Still no clarification to rules
I met with CMHC on Wednesday to go over the new federal guidelines set for April 19th. CMHC, like everyone in the industry, is waiting for clarification on the rules for qualifing rate. Are they using 5 year posted or discounted rates. I get the feeling that they will use discounted and here is why...the banks do have both posted and discounted rates, but most of the broker lenders don't have posted rates (at least not published). So to keep the playing field level, I think they will use discounted rates. We were expecting an answer on this last week, but with the budget coming out yesterday, there was a delay in this. Cross our fingers for the discounted option.
Where are rates headed
We are getting lots of mixed signals on where fixed rates are headed. BMO just dropped their 5 year to 3.75% (not that this makes a difference in the broker world). But on Wednesday the bond yield spread went down again, enough that a rate hike was warranted. I think for the time being, rates will be dictated by market share desired by the lenders, not by spreads and bond yields.
Is being a bank the new way to fund B business
After the August 2007 collaspe of the ABCP (asset backed commercial paper) market, we have seen most of the B lenders disappear. Only my company, Home Trust, survied in Atlantic Canada as a B lender (and expanded into the A world too) and there are only a couple other regional lenders in the rest of the country who survived. So what we have seen is a move by lenders to become banks (or trust companies, which are under the bank act). This move might also make good sense for the insured lenders out there to raise funds to lend on the A side too. Who knows how long the CMB pool will be supported by the federal government. In fact there was speculation that there would be changes to the CMB pool in yesterday's budget. Is being a bank the right move? Time will tell.
