500,000 Canadians Deferred Their Mortgage Payments

Commercial & Rental DAZADA DIAMOND 25 Sep

500,000 Canadians Deferred Their Mortgage Payments

Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House
The mortgage payment deferrals extended by the big banks in Canada to households at the onset of the COVID-19 pandemic have elapsed. There are over 500,000 mortgages on payment deferral at the Big Six banks in the country. Payments are resuming and the level has dropped by one-fifth in the most recent quarter.In the report by Canada Mortgage and Household Corp. (CHMC), more than 75% of a million Canadian homeowners have either deferred or skipped a mortgage payment. The total amount per month is about $1 billion. CHMC’s report also reveals that more people are taking out more loans.

Significant impact on mortgages

The big lenders announced the sweeping mortgage deferral programs in March 2020 to give borrowers some breathing room. Since incomes were falling, the banks allowed households to skip some payments on their mortgages. The big wave of deferred payments indicates the significant impact of the pandemic on Canadian mortgages.

All the payment deferrals in the six banks are expiring, as tens of thousands of borrowers are starting payments again. At the end of the third quarter, the number of mortgages on payment deferral is 510,530, or 17.53%, lower from the preceding quarter. The total amount likewise dropped 15.38% to $136.27 billion from the second quarter.

Royal Bank of Canada (TSX:RY)(NYSE:RY) has the most number of accounts (138,830) on payment deferrals, while Toronto-Dominion Bank is second with 107,000 accounts. Interestingly, the Bank of Nova Scotia saw a 5.3% increase in payment deferrals or 99,000 mortgages in the third quarter. The length of the deferrals varies from one to six months.

Dream investment

It’s not surprising to learn that RBC has the most mortgages on payment deferrals. With a market capitalization of $139.3 billion, it’s the largest banking institution. For the same reason, RBC is the top investment choice of income investors and retirees’ dream investment.

RBC was founded in 1864 and started paying dividends six years later. The 150-year dividend track record is what attracts investors, because it has been paying dividends for the vast majority of its corporate existence. Likewise, it tells you that you can buy and hold the stock for decades.

When you’re investing for the long term, the choice must be a company that can weather economic downturns. Your pick should be well positioned to ride out the pandemic. According to RBC’s president and CEO Dave McKay, the bank is navigating these uncertain times on a position of strength and stability.

In Q3 fiscal 2020 (quarter ended July 31, 2020), RBC reported $3.2 billion in net income — a 2% year-on-year drop. The capital markets segment posted record earnings (+45%), while the insurance business turned in stable profits (+6%).

The push to grow its U.S. business continues after RBC hired a Merrill Lynch Wealth Management team and a UBS wirehouse advisor. For prospective investors, RBC pays a 4.41% dividend, despite the low-rate environment.

Expected declines

The big banks expect the reductions in mortgages on payment deferrals. However, the real number of distressed households should be known soon.

  • https://www.fool.ca/2020/09/18/500000-canadians-deferred-their-mortgage-payments/

Scotiabank: Millennials hopeful about buying homes despite COVID-19

Banks & Bank of Canada DAZADA DIAMOND 24 Sep

Scotiabank: Millennials hopeful about buying homes despite COVID-19

Scotiabank: Millennials hopeful about buying homes despite COVID-19Compared to other demographics, Canadian millennials are more optimistic about purchasing a home during the COVID-19 pandemic, according to a new survey by the Bank of Nova Scotia.

The 2020 Scotiabank Housing Poll found that around 18% of young Canadians in the 18-34 age range have “accelerated their plans” to buy their next homes or investment properties. However, roughly 32% of them said that they will only make their purchases once property prices drop.

Scotiabank said that these intentions are mainly driven by lower interest rates. Approximately 68% of those planning to buy will be using their savings, while 42% will be using the equity from their primary homes.

Millennials were also more optimistic (36%) about home price declines within the next 12 months, compared to 24% of those in the 35-54 age cohort and 17% of those older than 55 years old.

Additionally, better purchasing power fed into a greater appetite for renovations, with around 26% of Canadians considering major reworks in their current homes.

“The pandemic has caused many Canadians to turn their living rooms into classrooms, their dining rooms into offices, and their basements into home gyms,” said John Webster, head of real estate secured lending at Scotiabank. “This is motivating many to consider investing more in their current homes or re-evaluating their living spaces altogether.”

