Harper Government Teams up With Canadian Home Builders Association

Harper Government Teams up With Canadian Home Builders Association

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Harper Government Teams up With the Canadian Home Builders’ Association

Here is the press release from the Government of Canada dated 5 March 2015 about the Harper Government Teams up With Canadian Home Builders Association to ensure Canadians Get it in Writing!

Harper Government teams up with the Canadian Home Builders' Association to ensure Canadians Get it in Writing!

Harper Government teams up with the Canadian Home Builders’ Association to ensure Canadians Get it in Writing!

The Honourable Kerry-Lynne D. Findlay, P.C., Q.P., M.P., Minister of National Revenue, announced today that the Government of Canada is providing approximately $745,000 over the next three years to support the Canadian Home Builders’ Association’s (CHBA) Get it in Writing! campaign. The campaign helps Canadians and legitimate businesses protect themselves from unscrupulous contractors in the construction industry who are operating through the underground economy. Minister Findlay made the announcement at the CHBA’s National Conference in Halifax, Nova Scotia.

The Get it in Writing! campaign raises awareness about the safety and financial risks the public face if they participate in the underground economy by purchasing construction or home renovation services “under the table.” It provides consumers and home renovation contractors with tools and information to discourage and reduce participation in the underground economy.

The Government of Canada works closely with industry and other levels of government to combat the underground economy in Canada. Minister Findlay launched a three-year Underground Economy Strategy, Reducing Participation in the Underground Economy last fall, and formed an Advisory Committee of industry representatives.

For more information, visit: www.cra.gc.ca/undergroundeconomy.

 

Quick facts

  • In 2011, Statistics Canada estimated the value of underground economy activity in Canada at 2.3% of the GDP.
  • In 2013-2014, the CRA audited almost 8,000 cases involving participation in the underground economy, and identified an additional $718 million in unreported income.
  • The CRA’s strategy, Reducing Participation in the Underground Economy, will:
    • promote better understanding of Canada’s underground economy – where, when and how it occurs;
    • reduce the social acceptability of participation in the underground economy; and
    • reduce participation in the underground economy through a range of initiatives over the next three years.
  • On November 17, 2014, the Minister of National Revenue’s Underground Economy Advisory Committee held its first meeting in Toronto, Ontario. The Committee has representatives from academia and key industry associations representing the financial, restaurant, retail, home building, and construction industries, as well as small businesses and chambers of commerce.

Quotes

“The Canadian Home Builders’ Association is a valuable partner, and a leader among peers in raising awareness about the pitfalls of participating in the underground economy in the construction industry. We are proud to support the Get it in Writing! campaign. It is a clear example of how government and industry can work together to make a genuine difference in the safety and economic health of our communities.”

The Honourable Kerry-Lynne D. Findlay, P.C., Q.C., M.P., Minister of National Revenue

“Participating in the underground economy provides an unfair advantage to unscrupulous businesses, and undermines the competitiveness of the millions of legitimate Canadian entrepreneurs. By simple actions like always getting a receipt, Canadians can do their part and join our Government and industry partners in tackling this pervasive and costly problem.””

The Honourable Kerry-Lynne D. Findlay, P.C., Q.C., M.P., Minister of National Revenue

“Contractors who cut corners when it comes to their taxes are also likely to cut corners in their work. That’s bad news for Canadian consumers. The Canadian Home Builders’ Association urges Canadians to not expose themselves to undue risk, both physical and financial. The Government of Canada’s underground economy strategy is a significant step in fighting the underground economy. We thank the Government of Canada for its renewed support for the Get it in Writing! campaign.””

Kevin Lee, Chief Executive Officer, Canadian Home Builders’ Association

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Mortgage Professional

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Mortgage Professional

In the complexities of an ever advancing Canadian real estate market it has become increasingly important and beneficial for the consumer, such as the first time home buyer, existing home owner looking for a mortgage renewal, or the real estate investor seeking to acquire an investment property to work with a seasoned Canadian mortgage professional – mortgage broker / mortgage agent —  when it comes to getting their mortgage financing in order.

A mortgage professional, or otherwise known as a mortgage broker or agent – we will call them from this point onwards the ‘mortgage professional’ — studies in the field of real estate financing and specializes just in mortgages. A mortgage professional here in Canada works for the benefit of the consumer / client, making sure that the mortgage client receives the correct and unbiased professional advice that best suits the needs and realities of each clients situation, which differs from everyone one else.

