Mortgage

Professionals
Canada
Grassroots
Advocacy Kit
 Purpose
Mortgage Professionals Canada is the national association representing the mortgage broker industry and
is the premier voice of Canadas mortgage broker channel and the leading authority on mortgage issues.

Mortgage Professionals Canada aims to help ensure an effective and efficient mortgage marketplace in
their communities, and throughout Canada. Mortgage Professionals Canda believes in a competitive
marketplace as it produces better options for Canadian consumers and increases the need for better
service delivery and products. The mortgage broker industry creates possibility, fuels the economy and
provides Canadians with choice when making the most important financial decisions many individuals will
encounter.

As an association, Mortgage Professionals Canada wants to solve challenges together with the federal
government by creating an effective and efficient mortgage marketplace, leveraging new innovation
initiatives, and raising awareness of mortgage broker industry among Canadians.

To promote greater success working with Parliamentarians, Mortgage Professionals Canada is introducing
the Parliamentary Partners Program. Parliamentary Partners engages members in Mortgage Professionals
Canadas advocacy on a more frequent and consistent basis. Unlike an annual Parliament Hill Day where
co-operators must be in Ottawa, the Program allows the association to leverage Mortgage Professionals
Canada members local connections in their ridings and communities year-round, engaging them in
advocacy on an ongoing basis and creating a pool of experienced citizen lobbyists on behalf of the
mortgage industry.

The Parliamentary Partners Program supports Mortgage Professionals Canada members at a grassroots
level to work and communicate with local Members of Parliament (MPs) and nominated federal candidates
in their riding. Developing a relationship with local MPs is an extremely powerful tool. Whether it be a
face-to-face formal meeting or an invitation to tour a facility or organization, meeting with MPs in person
is essential in establishing and fostering a lasting relationship.

Moreover, the Parliamentary Partners Program will allow Mortgage Professionals Canada to quickly
respond to new and emerging issues whether Parliament is in session or not. The Program will help
Mortgage Professionals Canada to engage MPs during the winter and summer months when members are
home in their local ridings and more accessible to meet with their constituents.

By working together we can make a difference!

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 Background and Objectives
Changes to Canadas Housing Regulations

Federal Finance Minister Morneau outlined mortgage insurance and

qualification changes.
1. All insured mortgages will now need to qualify at the Bank of Canada benchmark rate (4.64%) instead
of the contract rate offered on their commitment. This change is scheduled to come into effect on
October 17, 2016.

2. Portfolio (bulk) insurance must now meet the same criteria as those that are high ratio insured. This
change is scheduled to come into effect on November 30. This means that amortizations greater than
25 years, rental and investment properties and homes with values greater than $1M can no longer be
portfolio-insured.

3. Capital gains exemptions on principal residences will apply only to residents of Canada.

4. In addition, there is further discussion about sharing in risk that is currently borne in large part by the
three mortgage insurers. While high ratio customers and portfolio insurance funders pay for this risk, there
is discussion about sharing in the cost of losses beyond just the mortgage insurers. This in and of itself
could have significant implications. We will continue to monitor any discussion around this as well.

Frame the mortgage broker channel for the MP or government official you are
speaking with.
The mortgage Broker channel originates approximately 33% of all mortgages in Canada, and
approximately 50% of mortgages for first time buyers. This represents approximately $80 billion
We are an incredibly important segment of the economy and help maintain a healthy and competitive
marketplace
These changes were announced with no warning to our industry and almost no consultation.
State that we have concerns about the potential impacts and unintended consequences of these changes
for Canadian consumers.

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 Key Messages
How will this impact my customers?
1. A large contingent of borrowers may see their overall purchasing power artificially reduced by upwards
of 20%.
According to StatsCan, the average Canadian family earned $78,870 in 2014. Lets use this as the basis of a
hypothetical mortgage qualification, along with an estimated property tax bill of $2,000 annually and heating costs
of $200 a month. Current market rates for a fixed 5 year mortgage are as low as 2.29%. With good credit history,
the average Canadian family can afford to purchase a property worth $403,109 with a 5% down payment. Requiring
the family to qualify at the benchmark rate of 4.64%, they can afford to purchase a property worth $314,264. This
is a significant reduction is purchasing power and may force many middle class families to find housing further from
their places of work and family. An additional 2% interest rate stress test sounds small, but in application equates
to a 20% reduction in purchasing power.

2. These changes may increase the mortgage rates offered by many of the lenders who sell through
mortgage brokers, costing Canadians thousands more dollars through the life span of their mortgage.
Many of the lenders currently offering mortgages through brokers depend upon the insurance to securitize their
debt. In plain English, the government backing makes the mortgage investments easier to sell into the market.
Many of these lenders are smaller Canadian businesses that dont have the capital of the big six banks and therefore
cannot retain the loans on their own balance sheets. They must move the debt into the market place. Without
insurance, investors require higher yields (as a risk premium) thereby increasing the required mortgage rate charged
to the consumer.

3. There may be a reduction in the number of lenders in the Canadian marketplace, leading to less
competition and mortgage availability.
Since the large banks are sufficiently capitalized (have enough assets) to issue loans directly and retain them on their
books, they have less need for insurance. They can therefore continue to issue mortgages at lower rates hurting
the competiveness of the smaller lenders. The smaller lenders are therefore under threat and some may fold or
consolidate with others. In either case, the result is less choice for Canadian consumers. Additionally, the same
banks are trusted to set the mortgage qualification rate.

How will this impact the economy?

