by Neil Sharma 09 May 2018

According to one brokerage owner, the bureaucrats who determine mortgage lending rules are leading us down a path of reckoning.

“I think if they continue on with the restrictive policies they’ve been putting in place, they’ll get what they want: A housing collapse in Toronto and Vancouver. Then what are they going to do?” said Croft Axsen, owner of DLC Jencor Mortgage Corporation.

“I’m not saying they shouldn’t be trying to address housing prices in Toronto and Vancouver, but I think most of that has to do with supply. There’s this overall restriction throughout the entire economy about who can get a mortgage, how many people can get a mortgage, and how big the mortgage they can get is. I don’t think they understand what they’re doing. It makes me nervous that bureaucrats are making these decisions and not bankers.”

The B-20 guidelines have locked borrowers into their mortgages and impeded housing mobility. But most incredulous to Axsen is that existing mortgage holders have been displaced onto shaky ground. Irrespective of high Beacon Scores, they’re being punished.

Citing a client who paid down an $800,000 mortgage and still cannot move lest they substantially downsize, Axsen said, “The government has set up rules in which you can’t even qualify for the mortgage you have. Not only can’t you move, you can’t go to a different lender because they have to qualify you, so you’re stuck with your existing lender. You can’t compete to get yourself a lower interest rate on your house and you can’t sell your house for a different one because the government has deemed you’re not worthy, even though you have perfect credit and you’ve never missed a payment. Somehow, some bureaucrat sitting in front of a computer running a statistics program is telling the bankers how to qualify you to get a mortgage.”

Axsen added that he expects a stagnant economy to result from a considerably cooler housing market, in large part because—in a bid to rectify abnormalities in Toronto and Vancouver—smaller cities are suffering.

Shane Bruce of VERICO ACME Mortgage Professionals says people with modest incomes are bearing the brunt of the rule changes, while it’s business as usual for the well-heeled.

“I’m surprised homeowners aren’t complaining because the large portion of Canadians’ net worth is in their real estate equity, and we’re saying we’re all underfunded, too much debt and not enough pension, why would the government prevent their properties from appreciation?”
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