Unlike the individual working in a bank, mortgage professionals will not try to up-sell to you proprietary specific bank products in order that they meet their sales quota. Mortgage professionals will not push you towards one lender over another, but rather, they will decide which one of the lenders has the best mortgage product based on your personal and unique circumstances. For most consumers when working with mortgage professionals there is no fee’s or charges that they have to pay. The lending institution that approves your mortgage application will pay a commission to the mortgage professional after the closing of the deal.

Unfortunately it has become normal practice for the consumer to shop around just for the lowest interest rate even if that means sacrificing the quality and trustworthiness of the individual or company that is quoting the low interest rate. There should be more to your investigation and shopping of mortgages than just how low their interest rates are. You should be looking at the overall package of the mortgage professional.

Most provinces in Canada regulate the mortgage brokerage industry. The purpose of the regulation is for the protection of the consumer by making sure that individuals who want to work in the industry meet certain minimal judiciary and educational requirements.

If you are considering to become a mortgage broker or agent in any of the Canadian provinces, or you are thinking about seeking the professional help of a mortgage broker or agent, you can visit the following Government web sites to learn more about the mortgage industry and its professionals in most Canadian provinces.

British Columbia

Financial Institutions Commission – FICOM

The Financial Institutions Commission (FICOM) is an agency of the provincial government, which administers nine statutes providing regulatory rules for the protection of the public in the province of British Columbia.

 

Alberta

Real Estate Council of Alberta – RECA

RECA is an independent, non-government agency, responsible for governing industry professionals in the real estate, mortgage broker, and real estate appraisal industries.

 

Saskatchewan

Financial and Consumer Affairs Authority – FCAA

Financial and Consumer Affairs Authority (FCAA) protects consumer and public interests and supports economic well-being through responsive financial marketplace regulation. FCAA enhances consumer protection through licensing, registration, audit, complaint handling and enforcement activities pursuant to various provincial statutes.

 

Manitoba

The Manitoba Securities Commission

The real estate division is responsible for administering The Real Estate Brokers Act and The Mortgage Brokers Act. This division registers real estate brokers, salespersons, and mortgage brokers, monitors brokers’ trust accounts, and investigates complaints against real estate brokers, salespersons and mortgage brokers.

 

Ontario

Financial Services Commission of Ontario – FSCO

The Financial Services Commission of Ontario is a regulatory agency of the Ministry of Finance that regulates insurance, pension plans, loan and trust companies, credit unions, caisses populaires, mortgage brokering, and co-operative corporations in Ontario.

 

Quebec

Organisme d’autoréglementation du courtage immobilier du Québec – OACIQ

The Organisme d’autoréglementation du courtage immobilier du Québec (OACIQ) is the organization responsible for the application and enforcement of the Real Estate Brokerage Act.

 

New Brunswick

Department of Justice and Consumer Affairs Consumer Affairs Branch

 

Nova Scotia

Service Nova Scotia and Municipal Relations Business Licensing

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What is mortgage loan insurance

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Mortgage Loan Insurance

Source: Government of Canada Department of Finance

Mortgage loan insurance (which is sometimes called mortgage default insurance) is a credit risk management tool that protects lenders from losses on mortgage loans. If a borrower defaults on a mortgage, and the proceeds from the foreclosure of the property are insufficient to cover the resulting loss, the lender submits a claim to the mortgage insurer to recover its losses.

The law requires federally regulated lenders to obtain mortgage insurance on loans in which the homebuyer has made a down payment of less than 20 per cent of the purchase price (also called high loan-to-value mortgages). The homebuyer pays the premiums for this insurance, which protects the lender if the homebuyer defaults.

The Government backs insured residential mortgages in Canada. It is responsible for the obligations of Canada Mortgage and Housing Corporation (CMHC) as it is an agent Crown corporation. In order for private mortgage insurers to compete with CMHC, the Government backs private mortgage insurers’ obligations to lenders, subject to a deductible equal to 10 per cent of the original principal amount of the loan.

Since 2008, the Government has taken measured steps to strengthen the minimum standards for government-backed insured mortgages, including:

  • Requiring a minimum down payment of five per cent for owner-occupied properties and 20 per cent for speculative properties.
  • Limiting the maximum amortization period to 30 years.
  • Lowering the maximum amount Canadians can withdraw in refinancing to 85 per cent of the value of their homes.
  • Requiring that borrowers meet the standards for a five-year fixed-rate mortgage even if they choose a mortgage with a lower interest rate and shorter term.
  • Withdrawing Government insurance backing on lines of credit secured by homes.