  • https://www.mortgagebrokernews.ca/news/scotiabank-millennials-hopeful-about-buying-homes-despite-covid19-333422.aspx?utm_source=GA&utm_medium=20200918&utm_campaign=MBNW-Newsletter-20200918&utm_content=CAB225E9-A56E-4453-BA7A-30CBD695B619&tu=CAB225E9-A56E-4453-BA7A-30CBD695B619

Bank of Canada’s 4.79% benchmark rate expected to increase home buyers’ purchasing power

Banks & Bank of Canada DAZADA DIAMOND 16 Sep

Bank of Canada’s 4.79% benchmark rate expected to increase home buyers’ purchasing power

Bank of CanadaWith the five-year conventional mortgage rate at a historic low of 4.79%, experts are saying that now might be the right time to secure a mortgage.

In August, the Bank of Canada (BoC) dropped its five-year conventional mortgage rate to 4.79%, following cuts from the country’s six biggest banks. It was the second time in three months that the central bank cut the benchmark rate.

And with the benchmark qualifying rate at a record low, experts are saying that it may be a good time for potential home buyers to enter the market.

Read more: BoC overnight rate remains at effective lower bound of 0.25%

“Over the last few years, rule changes have made it harder for Canadians to qualify, so the recent reductions in the benchmark qualifying rate is welcome news for first-time home buyers hoping to enter the housing market,” said James Laird, co-founder of Ratehub.ca and president of CanWise Financial. “The change to the benchmark qualifying rate will increase home buyers’ affordability by 1.5%.”

Meanwhile, Paul Taylor, president and chief executive officer of Mortgage Professionals Canada, told the Globe and Mail that the new rate will l make qualifying easier, or permit some people to borrow fractionally more.”

“In addition to the lower rates, the lower stress test added about one percent to a buyer’s maximum mortgage amount, depending on the down payment,” said Mark Herman of Mortgage Alliance. “The new rules that have come in and the tighter underwriting guidelines the banks are using have taken away much more than that for the average buyer.”

  • https://www.mortgagebrokernews.ca/news/bank-of-canadas-4-79-benchmark-rate-expected-to-increase-home-buyers-purchasing-power-333291.aspx

Big Banks Still Dominate Mortgage Market Share, Says CMHC

Banks & Bank of Canada DAZADA DIAMOND 15 Sep

Big Banks Still Dominate Mortgage Market Share, Says CMHC

Big banks originate nearly 7 out of 10 (67%) of new Canadian mortgages, although their market share has fallen slightly from last year, according to CMHC.

Of total mortgages outstanding, the big banks hold 72% of those loans, down from 75% in 2018, according to the latest Residential Mortgage Industry Report released by the Canada Mortgage and Housing Corporation (CMHC).

Their average loan in 2019 was $220,650, with interest rates ranging from 3.10% to 5.20% and a delinquency rate of 0.24%.

Mortgage Finance Companies (MFCs) dominate the insured mortgage space after the larger lenders, holding 20% of the market, followed by 12% for credit unions.

Of total mortgages outstanding, MFCs have 9% of the market share, with average mortgage loans of $247,828 and a delinquency rate equal to that of the big banks at 0.24%.

Credit unions hold 14% of outstanding mortgages, with smaller loan amounts averaging $156,817 and a lower delinquency rate at 0.17%.

Private lenders and mortgage investment corporations (MICs) hold just 1% market share and reported average interest rates of between 7% and 15% with an average delinquency rate of 1.73%.

$1 Billion in Monthly Mortgage Deferrals

Canadian government COVID-19 initiativesCMHC also reported that Canadians have deferred a total of $1 billion per month since the height of the pandemic.

“This significantly reduces the influx of payments toward outstanding mortgage debt and is expected to contribute to increasing the total mortgage debt in the second and third quarters of 2020,” CMHC noted.

The calculation was made based on an average monthly payment of $1,333.

“…we also expect fewer mortgage borrowers will be making additional mortgage payments this year in order to accelerate their mortgage repayments (through lump-sum payments or accelerated repayments),” CMHC added.

About 20% of borrowers said they plan on making prepayments to their mortgage this year, based on data from the Financial Industry Research Monitor (FIRM). Last year, two thirds of mortgage borrowers said they planned to make extra payments towards their mortgage in 2020.

Additional Data from CMHC

  • About 760,000 borrowers from Canada’s chartered banks have deferred their mortgage payments.
  • 63% of all mortgages offered by the big banks were for uninsured loans.
  • “Renewals with the same lender increased by 11% relative to the previous year and accounted for more than half of all extended loans,” CMHC noted.
  • Up to 20% of borrowers said they “might be looking at switching lending institutions depending on whether their lender approved mortgage relief measures and how they dealt with accommodations during the crisis,” according to FIRM data.

  • https://www.canadianmortgagetrends.com/2020/09/big-banks-still-dominate-mortgage-market-share-says-cmhc/

Q3 2020 Bank Earnings – An Update on Big Bank Deferrals

Banks & Bank of Canada DAZADA DIAMOND 14 Sep

Q3 2020 Bank Earnings – An Update on Big Bank Deferrals

The country’s Big Six banks provided an update on the state of their mortgage deferrals, with each reporting varying results in terms of getting those borrowers back to making regular payments.

