Tuesday, April 29, 2014
Another brick is pulled
First off, the BC Financial Institutions Commission (FICOM) is proposing a set of Residential Mortgage Underwriting Guidelines to bring BC credit unions (who are not covered under the federal Office of the Superintendent of Financial Institutions, or OSFI) in line with federal regulations restricting HELOCs to a max of 65% of the value of the mortgage, amongst other restrictions.
In an interview with CMT, Doug McLean, the Deputy Superintendent of FICOM claims that the new BC guidelines have nothing to do with the feds, but they were certainly inspired by them given the similarities. Perhaps Doug also got a little antsy from the likes of Vancity offering a little too much lending "innovation" by letting people borrow half their minimum down payments.
The new guidelines are out for feedback, but if I know government agencies, that's hardly more than a formality and they will likely be adopted almost as is. How many people will be affected? Impossible to say, but what's certain is this will prevent some people from extracting equity from their homes, and prevent others from qualifying to buy, thus taking some demand out of the market.
At the same time, CMHC is getting nervous again and is tightening the screws on borrowers. CMHC has announced that they will stop insuring second homes (Finally! Which industry shill on their board thought that was ever reasonable??) and stop accepting "non-traditional" (aka fake) proof of income for self-employed borrowers. Again, the impact isn't huge, with those programs making up only 3% of CMHC business, but the little adjustments add up (more info on the changes here). And CMHC isn't done yet, even announcing that more changes are coming. Funny how things change when you throw out the industry insiders and bring in people that actually know how to regulate financial institutions.
All this comes with the chance it might destabilize our apparently stabilizing market. After 4 years of decline and 6 years of flat prices in Victoria, it seems our market has shed some risk while the rest of the country continued to go bananas (1.3 months of inventory in Calgary right now!). However the government remains the wildcard in this game, and they are not concerned with little Victoria. In order to slow the nation, Victoria might get sideswiped.