These standards apply for mortgages on residential property with four units or less. They do not affect multi-unit buildings with five units or more.

 

Further Measures have been initiated by the Federal Government

The Government announced further changes to the standards for government-backed insured mortgages. These measures would apply to new high loan-to-value mortgages backed by the Government.

Limit the Maximum Amortization Period to 25 Years

The amortization period is the length of time it will take to pay off the entire mortgage loan. It is usually much longer than the term of the mortgage. A typical mortgage in Canada may have a term of five years or less during which a specific fixed or variable interest rate will apply, and the mortgage can be renewed at the end of the term.

The measure announced today will reduce the maximum amortization period from 30 years to 25 years for high loan-to-value mortgages, which are backed by government insurance. (Banks will still be able to offer 30-year amortization periods on low ratio—20 per cent or more down payment—mortgages, if they so choose.). For any given mortgage loan, a lower amortization period would result in a moderate increase in the monthly payment along with a significant reduction in the total interest paid over the amortization period. The following table illustrates the benefit of reducing the amortization period from 30 years to 25 years for a mortgage loan of $350,000.1

Interest Rate 30-Year Amortization—Monthly Payment 25-Year Amortization—Monthly Payment Difference in Monthly Payment—
25-Year vs. 30-Year Amortization
Interest Savings—25-Year vs. 30-Year Amortization
3 per cent $1,472 $1,656 $184 $33,052
4 per cent $1,664 $1,841 $177 $46,832
5 per cent $1,868 $2,036 $168 $61,765

 

Lower the Maximum Refinancing Amount to 80 Per Cent of the Loan-to-Value Ratio

Borrowers can refinance their mortgage and increase the amount of the loan secured against their home. The measure announced today will reduce the limit on refinancing from 85 per cent to 80 per cent of the value of the home. Reducing the maximum refinancing amount to 80 per cent follows the change from 90 per cent to 85 per cent in March 2011. Reducing the maximum loan-to-value ratio on refinancing will encourage Canadians to keep equity in their home and save through home ownership.

As an illustration, for a home valued at $350,000, refinancing at 85 per cent would allow the homeowner to access up to $297,500, whereas refinancing at 80 per cent would allow the homeowner to access up to $280,000. The lower refinancing limit means homeowners will keep an additional $17,500 in the equity of their home and at the same time save up to $5,200 in insurance premiums.

Limit the Gross Debt Service Ratio to 39 Per Cent and Total Debt Service Ratio to 44 Per Cent

There are two ratios commonly used to measure the risk associated with household debt: the gross debt service (GDS) ratio and the total debt service (TDS) ratio. The GDS ratio is the share of the borrower’s gross household income that is needed to pay for home-related expenses, such as mortgage payments, property taxes and heating expenses. The TDS ratio is the share of the borrower’s gross income that is needed to pay for home-related expenses and all other debt obligations.

Lenders must review a borrower’s debt service ratios before granting a mortgage loan. In 2008, the Government announced a 45 per cent TDS limit as part of the adjustments to the rules for government-backed insured mortgages. The measure announced today will limit the GDS ratio to 39 per cent and lower the maximum TDS ratio to 44 per cent. Setting a GDS limit and lowering the TDS limit will help prevent Canadian households from overextending themselves and reduce the number of financially vulnerable households.

Limit the Availability of Government-Backed Insured Mortgages to Homes With a Purchase Price of Less Than $1 Million

The measure announced today will establish that government-backed mortgage insurance is only available for a new high loan-to-value mortgage if the home purchase price is under $1 million.

Establishing a maximum allowable price will ensure that government-backed mortgage insurance operates the way it was originally intended: to help working families and first-time homebuyers. According to the Canadian Real Estate Association, the national average price (based on Multiple Listing Service sales activity) for a home sold in May 2012 was $375,605. This measure is expected to have a negligible impact on working families and first-time homebuyers as the vast majority of these borrowers purchase properties priced below the threshold. Borrowers purchasing homes priced at or above the maximum allowable price would require a down payment of at least 20 per cent.

Implementation of the New Framework started on July 9, 2012.

 


1 The mortgage loan amount used in the illustrative example represents approximately the size of the mortgage loan needed for an average house in Canada. According to the Canadian Real Estate Association, the national average price (based on Multiple Listing Service sales activity) for a home sold in May 2012 was $375,605.

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