Both RBC and National Bank of Canada saw their mortgages under deferral drop substantially from Q2 to Q3. RBC said 12% of its loan portfolio remains in deferral (vs. 18% in Q2), while NBC’s deferrals are down to 5% of its loan portfolio (vs. 11.9% in Q2).

Others are seeing a slower transition. TD said its mortgage deferrals fell to 12% of the portfolio from 14% in the previous quarter, while deferrals actually rose at Scotiabank from 17% of its portfolio in Q2 to 18% in Q3.

All of the big banks, however, expressed confidence in the ability of the far majority of those mortgagors to get back on schedule, with several offering insight into the financial strength of some of those clients.

“If we look at the LTVs and the FICO scores on the uninsured book, I think that’s the place we take a lot of comfort in, in terms of the underlying risk,” said Neil McLaughlin, Group Head, Personal and Commercial Banking at RBC. “LTVs in the mid-50%…and then average FICO at 758. I mean, these are strong credit clients with a lot of absorption capability.”

As we do every quarter, we’ve picked through the Big Banks’ quarterly earnings reports, presentations and conference calls, and compiled all the mortgage notables right here. Key tidbits are highlighted in blue.



Bank of MontrealBMO

Q3 net income: $1.23 million (-21% Y/Y)
Earnings per share: $1.85

  • BMO’s residential mortgage portfolio rose to $115.6 billion, up from $110.5 billion a year earlier.
  • The HELOC portfolio—62% of which is amortizing—rose to $35 billion from $33 billion a year ago.
  • Mortgage growth through proprietary channels, including amortizing HELOCs, was up 7% year-over-year.
  • 40% of BMO’s residential mortgage portfolio is insured, down from 43% a year ago.
  • The loan-to-value on the uninsured portfolio is 54%, down from 55% a year ago.
  • 80% of the portfolio has an effective remaining amortization of 25 years or less, up from 71% a year ago.
  • Net interest margin (NIM) in the quarter was 2.54%, down from 2.66% in Q3 2019.

Deferrals & Provisions

  • The average credit score for clients with deferred balances is 745, and the average loan-to-value is 59%, BMO reported.
  • Total provisions for credit losses in Q3 was to $1.05 billion, down from $1.12 billion in Q2 but up from $306 million in Q3 2019.

Source: BMO Q3 Investor Presentation

Conference Call

  • “We have been pleased with our credit experience so far during this crisis, with credit migration, payment deferral expiry and impaired loan loss provisions well within expectations and utilization rates back to normal levels,” said Pat Cronin, Chief Risk Officer. “With that said, we do expect to see our impaired loan loss rate rise in the coming quarters and would guide to a rate in the 40s in terms of basis points for the next few quarters.”
  • “We would expect the bulk of the consumer deferrals to roll off in Q4. We wouldn’t anticipate giving out additional deferrals there,” Cronin added. “We think we will move much more just simply to a case by case with our consumer customers after that.”
  • “Overall, we have seen good performance on deferrals that have matured reflecting the quality of the clients and the collateral,” Cronin said.

Source: BMO Conference Call


Q3 net income: $1.17 billion (-16% Y/Y)
Earnings per share: $2.55

  • CIBC’s residential mortgage portfolio rose to $207 billion in Q3, up from $201 billion in Q3 2019.
  • Of the portfolio, $27 billion is from the Greater Vancouver Area (unchanged a year earlier), and $65 billion is from the Greater Toronto Area (up from $63 billion a year ago).
  • Of the uninsured portfolio, the LTV was 52%, unchanged from a year ago.
  • The bank reported $11 billion in originations in the quarter, up from $9 billion last quarter.
  • The bank’s HELOC portfolio ended the quarter at $19.5 billion, down from $21.6 billion a year ago.
  • Net interest margin in Q3 was 238 bps, down from 254 bps in Q3 2019.

Deferrals & Provisions

  • CIBC reported $33.3 billion worth of mortgage balances still in deferral in Q3, down slightly from $35.5 billion reported in Q2.
  • Of the bank’s uninsured residential mortgage portfolio, 0.36% are in arrears by 90+ days, up from 0.32% in Q2 and 0.27% in Q3 2019.
    • CIBC says this is “due to the stopping of collection efforts during the peak COVID period. Delinquencies are expected to trend lower in Q4/20.“
    • “We experienced a small increase in gross impaired balances,” said Shawn Beber, Chief Risk Officer. “However, given the moderate average loan-to-value ratio of this portfolio, we do not expect this increase to translate into material losses.“
  • Provisions for credit losses were $525 million for the period ended July 31, up from $291 million a year ago, but down from $1.41 billion in the second quarter.
  • “Provisions on impaired loans were lower this quarter than the second quarter,” he added. “However, we do expect to see impaired provisions trend higher over time, as relief programs come to an end and flow write-offs and insolvencies increase.“
  • “The overall Canadian consumer late-stage delinquency rate was up this quarter, with a higher rate in residential mortgages and a lower rate in credit cards and personal lending,” Beber added.

