Canada: New mortgage qualification rules, 2010: Why, what, & when in effect?
The new mortgage qualification rules were introduced to cool a hot Canadian housing real estate market. The rules are a pre-emptive measure intended to avoid a bubble (and later crash) in real estate. The government wants to make sure anybody buying a house can handle higher interest rates. Those rates, currently at record lows, are expected to go up later this year and into the future. The tighter mortgage rules include: Borrowers will need to qualify against a minimum standard 5-year fixed rate mortgage, even if they'll contract their mortgage at a lower or variable rate.  Previously, the 3-year fixed rate mortgage was used as the minimum qualification standard. The amount a homeowner can borrow in a refinanced mortgage drops to 90% of the home value, down from 95% of the home value.  A home is not meant to be an ATM machine. Anybody wanting to borrow to buy an investment property – i.e. a property that won't be their principal residence – will need a 20% downpayment instead of a 5% downpayment. The new rules go into effect April 19th, 2010.  However, according to the backgrounder (see below): Exceptions would be allowed after   April 19 where they are needed to   satisfy a binding purchase and sale,   financing, or refinancing agreement   entered into before April 19, 2010. Definitive information about the new rules can be found at the Department of Finance of Canada.  Specifically, refer to: Some additional news media sources:
I'm not sure the reasoning still holds though.  If you default on your student loan, your diploma doesn't get repossessed.  There's a signifiant moral hazard associated with student loans.  A mortgage on the other hand is around a very physical item.  Though I can still banks lobbying for better rules, that would be hugely in the consumers disadvantage. I had this problem when I finished my job in Canada in Sept 2013.   You'll likely have to open the account in person in Canada, at least if you don't already have a relationship with a broker there. DO NOT go to Virtual Brokers.  They told me that my US citizenship was no problem, but right before I left Canada to double check.  It wasn't until I asked specifically which US states they were licensed in that they realized they were licensed in NO US STATES. They told me that they'd freeze my account when I left. I then moved my (former) pension to a locked-in RRSP at BMO.  As of September 2010 BMO could handle residents of most US states, but it took some tooth pulling to get the list out of them.  However, after I flew to the USA, BMO called to demand more ID.  My account was frozen until I flew back to Canada in person just to show ID. Annoyed, I closed the BMO account and moved it to TD Waterhouse.  TD waterhouse can handle accounts for residents of all the US states EXCEPT Virginia, Louisiana, and Nebraska.  (I only got the complete list of exceptions when I made my first trade, since the guys at the trading desk are much more knowledgeable about such things than the guys in the branch.)  TD was extremely friendly about my USA citizenship/residence.  (Many Canadian brokers simply won't accept US residents, at least as of the end of 2013.) Whichever broker you choose, BRING LOTS MORE ID than they require.  Insist that they zerox it all. Make sure to include your social security card.  You don't want them to demand more ID after you've left the country, like BMO did.  They may even make such a move simply to get rid of US customers, because the FATCA is a pain for foreign banks. Some Canadian banks (RBC for instance), will accept the format  No spaces, no slashes. Transit number must be five digits, if it's not add a 0 to the front. Just had a situation where the European-based system would not accept anything but an IBAN, so I called my bank and that's what they confirmed.  I know this is super late, but thought I would leave it here for future generations to discover. Edit: See comments for an example. "I dislike this argument that government pressure to make bad loans is the origin of subprime loans.   In fact, the term subprime is because those type of loans can't be underwritten by the government.  Usually the concept of government forcing bad loans, is government forcing banks to give minorities and low-income people loans for their first houses.   The government requires w-2 income and a base credit score to procure these loans.  At the peak of the bubble, the majority of home sales were for investment purposes, not homeownership purposes.   Those who declared the housing market was wildly unstable (and who were proven right) were talking about the problem of mortgage brokers being incentivized to lie about a person not being qualified for prime government loans, in order to make more money by putting them in lucrative subprime loans (or simply advising them they were better off in subprime and could get cash out up front!).  Also, liar no-doc loans were booming and speculators and house flippers were getting multiple properties in order to flip them for profit.  Once upon a time these speculators would make sure they could rent out the house for the carrying costs if they needed to.  0 down, 0 interest meant a whole different speculatory ballgame.    Ah, but maybe these speculators wouldn't have anyone to sell to if low income people couldn't get prime loans from the gov?  All evidence points to them selling to other speculators until there was no fool left to hold the bag.  See: Miami, Las Vegas, etc.  