With new rules, one-third of consumers anticipate challenges

by Ephraim Vecina07 Oct 2016
Approximately one-third of consumers would have “difficulty” in meeting the new debt service ratios outlined in Finance Minister Bill Morneau’s new mortgage measures, Genworth MI Canada Inc. cautioned in a statement.
Genworth added that among the hardest hit segments of the tightened rules would be first-time homebuyers, who hold many of the company’s insured mortgages.
Applicable starting October 17, the regulatory changes would subject all insured mortgages to “stress testing”, which would measure a particular borrower’s capability to fulfill mortgage payments under the Bank of Canada’s 4.64 per cent posted rate for five-year mortgages, CBC News reported.
Under the new rules, fully 50 to 55 per cent of Genworth’s total portfolio new insurance written would no longer be eligible for mortgage insurance. Previously, only insured mortgages with down payments of less than 20 per cent were mandated to undergo the stress test.
Genworth further warned that these changes might drive off a significant proportion of the consumer base from the market and force them to just go for lower priced homes. And with the new requirements, even consumers who currently hold mortgages would not be able to search for new lenders easily.
The new measures include the closing of tax loopholes for capital gains exemptions on principal residence sales; increasing mortgage insurance eligibility requirements (even for borrowers who have large down payments); and the consultation of stakeholders to ensure the proper distribution of risk (including risk sharing among lenders).

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