Source: CIBC Q3 Investor Presentation

Conference Call

  • “We drove year-over-year growth in mortgage balances of 3% on a spot basis as the real estate market started to recover in June and July,” said CEO Victor Dodig. “And while our performance is not yet where we want it to be, our recent growth has returned closer to market levels, supported by additions to our more mobile advisor team and a streamlined application process. We continue to see very high levels of digital engagement with digital banking sessions and transactions up approximately 25% from pre-pandemic levels.”

Source: CIBC Conference Call


National Bank of Canada

Q3 net income: $602 million (-1% Y/Y)
Earnings per share: $1.66 a share

  • The bank’s residential mortgage and HELOC portfolio rose to $85.6 billion in Q3, up from $78.7 billion a year ago.
  • The bank’s residential mortgage portfolio is 38% insured (70% in Alberta), down from 40% a year ago.
  • The average LTV on the uninsured mortgage portfolio was 59%, while the average LTV on the HELOC portfolio was 56%.
  • Quebec represented 55% of the mortgage book (up from 54% from a year ago), while Ontario made up 26% (unchanged) and Alberta 8% (unchanged).
  • Net interest margin was 2.15% in Q3, down from 2.23% a year earlier.

Deferrals & Provisions

  • NBC reported 14,405 real estate secured loans (5% of loan balances) still under deferral as of July 31, down from 36,682 loans (11.9%) as of April 30.
  • The bank said it handled 10k payment deferral requests in Q3 vs. 75k in Q2.
  • About 99% of the bank’s deferrals will expire by Oct. 31.
  • Insured mortgages represent nearly half of all mortgages under deferral.
  • 98% of expired residential mortgage deferrals have restarted regular payments.
  • Since Q1, total allowances for credit losses has increased from $769 million to $1.3 billion.
  • Of the bank’s uninsured residential mortgage portfolio, 0.34% are in arrears by 90+ days, up from 0.21% in Q3 2019.

Source: National Bank Q3 Investor Presentation

Conference Call

  • “Since Q2, the value of retail loans on the deferrals is down 60%,” said CEO Louis Vachon. “In addition, the vast majority of clients are resuming payments as scheduled as they exit deferral programs.“
  • “On mortgages…we offered up to six months [payment deferral], but we approached it to work proactively with our customers for a first three-month period, and then proceed with another three months at their request based on each individual need for hardship,” said Lucie Blanchet, VP Personal Banking and Marketing.
  • “So, there were a couple of reasons why we did that. First, we wanted to be proactive and work with our customers quicker than in six months to better understand their situation and find proactive solution,” she said. “But we also understood that there was a cost for them to defer their payments. And we wanted to limit that impact as much as possible. And obviously, it gave us some insights on the restraints before six months.“

Source: NBC Conference Call

Royal Bank of CanadaRBC

Q3 net income: $3.2 billion (-1.8% Y/Y)
Earnings per share: $2.20

  • RBC’s residential mortgage portfolio rose this quarter to $283 billion, up from $276 billion a year ago.
  • Mortgage volume was up 10% year-over-year.
  • The bank’s HELOC portfolio fell to $37 billion from $39.4 billion a year ago.
  • 66% of its mortgages are uninsured, up from 64% a year ago. The average LTV on the uninsured portion is 51%, down from 52% a year ago.
  • 90+ day delinquencies in the overall residential mortgage portfolio rose to 0.18% from 0.17% a year ago.
  • The bank’s uninsured mortgage portfolio has an average FICO score of greater than 800, up from 797 in Q3 2019.
  • Net interest margin was 2.58%, down from 2.80% in Q3 2019 “due to lower interest rates and the impact of competitive pricing pressures.”

Mortgage Deferrals & Provisions

  • RBC approved about 350,000 Canadians as part of its deferral program.
  • As of Q3, $55 billion worth of loans were still being deferred (12% of total Canadian banking loans).
  • RBC said 83% of its active deferral balances will expire in Q4. The average remaining term on active deferrals is 2.5 months.
  • To date, $23 billion worth of loan deferrals have expired, and 80% have resumed regular payments, while 19% have extended their deferrals by up to 6 months. The remaining 1% became delinquent.
  • Total allowances for credit losses grew to $6.1 billion in Q3, up from $5.9 billion in Q2.

