Canadian mortgage professionals polish image in wake of U.S. subprime mess
Published Monday December 1st, 2008
VANCOUVER, B.C. - The Canadian mortgage industry is polishing its image in the wake of the subprime mortgage meltdown south of the border by boosting its education standards and forcing new members to earn their stripes before landing a professional designation.
The move comes as the Canadian housing market continues to slow and credit conditions to obtain a mortgage tighten.
The Canadian Association of Accredited Mortgage Professionals, known as CAAMP, said Monday it has increased the amount of education required for its members by 20 per cent, and created a new category for newcomers, similar to an articling period in the legal profession.
New mortgage brokers must work in the industry for two years before they can apply for the Accredited Mortgage Professional, or AMP, designation.
"We cannot just be order takers," CAAMP chairman Pierre Martel told the organization's annual conference in Vancouver on Monday.
"We must embrace education ... professionalism ... and be the trusted experts."
CAAMP president and CEO Jim Murphy said in an interview that the new rules are intended to "raise the bar" for the industry, which is under pressure as a result of a real estate slowdown that some experts say could be as bad as the U.S. housing crisis.
Merrill Lynch said recently Canada's housing market is following the same troubled path that eventually led the US. market into a major downturn, but with a two year lag.
Murphy said Canada is different than the U.S., where about one-third of mortgages were in the risky subprime category, compared to just five per cent in Canada.
But he acknowledged the impact U.S. subprime crisis has spread to Canada.
"Things are different in Canada in terms of the overall market, but clearly we are being impacted ... . We have a credit crisis in Canada," Murphy said.
It its outlook, CAAMP predicts mortgage approval activity (including new mortgages, transfers and refinancings) to fall nearly 12 per cent to $193 billion in 2008, compared to $218 billion in 2007.
Approvals are forecast to fall another 10 per cent to $174 billion in 2009 and another 1.6 per cent in 2010 to $171 billion. That follows a growth rate of about 11.5 per cent annually for the three years ended August 2008.
In the past 15 years, residential mortgage credited grew by an average of 7.2 per cent annually in Canada, which is slightly faster than the 6.9 per cent growth rate for total household and business credit, according to statistics released Monday by CAAMP.
CIBC World Markets economist Benjamin Tal said he disagrees with the dim view from Merrill Lynch regarding the Canadian housing market because the ratio of house prices to income was much higher in the U.S. compared to Canada.
He said house prices surpassed income by about 25 per cent south of the border, compared to about seven-to-10 per cent in Canada. However, Tal said Canada is "getting close to a buyer's market" as listing rise, and prices to drop.
Tal said while mortgage rates may fall along with interest rates in the short term, the days of deep discounts are over.
"Maybe the new normal will be prime, maybe it will prime minus a quarter, maybe prime plus a quarter, I don't know, but it will not be prime minus 80 any time soon because this means we will go back to the days of extremely cheap risk, which I don't think is a good thing," Tal told the CAAMP conference Monday.
In the longer term, Tal believes interest rates will need to rise to finance a pending deficit.
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