Will Obama’s ‘Better Bargain’ Temper CMHC’s Rules

Presidential Thoughts

Zillow scored major social media points today. In a live stream presentation, U.S. President Obama responded to questions from U.S. homeowners, buyers, and renters.

Another Change that May Cost Homebuyers

Up here in Canada mortgage lending rules cast a different shadow. Today’s new rule added to the many that includes the elimination of a 40 year mortgage amortization that dropped to 25 years.

This new rule change will affect the Mortgage Backed Security (MBS) by imposing limits on government guarantied amounts. (A mortgage backed security is a pool of mortgages that lenders sell to investors to raise money which they then lend out.)

Bottom line is that this new restriction sans government guarantee, adds investment risk. With greater risk comes a higher price for loans demanded from mortgage investors. A demand that may trickle down and translate into higher interest rates.

Hung Out to Dry Main

Will Home Buyers Be Hung Out to Dry?

According to interviews conducted by Rob McLister of Canadian Mortgage Trends “the capital markets professionals we spoke with today project small rate increases as a result of this news (i.e., less than 20 basis points). And few expect any significant slowdown in home sales/prices from this change alone.”

Tail or Dog

Overall, President Obama’s talk with Zillow seems more positive than the latest missives from Ottawa and CMHC. While many believe we stand in the shadow of U.S. real estate the question begs will Obama’s outlook temper the rule change barrage from CMHC?

**In Depth Explanation of CMHC’s Rule change.

About Larry Yatkowsky

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