1. House prices may fall as a result of these changes.
Toronto and Vancouver have received much attention in the press, but the rest of Canada is in a considerably
different economic climate. House prices have seen mild appreciation or in some areas mild depreciation over the
last few years. Depressing middle class Canadians purchasing power will have an impact of housing affordability
that will see house prices fall. A reduction in the real value of their largest asset will also have psychological wealth
effect results, causing more people to spend less and save more, thereby slowing many Canadian economies
further. The risk the government is trying to mitigate, that Canadians find themselves after a price correction with a
larger mortgage than property value, could actually become a self-fulfilling prophecy following the implementation
of these changes.

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 P. 1

Suggestions
1. If the government is intent on applying a stress test for insured mortgages, use a mechanism to set
stress test published rates that are not dependent on the big six banks.

The current mechanism for setting the Bank of Canada posted five-year rate is to use the mode (most frequently
occurring) five-year posted rate of the Big Six Banks. This rate is somewhat arbitrary as it is rarely, if ever, used by
the banks to actually issue a mortgage. Relying on the banks to set and move these rates essentially places regulatory
authority in their hands. The Bank of Canada should consider setting benchmark rates based on other market
criteria, e.g.., current market rates for 5 or 10 year bonds with adjustments based upon a mortgagees risk.

2.Tier the differential between actual market rates and the stress test rate according to the term of the
mortgage.

On the same subject: The risk that a consumer will not be able to afford their debt level in the event of an interest
rate increase automatically reduces as the term of a mortgage gets longer. A consumer with a five-year mortgage
will not pay down as much principal by the end of the mortgage term as a customer in a seven-year mortgage.
Because the seven-year mortgage term customer will have a higher percentage of equity in their home, and
therefore less relative debt at the end of the term, the risk of a mortgage default is lower. As such, consider setting
benchmark rates that reflect the possible impact to a consumer of and interest rate spike while considering the
renewing mortgagees terms and earned equity to debt ratio.
Example

3.These rules are introduced only for government backed insured mortgages. For unity and to ensure the
same protections for all Canadians, we recommend OSFI set similar standards for non-insured mortgages
issued by lenders.

By virtue of these requirements being set as eligibility guidelines for insured mortgages, larger lenders may continue
to issue loans to individuals with a 20% or greater equity in their homes without applying the stress test criteria by
virtue of there being no need to insure the loan. Without OSFI also introducing similar requirements, larger lenders
will find themselves with a competitive advantage over smaller lenders, an outcome that contravenes the intent of
the Canada Mortgage Bond system, as described directly on CHMCs website.

In 2001, CMHC introduced Canada Mortgage Bonds (CMB), an attractive, high-quality and simple investment
option that provides reliable and cost-effective mortgage funding for lenders. Small lenders in particular, which
have limited funding channels, have benefitted from the ability to access this Program. This allows them to compete
more effectively with larger financial institutions. Competition among a wide range of mortgage lenders supports
innovation and leads to more and better choices for Canadian borrowers.
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 Support and Next Steps

Once you have volunteered to represent Mortgage Professionals Canada as a Parliamentary Partner, you
will receive a follow-up call from Impact Public Affairs, Mortgage Professionals Canadas public affairs
consultants, to facilitate your participation and to answer any questions you many have about the program.
We will then connect you with your Member of Parliament (MP) or nominated candidate(s) to secure a
meeting in your riding that it suitable for both of your schedules.

We will provide each Parliamentary Partner with a personalized toolkit including a meeting guide on how
to meet with your MP, background issue papers, a personalized MP or candidate biography, tip sheet and
feedback form. These resources will properly prepare you for your meeting(s).

Following the meeting, please fax or email your feedback form to 613-230-2669 or email it to Impacts
staff. From this information, our team will be able to track which MPs will be fruitful allies and potential
champions on Parliament Hill, as well as organize future meetings and partnership opportunities.

The Parliamentary Partners Program will help to raise Mortgage Professionals

Canadas profile and influence with the federal government year-round!

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 Meeting Guide

Having a meeting with your MP provides and opportunity to educate him/her

about yourself, your business and your concerns.

1. Keep in mind that most MPs will afford you only 15-30 minutes, so you should be brief and to
the point. If there are two or more individuals at the meeting, you should decide on a principal
spokesperson to handle the main points. Keep in mind, however, all individuals should feel free to
comment at any time.
2. Open your meetings by thanking the MP for having taken the time from their busy schedule to meet
with you and discuss this important issue.
3. Introduce yourself by giving your name, title and the business you represent.
4. Say a few words about the purpose and aim of your meeting: Use your key message (outlined above) as
your guide.
5. Note that you will be reporting on your meeting to other Mortgage Professionals Canada members and
employees in his or her riding.
6. Stress the importance of your companys contribution to their local community through philanthropic
means and your contribution to the local economy within the riding as a small business.
7. Briefly summarize the key points on the issue(s) you are raising with the MP. Key messages are
included in your kit. Make sure to add that if they have any questions, to not hesitate to either
personally contact you, or an Mortgage Professionals Canada Executive.
8. Complete the De-Briefing Questionnaire after the meeting and return it by fax to (613) 230-
2669 or by e-mail, ashley@impactcanada.com.

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 De-Briefing Questionnaire
Your Name: _______________________________________________________________

Company You Represent: ____________________________________________________

Business Address: __________________________________________________________

Email: ___________________________ Telephone Number: _______________________

Name of MP that you met with: _______________________________________________

Constituency: _________________________ Date of Meeting: _____________________

Party of MP: _________________________ Duration of Meeting: ___________________

I found this individual to be:

Knowledgeable of the issues facing Canadas mortgage industry Yes No

Supportive of our key messages Yes No

Interested in more information Yes No

Additional Comments: ______________________________________________________

__________________________________________________________________________

__________________________________________________________________________

Please complete and return by fax to (613) 230-2669 or by e-mail

ashley@impactcanada.com

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