OSFI rule changes may lead to spike in reverse mortgages

With the expectation that first-time homebuyers will be shuttered out of the housing market, thereby reducing the number of people to whom seniors can sell their homes, reverse mortgages might begin surging next year.

OSFI’s new lending rules are widely expected to affect first-time buyers more than any other buying cohort, and the ripple effect it can have through the marketplace could result in seniors being stuck in their homes, rather than pulling out equity and retiring.

Yvonne Ziomecki, the executive vice president of marketing and sales at HomEquity Bank, says the new borrowing rules coming into effect on January 1 will give the reverse mortgage market an indirect boost.

“If there are less people qualifying for conventional mortgages, therefore, there are less buyers in the marketplace, then our clients 55 years and older will have fewer buyers to sell to,” she said. “There are [younger] buyers in the market who may not be able to qualify under the new rules. They may be looking to their family for a larger down payment so that they look better to lenders.”

This, too, could be a boon for the reverse mortgage industry. It’s no secret that many millennial buyers rely on the bank of mom and dad to help them afford their down payments, and with home value appreciation skyrocketing in the Vancouver and Toronto areas, many homeowners are dipping into their homes’ equity to help their kids get a start.

Ziomecki says that we’ll see more of that with the new rules.

“It’s not uncommon to get a Toronto or Greater Vancouver Area family who lives in a $1mln-plus home and take out equity and give it to either adult children or grandchildren,” said Ziomecki. “We’re also seeing the bank of grandma and grandpa, who want to see the young ones enjoy their lifestyles.

“With the new rules coming in, we’re going to see more and more of that. It’s becoming more restrictive for younger buyers to get into the market, and considering older generations are sitting on so much equity in their homes, it’s a smart way to unlock equity and help the younger ones.”

But Shane Bruce, founder of the ACME Group of Companies, is doubtful that seniors will be insulated from any harmful effects the OSFI rule changes might have on the housing market. While first-time buyers are expected to struggle with the new underwriting rules, Bruce expects there to be a domino effect in the housing market.

If anybody loses buying power, sellers will have a harder time unloading their homes, he says—and it won’t matter whether or not they’re seniors.

“Certainly for first-time buyer will struggle, but what does it do to all these people who are homeowners?” said Bruce. “The government talks about how real estate equity is a major component of seniors’ retirements, so when you’re tapping their major asset and reducing how much it’s increasing in value, then I think they do get affected. They’re in their golden years and their home is not worth as much as they expected it to be, and it will underfund their retirement.”

Ontario, B.C. mull pre-construction condo sales registry amid CRA crackdown

Ontario and B.C.'s finance ministers say they are open to the idea of a registry of pre- construction condominium sales as the Canada Revenue Agency ramps up efforts to find tax evaders who earn money flipping condos still being built.

Ontario Finance Minister Charles Sousa says the government wants the CRA to enforce disclosure of so-called assignment sales or shadow flipping, where a buyer purchases a condo from a developer and sells it to another buyer before it is completed, to prevent tax avoidance of any capital gains.

His B.C. counterpart, Carole James, says the province has made some changes to allow for better sharing of information with the federal government, and is looking into ways it can assist the federal government in their investigation and audits.

She says the provincial government is discussing a registry of condominium presales and assignment sales, which some have suggested might help the problem, but stresses it's one of many possible options.

Sousa says he's supportive of anything, including a registry, that enables the government to ensure full disclosure.

The CRA said Oct. 24 it is analyzing 2,810 transactions of pre-construction condo flipping in Toronto and may carry out audits to find tax evaders. The agency says real estate deals in the hot housing markets in the Toronto and Vancouver areas have been the subject of greater scrutiny.

Condo disputes can now be resolved online

Ontario's 1.6 million condo residents have a new avenue for settling disputes in their buildings and neighbourhoods. Recently, the province launched its first online tribunal to help resolve the complaints that arise in 10,000 condo corporations.

The Condominium Authority Tribunal (CAT) provides direct access to mediators and adjudicators in a stepped process that begins with a $25 fee, although to start, it is only looking at issues related to accessing condo records.

In its first week, only two disputes had been registered with the tribunal.

It is the first online-only tribunal in the province but it's a model that other agencies might consider in the future, said Tom Wright, chair of the Condominium Authority of Ontario (CAO), which oversees the new system.

The CAO will also be administering a new training program to condo directors.

Only 2,700 of the nearly 10,000 condominium corporations have registered with the CAO to date. But all condo corporations in the province will be required to register by Dec. 31.

The Toronto Star spoke to Wright about how the tribunal and training will work. The following is an edited version of that conversation.

Q. Why does Ontario need this kind of tribunal?

A. There was a need for an easier, more cost-effective way to resolve disputes that arose in a condo corporations and communities.

One of the features that will make it more accessible is that it's exclusively online. You're not bound by office hours or required to show up at a hearing.

It is more cost-effective in terms of resolving disputes as quickly and efficiently as possible.

Q. How were condo disputes handled in the past?

A. Typically these disputes would require someone taking the matter to the courts, often a costly and lengthy avenue. Sometimes a mediator would be brought in, but that would require the agreement of all parties and, again, it could be costly. The fact that a condo corporation would have to pay means the owners are footing the bill.