Source: RBC Q3 Investor Presentation

Conference Call

  • “Our e-signature solution is helping our mortgage specialists in the field and our clients are benefiting from investments we made in digital tools to allow for self serve renewals,” said CEO Dave McKay. “While it’s too early to comment on the sustainability of these trends, we will continue to help Canadian homeowners while supporting balanced growth in the market.”
  • “Many clients took deferrals as a precaution, and we expect most to resume payments when deferrals expire,” McKay added.
  • “We’re reaching out to these clients,” said Neil McLaughlin, Group Head, Personal and Commercial Banking. “I think we’re quite encouraged by the feedback we’re getting from clients and their ability to resume these payments.“
  • In terms of geographic breakdown of RBC’s mortgage deferrals, Graeme Hepworth, Chief Risk Officer, said this: “…the highest deferral rates would be in Alberta, consistent with… the kind of dual impact that Alberta is facing, both with the pandemic and the impact on the oil and gas environment. GTA would be next highest there. And again, that’s a reflection of two things, I would say. One is kind of a lot of the service economy that comes out of Toronto, but also kind of the higher level of home prices. And then, on the lower side, you’d see Quebec and some of the other parts of Ontario outside of the GTA.”
  • Commenting on the makeup of its deferral clients, McLaughlin said this: “if we look at the LTVs and the FICO scores on the uninsured book, I think that’s the place we take a lot of comfort in, in terms of the underlying risk. LTVs in the sort of the mid-50%…and then average FICO at 758. I mean, these are strong credit clients with a lot of absorption capability.“

Source: RBC Conference Call


Q3 net income: $1.3 billion (-34% Y/Y)
Earnings per share: $1.04

  • The total portfolio of residential retail mortgages rose to $221 billion in Q3, up 6% from $207 billion in Q3 2019.
  • Net interest margin fell to 2.26%, down 18 bps from Q3 2019.

Deferrals & Provisions

  • Gross impaired loans were up 34 bps as of Q3 vs. 31 bps in Q3 2019. Mortgage loans that were 90+ days past due rose to 0.21%, up from 0.19% a year ago.
  • Scotia reported that 41.5% of its mortgage deferrals expired in July, with another 23.3% coming up for expiry this month. Another 11.9% are set to expire in October.
  • Scotia had 137,000 active deferral requests as of Q3, representing $39 billion of its mortgage portfolio.

Source: Scotiabank Q3 Investor Presentation

Conference Call

  • Of the mortgage holders still in deferral, their average credit score is 750 and higher, “close to those that are not in deferral,” noted Dan Rees, VP of Canadian Banking.
  • “We have identified in June…the customers we would qualify or characterize as vulnerable, through the course of July and into August we will have contacted all of those mortgage customers two months ahead of their scheduled prepayment and are working with them on a case-by-case basis and we are encouraged by what we saw through the month of August,” said Rees.
  • Asked what proportion of those would be considered “vulnerable,” Rees replied, “Less than 10% of those that are still in deferral.”

Source: Scotiabank Conference Call

TD BankTD-Bank

Q3 net income: $2.25 billion (-31% Y/Y)
Earnings per share: $1.21

  • TD’s residential mortgage portfolio was $206.1 billion in Q4, up from $197.5 billion in Q3 2019.
  • The bank’s HELOC portfolio rose to $92.1 billion from $90 billion a year ago.
  • TD’s residential real estate secured lending portfolio is 72% uninsured (up from 68% a year ago) with a 53% LTV for the uninsured portion (down from 54% in Q3 2019).
  • Gross impaired loans in the residential mortgage portfolio rose to 0.17%, up from 0.16% a year ago.
  • Net interest margin in the bank’s retail portfolio fell to 2.68% in Q3, down 15 bps from the previous quarter and down 28 bps from a year ago.
  • 56% of the bank’s residential mortgage portfolio is in Ontario (down from 51%), followed by B.C. at 20%, the Prairies at 14%, Quebec at 8% and just 2% in Atlantic Canada.

Deferrals & Provisions

  • Provisions for credit losses rose 74% over the last two quarters to $9.2 billion (124 bps) in Q3, up from 7.9 billion in Q2 and $4.9 billion a year ago.
  • Impaired residential mortgage loans ticked up to 0.07% from 0.06% in Q2.
  • Mortgages under deferral fell to 12% of the portfolio from 14% in the previous quarter.

