Clear communication is essential between policymakers and mortgage professionals in the year ahead, says industry veteran
As ever, regulatory changes are set to play a huge role in the direction of Canada’s mortgage market in 2023 – and a prominent industry member is calling for regular and productive communication between policymakers and mortgage professionals on those moves and their implications in the year ahead.
Where regulators bring in new measures aimed at protecting consumers, both they and the public need to be fully aware of what the consequences, both intended and unplanned, may be, according to J.P. Boutros (pictured), a public relations and government relations expert in the mortgage space.
“The industry as a whole is going to have to be sold on any new policies being seen as consumer protections for the greater good,” Boutros, who formerly served as director of government and relations and regulatory affairs at Mortgage Professionals Canada, told CMP.
“If there are regulatory changes to come that are more aggressive, there has to be proactive and calm consultation with governments and regulators to explain to them and to the public, and to understand what the consequences of those decisions are.”
That’s especially relevant, Boutros added, with a growing number of good borrowers set to be moved into the alternative lending and private space because of recent changes, as interest rates tick upwards and many Canadians find themselves priced out of a mortgage they might have previously qualified for.
“What does that bode for the future? I think because the regulators and policymakers are so understandably focused on the big picture, they’re missing where a private lender may only be interested in the property, not the borrower,” he explained.
“Those lenders are going to call a loan a lot more quickly than a bank ever would. And that trickle effect is going to be a big problem. I would like regulators to talk to us more and have mortgage professionals in the room.”
How significant was regulatory change in the mortgage industry in 2022?
The end of the year saw Canada’s banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), announce that it would be making no imminent changes to its mortgage stress test rate despite some speculation that it could be adjusted in light of the rising-rate environment.
That was an unsurprising move, Boutros said, especially with the regulator having increased its Domestic Stability Buffer (DSB), essentially requiring Canadian banks to set aside capital for a rainy-day fund, in the days prior to the announcement.
“OSFI’s only objective is protecting and preserving Canada’s big banks and system as a whole,” he said. “There was never going to be a decision in the near- to mid-term that would deviate from that.
“They are worried about the system, and especially with the DSB buffer being increased to 3% only a few days before this announcement, there was no way they were just going to loosen the strings for the mortgage industry.”
In the past couple of weeks @OSFICanada made announcements about some of the tools we use to help maintain #FinancialStability.
— Peter Routledge (@OSFIBSIF_leader) December 28, 2022
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Last May, with the Bank of Canada’s series of rate hikes already underway, its deputy governor Toni Gravelle indicated that it would be closely monitoring the housing market’s response to higher borrowing costs as it weighed up how much it needed to increase its policy rate.
Then, the Bank’s trendsetting rate sat at 1%, although it subsequently surged to 4.25% by the end of the year, with the central bank seemingly still undecided on whether further hikes are necessary.
Boutros said it was imperative the Bank and regulators clearly indicate their understanding of the consequences of their current actions before moving forward with new measures.
“[The benchmark rate has] gone up 17 times greater than it was in March [0.25%],” he said. “I want to hear articulation from regulators that they understand what they’re doing already, and what effect it’s having, before they take the next steps.”
How can the mortgage community have a strong relationship with regulators?
While strong communication is required from regulators, it’s also incumbent on the mortgage industry to set out its views, concerns and recommendations on policy in a clear and coherent way, Boutros added, especially with the borrowing landscape having shifted so radically in recent years.
“Are recommendations the community made in 2021 correct and valid now, in 2023, with a steep drop in affordability and home values?” he said.
“Policymakers appreciate recommendations which benefit the greater good; the mortgage community wants to ensure their volumes don’t go any lower. Messaging and recommendations to policymakers need updating to better reflect new realities.”
Boutros, whose work with MPC included a campaign to convince the Liberal, Conservative, and New Democratic Parties to pledge a raise on the insured cap to $1.25 million prior to the 2021 federal election, highlighted the important role played by Canada’s mortgage industry in advocating for greater access to housing among Canadians.
“Increasing homeownership demand is not a 2023 priority for officials; ensuring Canadians don’t lose their homes is,” he said. “That is where the community is essential.”
What area would you like to see regulators working on more closely with the mortgage community in the year ahead? Let us know in the comments section below.