EDIT:  I forget that the argument has hopscotched from Fannie &amp;Freddie, to the end of redlining, to the CRA, and now to changes made to the CRA, where the argument finally gains a bit of traction: &gt; Law professor Michael S. Barr, a Treasury Department official under President Clinton,[63][131] stated that approximately 50% of subprime loans were made by independent mortgage companies that were not regulated by the CRA, and another 25% to 30% came from only partially CRA regulated bank subsidiaries and affiliates. Barr noted that institutions fully regulated by CRA made ""perhaps one in four"" sub-prime loans, and that ""the worst and most widespread abuses occurred in the institutions with the least federal oversight""  Further, the discussion devolves into whether the idea and enthusiasm of the rest started as a seed from the regulated banks, how much removing risk by Wall Street with non-government backed home loans through credit instruments had its origination in the CRA, and how much of the failure of ratings agencies to properly rate those credit instruments has to do with the US government and the CRA and not regular Wall Street greediness.  So originally I stated ""no relationship"" but yes, once you get into the complexity of it all I'm sure we could find a way to say a global mania in speculation in real estate is due to the American government getting poor people into their first home, and generally has nothing to do with the human condition of wanting something for nothing and getting excited when the government allows you to sell blue sky returns to foolish speculators." Well, as far as anecdotal evidence goes, my SO is working on a undergraduate finance degree at U of T, and has been hired at the Canadian office of a large American bank, in a field related to IB.  That said, if it's possible to be hired at the Canadian office of an American bank, presumably it is possible to apply and 'cross-over' to an American branch in the future - all you need is to be able to get your foot in the door, and be re-hired to another position as an insider, with references from your MD, Director and Associate.  Another piece of anecdotal evidence is that many of her superiors have degrees in other subject areas. The reality is, they're looking for smart people - pedigree is probably reasonably unimportant.  I'm not sure if this information is transferable to work as a quant, though. In many ways, your discipline would be more technical, or skill based, and require less 'character' from the applicant, and more competency.  As for Montreal.. the only two schools pedigreed Americans know of are McGill and U of T, generally in that order (everyone will know of McGill, and about half of those people will know of U of T). I can imagine that either of the two schools would be an excellent choice - I am biased toward U of T for personal reasons, and also because it is located directly beside Bay Street, so the networking opportunities for the widest variety of international banks (and private wealth managers) are definitely there, but I wouldn't knock McGill, from a reputation perspective.   I think the reality is that while you should consider your options *carefully*, whatever option you choose will be based on a lot of over-thinking - it's unavoidable, and a good thing, but ultimately, I imagine, meaningless. If you're smart, driven and connected, you *will* get the job, regardless of which of those two schools you choose. "I did a little research and found the eligible investments for TFSAs. In this document under heading ""Shares of private and other corporations"", sub heading ""Shares of small business corporations"" there is clause about owning less than 10% share and less than $25000 total value of the corporation. Generally, a connected shareholder of a corporation (as  defined in subsection 4901(2) of > the Regulations) at any time  is a person who   owns, directly or indirectly, at that time,  10% or more of the shares   of any class of shares of the  corporation or of any other corporation   related to the  corporation.    However, where   • such a person is   dealing at arm's length with the  corporation or any other related   corporation; and   • the aggregate cost amount of all shares of the   corporation  or any other related corporation the person owns, or is    deemed to own, is less than $25,000 that person will not be a   connected shareholder of the  corporation. For purposes of the 10%   and $25,000 tests, the rules in the  definition of ìspecified   shareholderî in subsection 248(1)  apply with the result that certain   shares will be deemed to be  owned by the shareholder. For example, by   virtue of  paragraphs (a) and (b), respectively, of that definition,   an  annuitant, a beneficiary or a subscriber under a plan trust is    deemed to own the shares owned by a person with whom the  annuitant,   beneficiary or subscriber is not dealing at armís  length, as well as   the shares owned by the plan trust.  In addition, any share that  • the annuitant, beneficiary, or subscriber under a plan trust;  or • a person not dealing at arm's length with any of the above  has a right to acquire is also included in the calculation of the  percentage and   cost amount of the shares held for purposes  of the 10% and $25,000   tests pursuant to subsection  4901(2.2) of the Regulations." This is generally wrong. For the vast majority of the time that underqualified alt-a and option-arm mortgages were being written, Fannie and Freddie were not buying, and they were never huge holders of these mortgages. Fannie and Freddie have minimum qualifications standards. However, as time went on, Fannie and Freddie did load up on the securities (not the mortgages), which were of course still problematic.   But the liquidity crunch of 08 was not substantially contributed to by Fannie and Freddie. Capital requirements for a de novo bank, as opposed to an established one, are a real bitch.  Basically the government wont let you loan nearly as much of your money out.  You can't skirt this by buying an existing bank.  Regulators don't want upstarts making stupid loans and thus encouraging lower credit criteria systemwide.  Also Incumbents don't want more competition and they have lobbyists so I don't see this changing soon. "The Bank of Canada does not ""set"" the interest rates. They auction government debt, and then report what the average yield/interest rate was (rounded to 25 basis points). [The average yield of yesterday's auction of 3-month Treasury bills was 0.76%](http://www.bankofcanada.ca/rates/interest-rates/t-bill-yields/).  