Source: TD Bank Q3 Investor Presentation

Conference Call

  • “We continue to operate through challenging and uncertain conditions given the unprecedented impact from the COVID-19 pandemic and have added allowances for credit losses accordingly,” said Chief Risk Officer Ajai Bambawale. “I’m satisfied with the bank’s allowance coverage, which reflects our current economic outlook and our portfolio and geographic mix.”
  • In terms of sequential volume growth, TD was third among its competitors, noted Theresa Currie, Group Head, Personal Banking. “If I think about the quarter, we were competing in some sense with one arm tied behind our back,” she said. “As of August 24, we have fewer branches open than three of our four top competitors, and I think we’ve been somewhat more conservative with our safe reopening.”
  • Still, Currie added: “with the investments we’ve made in distribution, in operations, in automation, in training and with the network open, I feel like we’re well positioned to grow the business. And our retention was very strong at 60 basis points in the quarter.

  • https://www.canadianmortgagetrends.com/2020/09/q3-2020-bank-earnings-an-update-on-big-bank-deferrals/

CMHC: Don’t underestimate economic impact of COVID-19 on Canadian housing market

Banks & Bank of Canada DAZADA DIAMOND 9 Sep

CMHC: Don’t underestimate economic impact of COVID-19 on Canadian housing market

CMHC: DonThe Canadian housing sector will have to wrestle with some major short- and medium-term risks, particularly market uncertainty and weaker household incomes, according to the Canada Mortgage and Housing Corporation.

Despite strong recent performances in crucial markets, the prolonged economic impact of the coronavirus pandemic might continue influencing prices, sales, and new building projects, the Crown corporation said.

“While it will take several months for the economic impacts of COVID-19 to fully materialize, some factors are starting to work their way into in our financial results – for example, we are starting to see the impacts in our provisions for insurance claims,” said Lisa Williams, chief financial officer at CMHC.

Williams said that the agency is sufficiently equipped to respond to future market fluctuations.

“We remain in a strong financial position to bear the full impacts of COVID-19, and to take further steps to support Canadians and the economic recovery if necessary,” Williams said.

CMHC has reported net income of $566 million in the second quarter, considerably higher than the $379 million seen during the same time last year. Arrears stood at 0.34%, The Canadian Press reported.

However, the corporation’s claims expenses shot up by 711% to $256 million due to greater allocations for pandemic-related claims such as mortgages in deferral.

  • https://www.mortgagebrokernews.ca/news/cmhc-dont-underestimate-economic-impact-of-covid19-on-canadian-housing-market-332947.aspx

Government of Canada to Launch First Round of $300 million Housing Supply Challenge

Banks & Bank of Canada DAZADA DIAMOND 3 Sep

Government of Canada to Launch First Round of $300 million Housing Supply Challenge

OTTAWA, ON, Aug. 21, 2020 /CNW/ – Every Canadian deserves a safe and affordable place to call home. To help foster housing supply solutions, the Honourable Ahmed Hussen, Minister of Families, Children and Social Development, today announced the Government will launch the first round of the Housing Supply Challenge in October.

The first round, Data Driven, seeks solutions to address gaps in housing data which is often outdated, inconsistent and not openly available, making it more difficult to manage housing supply issues. Participants will create technology or methodology-based solutions to improve data collection, sharing, analysis and integration, thus improving decision-making on housing supply. This first round will disburse up to $25 million to fund a variety of new solutions. The Data round aims to create long-term partnerships between data experts, housing experts, researchers, and communities, which will enable the creation of housing supply solutions.

Canada Mortgage and Housing Corporation (CMHC), in collaboration with the Impact and Innovation Unit in the Privy Council Office and Infrastructure Canada, will be running several rounds over the course of the five-year program, each targeting a different barrier to housing supply. Upcoming rounds will focus on various issues, including housing development, northern housing, and the future of housing.

“Our goal is to encourage innovative and disruptive thinking within the housing ecosystem. Challenge-based initiatives have proven effective in uncovering new ideas and different points of view in other contexts, and I am confident it will help address housing supply needs.”

– The Honourable Ahmed Hussen, Minister of Families, Children and Social Development

“The issues relating to housing supply are complex and cannot be solved by one organization alone. We need the right type of housing, with proximity to public transit, schools and other services. Through the Housing Supply Challenge, we are looking for the best ideas and the right solutions while encouraging collaboration among innovators, researchers, industry and all levels of Government.”

– The Honourable Catherine McKenna, Minister of Infrastructure and Communities

Quick facts

According to the 2016 Census, approximately 1.7 million Canadian households were in core housing need in 2016. Canada requires more housing supply, but there is no single solution to address this need.

To help municipalities grow their housing supply, Budget 2019 provided $300 million in funding over five years to launch a Housing Supply Challenge to address housing supply and unlock new solutions for Canadians searching for an affordable place to call home.

