first set of changes resulting from this review.

CMHC Second Home and Self-Employed Without 3rd Party Income Validation will remain available for new mortgage loan insurance requests submitted to CMHC before May 30, 2014, regardless of the closing date of the home purchase. As is normal practice, complete borrower and property details must be submitted by a lender to CMHC when requesting mortgage loan insurance.

Combined, CMHC Second Home and Self-Employed Without 3rd Party Income Validation account for less than 3% of CMHC’s insured business volumes in units. Given the limited use of these products, their discontinuation is not expected to have a material impact on the housing market.

As Canada’s national housing agency, CMHC draws on more than 65 years of experience to help Canadians access a variety of quality, environmentally sustainable, and affordable housing solutions that will continue to create vibrant and healthy communities and cities across the country.

For additional highlights please see attached backgrounder and key fact sheet.

Information on this release:

Charles Sauriol
Media Relations
613-748-2799
csauriol@cmhc-schl.gc.ca

Follow CMHC on Twitter @CMHC_ca.

Backgrounder

CMHC Self Employed (Without Traditional 3rd Party Validation of Income)

  • CMHC introduced its Self Employed Without Traditional 3rd Party Validation of Income product in 2007 in response to industry competition. The product allowed self-employed borrowers who were unable to provide traditional sources of income validation to access CMHC-insured financing for a 1-2 unit owner occupied property.
  • For the majority of self-employed borrowers, income validation is readily available. To validate their income, self-employed borrowers can provide copies of their Notice of Assessment, audited financial statements or unaudited financial statements prepared by an independent third party, for the previous two year period.

CMHC Second Home

  • CMHC introduced its Second Home product in 2005. CMHC Second Home offered borrowers more financing options when purchasing an owner-occupied second home located anywhere in Canada.
  • Going forward, CMHC will limit the availability of homeowner mortgage loan insurance to only one property (1-4 units) per borrower/co-borrower at any given time.