I don't know why the news tries to interpret what the BOC ""is trying to say"". BOC isn't saying anything - just reporting what happened, with some filler words." Let's look at the logical extreme. Two people get a house, no money down, 10 year mortgage. One moves out the day after the closing, and the gal left pays the full mortgage. Why in the world would the one who left be entitled to a dime?  You offer no information about the downpayment or amount paid during the time both lived there. That's the data needed to do any math. "It's OK... you can just admit you don't fully understand what happened...  Here's a quick run down:  1) Private banks (like Chase, Wells Fargo, etc.) start making bad loans. They do this intentionally because...  2) The bad loans are then bundled into what are called ""Mortgage Backed Securities"".  3) Ratings agencies like Standard and Poors rate these mortgage backed securities as AAA safe investments. Even though they know, and the banks know, they're junk.  4) Companies who don't (AIG) or can't (Fannie/Freddie) write sub prime mortgages are then sold bad mortgages as AAA rated investments.  5) The sales of investments are so popular and so profitable that the banks continue making more bad loans SOLELY so they can re-sell them as investments.  6) The laws preventing Freddie Mac and Fannie Mae from making sub prime loans are lifted and they start doing the same thing as everyone else, just before the collapse begins.  For most of the time these hijinks were going on, Freddie Mac and Fannie Mae were actually prevented from taking part." A security is a class of financial instrument you can trade on the market.  A share of stock is a kind of security, for example, as is a bond. In the case of your mortgage, what happens: You take out a loan for $180k.  The loan has two components. a.  The payment stream (meaning the principal and the interest) from the loan b.  The servicing of the loan, meaning the company who is responsible for accepting payments, giving the resulting income to whomever owns it. Many originating banks, such as my initial lender, do neither of these things - they sell the payment stream to a large bank or consortium (often Fannie Mae) and they also sell the servicing of the loan to another company. The payment stream is the primary value here (the servicing is worth essentially a tip off the top).  The originating bank lends $180k of their own money.  Then they have something that is worth some amount - say $450k total value, $15k per year for 30 years - and they sell it for however much they can get for it.  The actual value of $15k/year for 30 years is somewhere in between - less than $450k more than $180k - since there is risk involved, and the present value is far less.  The originating bank has the benefit of selling that they can then originate more mortgages (and make money off the fees) plus they can reduce their risk exposure. Then a security is created by the bigger bank, where they take a bunch of mortgages of different risk levels and group them together to make something with a very predictable risk quotient.  Very similar to insurance, really, except the other way around.  One mortage will either default or not at some % chance, but it's a one off thing - any good statistician will tell you that you don't do statistics on n=1.  One hundred mortgages, each with some risk level, will very consistently return a particular amount, within a certain error, and thus you have something that people are willing to pay money on the market for. So what, if anything, might this mean for those of us who still have those Countrywide mortgages?  BTW, my subprime mortgage is awesome. We rode out a bad year where the price shot up to $4,000/month. Today it's way down and we're paying only 2.5%. The uptick rule is gone, but it was weakly reintroduced in 2010, applied to all publicly traded equities: Under the terms of the rule, a circuit breaker would be triggered if a stock falls by 10% or more in a single day. At that point, short selling would only be allowed if the price is above the current national best bid, a restriction that would apply for the rest of the day and the whole of the following day. Derivatives are not yet restricted in such ways because of their spontaneous nature, requiring a short to increase supply; however, this latest rule widens options spreads during collapses because the exemption for hedging is now gone, and what's more a tool used by options market makers, shorting the underlying to offset positive delta, now has to go to the back of the selling line during a panic. Bonds are not restricted because for one there isn't much interest in shorting because bonds usually don't have enough variance to exceed the cost of borrowing, and many do not trade frequently enough because even the cost to trade bonds is expensive, so arranging a short in its entirety will be expensive.  The preferred method to short a bond is with swaps, swaptions, etc. "Canadian bubble is in a weird place.  The problem with the market is it doesn't take into account the increase in quality.  I lived in one of the frothiest places on the north side of Toronto.  When I first moved their the same bungalow that sold for $1mm + was about 400-450k.  What they don't mention in those articles is that there is a fair amount of LAND, and that the new owners will tear it down the day they take possession, and build a really large home on it.  That is why you see single dethatched homes in Toronto outpacing condos by a huge margin.  (or one reason anyway.  we have our green belt/intensification issues, and in Vancouver, they have natural intensification issues thanks to the mountains and the ocean.)  All that said, I was pretty sure I had bought at the height recently, but lo and behold prices continued to rise.  I think the only thing that will ""save"" us is the insured mortgages.  I mean there will be write offs, but not like what we saw in the US, as Canadian banks/and FIs are much more conservative.  I think China is the wild card in the Canadian RE market, at least on the condo side.  We don't have any good statistics about how many investors are off Canadian soil."