The Challenge aims to provide new resources and find solutions to enhance housing supply and provide a platform to share these models with communities across Canada.

The Challenge will also help address barriers to housing supply and affordability, showcase new ideas and solutions and cultivate collaboration and partnerships.

The Challenge is a component of Impact Canada, a Government of Canada-wide initiative to help departments accelerate the adoption of innovative funding approaches to deliver meaningful results to Canadians.

The Challenge also aligns with the National Housing Strategy and CMHC’s goal, that by 2030 everyone in Canada has a home they can afford and that meets their needs.

Canada Mortgage and Housing Corporation will launch the Data round in the fall. For more information visit https://www.cmhc-schl.gc.ca/en/nhs/housing-supply-challenge.

The Government of Canada is currently rolling out its National Housing Strategy (NHS), an ambitious 10-year, $55 billion plan that will create 125,000 new housing units and lift 530,000 families out of housing need, as well as repair and renew more than 300,000 housing units and reduce chronic homelessness by 50 percent.
Associated Links

As Canada’s authority on housing, CMHC contributes to the stability of the housing market and financial system, provides support for Canadians in housing need, and offers unbiased housing research and advice to all levels of Canadian government, consumers and the housing industry. For more information, visit our website or follow us on Twitter, YouTube, LinkedIn, Instagram and Facebook.

To find out more about the National Housing Strategy, visit www.placetocallhome.ca.
SOURCE Canada Mortgage and Housing Corporation

For further information: Information on this release: Jessica Eritou, Office of the Honourable Ahmed Hussen, P.C., M.P., Minister of Families, Children and Social Development, jessica.eritou@hrsdc-rhdcc.gc.ca; Audrey-Anne Coulombe, Media Relations, Canada Mortgage and Housing Corporation (CMHC), 613-748-2573, acoulomb@cmhc-schl.gc.ca

Related Links

  • https://www.newswire.ca/news-releases/government-of-canada-to-launch-first-round-of-300-million-housing-supply-challenge-806993433.html

Canada’s Banking Regulator Begins Phasing Out Special Mortgage Payment Deferrals

Latest News & Economy DAZADA DIAMOND 1 Sep

Canada’s Banking Regulator Begins Phasing Out Special Mortgage Payment Deferrals

Canadian banks are going to make it a little more difficult to get a break from your mortgage. Office of the Superintendent of Financial Institutions (OSFI) announced they will begin phasing out special treatment of payment deferrals. Previously, due to the pandemic, the regulator had allowed banks to avoid classifying payment deferrals as non-performing loans. Starting in October, no new deferrals will receive special treatment.

Regulators Gave Banks Freedom To Defer Payments

In March, OSFI began giving banks special capital treatment for deferred loans. This allowed deferral of payments without classifying the account as non-performing. Non-performing loans typically require banks to set aside extra capital, in case the loan goes bad. By avoiding the non-performing classification, banks were able to avoid setting aside extra cash. The program encouraged banks to easily grant deferrals for up to six months.

Payment Deferral Programs Start Phase Out In September

Starting tomorrow, OSFI is phasing out this program. Accounts granted a payment deferral from September 1 to September 30 will only receive special treatment for a max of 3 months. This is down from the previous six months from March to August. As of October 1, no new payment deferrals granted will be subject to special treatment. Basically, the program now has a final date.

What Does This Mean?

This likely means payment deferrals won’t be as easily granted from lenders. OSFI’s special treatment made it a no brainer to grant a deferral to borrowers. Since the lender didn’t have to classify it as non-performing, or put aside extra cash, they granted them with ease. Now banks will have to revert to their pre-pandemic support programs for borrowers experiencing hardship.

An end to payment deferrals means the deferral cliff is getting closer. While some people are expected to smoothly transition back to regular payments, the plan was always just to buy people a little extra time. Higher credit defaults are forecasted to rise well into next year.

  • https://betterdwelling.com/canadas-banking-regulator-begins-phasing-out-special-mortgage-payment-deferrals/

Have CMHC’s underwriting changes affected business for brokers and lenders?

Latest News & Economy DAZADA DIAMOND 28 Aug

Have CMHC’s underwriting changes affected business for brokers and lenders?

Have CMHCPrior to the implementation of the Canada Mortgage and Housing Corporation’s new underwriting rules on July 1, the industry was abuzz with the news that Canada’s private mortgage insurance providers, Genworth and Canada Guaranty, would not be following suit. Almost a month after the new CMHC guidelines were put in place, they don’t appear to be having much impact on brokers or lenders.

Multi-Prets Mortgages’ broker Linda Tosini says she has experienced no change to her day-to-day operations, as the decision on which insurer a deal is sent to is ultimately made by her lenders.

