Regulation Roundup

What a week it was for Canadian real estate regulation!!!

We should all be aware by now that first time homebuyers can now take a 30 year amortization on a new build -insured only of course. We should also know the homebuyer RRSP amount has now increased. First time homebuyers can now take $60,000.00, up from $35,000.00 from their RRSP for down payment – and get a grace period of 5 years, as opposed to 2 years before re-payment begins. I will do some math on a future blog as to why I don’t love the idea.

Today though had the Feds firing on all cylinders in relation to regulations and rules surrounding housing.

First and foremost – the government has at least acknowledged something needs to be done on income verification. Finally. Only took about 2 decades!!! Ron Butler to Ben Rabidoux are very positive on what this could mean – and rightly so. However, I am slightly more pessimistic than those 2. Ron and Ben are extremely smart individuals – and probably the ones who have championed this cause more than anyone. My issue comes not from what was announced, but from what WASN’T announced. Todays release said that the government will work with lenders to have linkage to CRA for income verification. That is great news, however, I fear this turns into another government boondoggle whereby we hire 10,000 people to start a study, consult with the industry, hire another 10,000 people to administer the program, and spend 700 Million dollars to have a company build a network to support the linkage. Oh, and it will take 5 years to fully implement. Maybe it is the pessimist in me, but I don’t think we see any real action for at least 24 months. Although, any step in the right direction is 1 step more than had been done to date – so I guess the turtle has started its journey going the right way. I remember at an industry event where they broke fraud into 2 different buckets – soft fraud and hard fraud. I laughed for days at that. Fraud is fraud – the end!! My concerns stems from the fact that everyone will be so busy working on income fraud, that the other fraud will slip under the radar and we will end up in the same place as we are now – just with another 20,000 on the government payroll. Fraud is like whack-a-mole. You stomp it out in one place, and it pops up in another.

Then there is the CRA systems side of things. Anyone trying to even get through to CRA this time of year has up to a 6 hour wait. Can CRA’s systems even handle an income verification process from mortgage lenders? How long will it take to “verify” information with the CRA? Will it take as long as it takes me to get the login code for the My CRA site? Yes, we need to clamp down on income fraud, and mortgage fraud, but I am not sure the outcome will be what we need, when we need it, or how we envision it going.

Good news today also for people who bought too much house prior to 2022. In yet another announcement leading up to the budget, it was announced that people in financial hardship can re amortize up to 35 years. This will come in handy for a few people who are really in trouble, however it comes in VERY handy for mortgage insurers. People who are behind generally default, and defaults are covered by insurance companies. During a housing crisis, the last thing you need is insurers having to pay out all of their money. Just like yesterday’s announcement, today’s news will help a lot of banks and insurers while optically looking like it will help the average Canadian. It has the aroma of moral hazard attached though, doesn’t it? By allowing the most financially stressed people to re amortize, it actually rewards people who made bad decisions the most. Now, I will get a lot of hate mail for that one I know, but facts is facts. There needs to be consequences for bad decisions. Yes, I know I sound like a total dick for suggesting that people who are treading water be drowned, but that is the financial circle of life Symba. People who get foreclosed, or power of sale initiated think real long and real hard before taking on risk in the future.

And finally today we had the environment minister pumping housing starts!!! The same guy who said Canada should not invest money in roads, today announced that Canada will build 3.9 million homes by 2031!!. Nevermind that would require Canada to build 3 times more homes a year than it currently does – every year for the next 7 years. 3 TIMES!! How exactly? Where will you source the raw materials? Where will the tradesmen and tradeswomen come to build these homes? How will the municipalities get the permits approved? Again, nothing more than vote buying. The government is keenly and acutely aware that housing is a hot button issue, and they think they can get votes if they ‘fix’ housing. As most of us know – nothing will happen , political promises are just that.

It should be a very interesting 6 months in mortgage and real estate land as we try to navigate the ever changing landscape. Reading comments on social, blogs, the web etc. even a lot of industry people don’t know what is going on. This means your clients are probably even more lost. Clients will have questions – and you need to have answers for them. Until we get through the budget, and campaign season, the rules surrounding real estate and real estate financing are going to bounce around, be up and down more than a toilet seat at a mixed party, and will constantly change. The old saying ‘ the only thing that stays the same is everything changes’ should probably become our industry motto.