Q. What kind of issues will the tribunal handle?

A. To begin, the tribunal will only deal with condo record complaints. That will likely be expanded to other kinds of disputes in the future but we don't know what kind yet.

Q. How does it work?

A. It's a three-phase process. The first stage is negotiation. It costs $25 and gives users access to the system, allowing them to try and resolve the dispute themselves. If you are unable to do that, you move onto Stage 2: mediation. That costs $50. A tribunal mediator then becomes involved in trying to resolve the matter. If that still doesn't work, you move on to Stage 3: adjudication for a $125 fee. At that point, a tribunal member, who is a different individual than the mediator, decides how the dispute will be resolved.

We recommend that condo owners try and resolve common issues on their own. In the case of noise complaints, for example, the CAO recommends occupants note the date and time of the noise to help identify the source and contact their condo board directly; then follow-up in writing. The CAO provides templates for letters and emails.

Q. If someone takes a dispute to Stage 2, which is mediation, is the other party compelled to come to the table?

A. No. But the dispute can still move through the process. Notice is given all along the way to the other party. If they choose not to attend, the matter can still proceed to a decision. It's a bit like a court where someone issues a claim and the other side doesn't show up. The court can still make a decision. The same thing applies here. Otherwise, it wouldn't work. People would just assume that if they didn't show up or didn't participate, they wouldn't be subject to a tribunal decision.

Q. The tribunal is only resolving records disputes to begin with. What does this mean?

A. This ties into what are being called core records. Those include the standard declarations, bylaws, budgets, amendments, financial statements, meeting minutes and reserve fund studies. If a condo owner wants access to those records and it is not provided, they can move to the tribunal process.

Q. How long before you move past this pilot phase to resolving other kinds of disputes?

A. That's up to the government. I can't give you a date, but the intention is clear this will be an ongoing process. This is so new we're going to be learning a lot of things. Once we have tackled this area it opens up a lot of possibilities.

Q. What kind of disputes would never come to the tribunal?

A. Anything to do with a breach of the Condo Act would be beyond the tribunal's jurisdiction. Things like directors failing to disclose an interest in a contract would be beyond the condo authority's mandate.

Q. Do mediators and adjudicators do the same job and what are their qualifications?

A. We have recruited and trained 15 people who are known as tribunal members. They have a range of experience in mediation, adjudication, condo law and some who have lived in condos. These are experienced people who know how tribunals work but also have an interest in following a new path in terms of the online nature of this tribunal.

It's important to know that members, who have mediated disputes at the Stage 2 part of the system, would not be adjudicating the same dispute at Stage 3. You have a fresh person looking at it.

Q. The CAO is also in charge of a new training program for condo board directors. How will that work?

A. Any director who is elected to a condo board after Nov. 1 will be obligated to take the free, online training within six months of their election. The training, which focuses on the obligations of directors and background on the Condo Act, can be done in under five hours during the six-month period.

Q. Volunteering on a condo board is already time-consuming, who will want the job with this additional required demand?

A. There will be people who genuinely want to do this. It's a question that has come up, but at the end of the day, the feedback we've had from more than 300 people who actually did the training was that it is helpful and positive.

Things Exceptional People Say

Want to make a huge difference in your own or other’s lives? Here are things you should say every day - to your employees, colleagues, family members, friends, and everyone you care about:

1. “Here’s what I’m thinking.” You’re in charge but that doesn’t mean you’re smarter, savvier, or more insightful than everyone else. Authority can make you “right,” but collaboration makes everyone right.

2. “I was wrong.” I once came up with what I thought was an awesome improvement plan. But a few weeks later, I had to say, “I know you didn’t think this would work, and you were right. I was wrong.” When you’re wrong just say you’re wrong.

3. “That was awesome.” No one gets enough praise. Pick someone - pick anyone - who does or did something well and say, “Wow, that was great how you…” Praise is a gift that costs the giver nothing but is priceless to the recipient.

4. “You’re welcome.” Make eye contact and say, “Thank you.” Or say, “You’re welcome. I was glad to do it.” Don’t let thanks, praise or congratulations, be all about you. Always make praise about the other person.

5. “Can you help me?” When you need help, just say, sincerely and humbly, “Can you help me?” And in the process you’ll show vulnerability, respect, and a willingness to listen - making you a great leader and a great friend.

6. “I’m sorry.” We all have things to apologize for: words, actions, omissions, failings… just say you’re sorry. Never follow with a disclaimer like, “But I was really mad, because…” Say you’re sorry, say why you’re sorry, and take all the blame. Then you both get to make the freshest of fresh starts.

7. “Can you show me?” Knowing what to do helps, but knowing how or why to do it means everything. Don’t just ask for input. Ask to be taught or trained or shown. Then you both win.

8. “Let me give you a hand.” Everyone needs help but often hesitate to ask for help. Find something you can help with. Be specific. Offer in a way that feels collaborative, not patronizing or gratuitous. Model the behavior you want. Then actually roll up your sleeves and help.

9. “I love you.” No, not at work, but everywhere you mean it - and every time you feel it.

10. Nothing. Sometimes the best thing to say is nothing at all. If you’re upset, frustrated, or angry, stay quiet. Be quiet until you know exactly what to say - and exactly what affect your words will have.