“If I do know there’s something, I can put it in my notes to the lender and say, ‘He’s not going to fit the 35/39 [CMHC’s new minimum debt servicing ratios],’” Tosini says. But she’s not sending those notes very frequently.

Tosini feels the CMHC changes will force brokers to have a better understanding of their lending partners. Desjardins, for example, primarily uses CMHC. If Tosini needs a lender to help out a client with a 39/44 situation, she knows where not to send it.

“It’s all about knowing your lenders,” she says.

Albert Collu, the recently named CEO of lender Marathon Mortgage Corp, says the CMHC/Genworth/Canada Guaranty split hasn’t made much of a difference to his company either, largely because of CMHC’s new minimum Beacon score requirement of 680.

“I can’t speak to all the books, but a lot of books, if you look at the average Beacon in our space, they’re usually well over 700,” he says.

Taylor Little, CEO of lender Neighbourhood Holdings, says that even though the increased competition in the mortgage insurance space may not impact borrowers significantly – limits on mortgage insurance for properties over $1 million means most owners of detached homes in Toronto and Vancouver can’t get insurance anyway – the two differing, very public views on the market implied by the divergent underwriting approaches can be used as a valuable resource.

“If Canada Guaranty and Genworth thought there was a huge amount of risk in the market, they’d probably be changing their rules as well,” Little says. “They’re signalling something to the market that’s a little different from what CMHC is.”

With price and sales forecasts all over the map and many awaiting July data to determine if June’s sales activity was a blip triggered by CMHC’s looming changes, Little suggests that Genworth and Canada Guaranty’s next moves could be a valuable indicator of market sentiment at a time of unparalleled uncertainty.

“At a very high level, seeing what the private insurers do is going to give a lot of clarity on how they view they market,” he says. “If they continue to hold firm and don’t change their policies to align with CMHC, that would be an interesting sign.”

It’s a strategy Little and his associates at Neighbourhood Holdings have used before.

“We certainly watch what the banks are doing, what the insurers are doing, in terms of adding to our matrix of how we determine our lending guidelines. If you’re seeing everyone clamp down on risk, it’s a really good sign that we, as a lender, should as well,” he says.

While the changes to CMHC’s guidelines haven’t affected her business thus far, Tosini says that’s largely because Canada Guaranty and Genworth are still providing alternative paths for lenders shut out by CMHC. It will be a different story for borrowers with more challenging credit profiles if CMHC’s competitors wind up following in its footsteps.

“Who knows?” Little says. “They could change next week or next month.”

  • https://www.mortgagebrokernews.ca/news/have-cmhcs-underwriting-changes-affected-business-for-brokers-and-lenders-331787.aspx?utm_source=GA&utm_medium=20200723&utm_campaign=Newsletter-20200723&utm_content=CAB225E9-A56E-4453-BA7A-30CBD695B619&tu=CAB225E9-A56E-4453-BA7A-30CBD695B619

Bank of Canada cuts benchmark mortgage rate, increasing affordability for homebuyers

Latest News & Economy DAZADA DIAMOND 17 Aug

Bank of Canada cuts benchmark mortgage rate, increasing affordability for homebuyers

Good news for some residents out there looking to purchase a home.

On August 12, the Bank of Canada lowered its five-year conventional mortgage rate from 4.94% to 4.79% — the second time it’s reduced the qualifying rate in the last three months.

The last time was in May, when the rate changed from 5.04% to 4.94%.

The most recent change to the benchmark qualifying rate will increase homebuyers’ affordability by 1.5%, according to James Laird, co-founder of Ratehub.ca and president of CanWise Financial.

“Over the last few years, rule changes have made it harder for Canadians to qualify, so the recent reductions in the benchmark qualifying rate is welcome news for first time homebuyers hoping to enter the housing market,” said Laird.

The decrease in the Bank of Canada’s five-year benchmark rate is the result of the big banks decreasing their five-year posted rates.

According to Ratehub.ca’s mortgage affordability calculator, a family with an annual income of $100,000 with a 10% down payment and 5-year fixed mortgage rate of 2.79% amortized over 25 years would have qualified for a home valued at $523,410 under the original 4.94% qualifying rate.

Under the new stress test, if they had a qualifying rate of 4.79%, they can now afford $531,230 — a total difference of $7,820.

“Five-year fixed rates are currently at historic lows, so now is a good time for Canadian to qualify and secure a mortgage rate,” said Laird.

Hopeful new homebuyers are advised speak to a mortgage professional to redo their affordability calculations using the new stress test rate and see how much their buying power has increased.

  • https://www.inhalton.com/bank-of-canada-cuts-benchmark-mortgage-rate-increasing-affordability-for-homebuyers