Tax Code Changes – Submission Guidelines

Federal Finance Minister Morneau is currently conducting a public consultation regarding proposed changes to tax laws related to private corporations. If our business is privately incorporated you may be impacted.

Mortgage Professionals Canada will be providing a detailed response to the Department of Finance outlining our concerns with the proposed changes based on member feedback. To ensure our collective voice has the most significant impact possible, we encourage you to submit your own personal story describing how these changes will impact your business, your employees, and your retirement and succession planning.

We have prepared some general guidelines to assist you with your submission. We also suggest that you send a copy of your submission to your local Member of Parliament (MP). To locate your local MP click here.

Structural Guidelines:

  • Make it personal
    • include examples of the real life consequences theses changes will have on your business e.g. will this mean you will lay off employees? will this prevent aan expansion? will you be forced to change careers?
    • provide specific examples and statistics on how the changes impact you
  • Be respectful
    • stick to the facts
    • avoid being overly emotional
    • avoid being confrontational by attacking their motives for making the changes
  • Be concise
    • responses should not exceed two pages

Key Messages
If you do not wish to share your personal circumstance or are looking for some broader arguments to make, here are some high-level points that may resonate the most:

  • The proposed changes are complex and administratively burdensome. A 75-day discussion window - over the summer - is too short of a consultation timeline.
  • The proposals represent the most significant tax changes we have seen in years and have the potential of severe negative impacts on small business in Canada.
  • These changes do not adequately take into account the risks that entrepreneurs take to start a business or the current tax system that is set up to account for those risks.
  • It is unfair to characterize small business owners utilizing the legal mechanisms available as somehow cheating the tax system.
  • Theses changes are in addition to a number of regulatory changes to the mortgage market and will further negatively impact my business’s ability to compete with larger financial institutions.
  • These changes do not take into account the cyclicality of my business and impedes my ability to put capital away in lucrative years to help offset the leaner ones.
  • My investment in my business over the years, much of it in the form of employee wages, has reduced my personal timeline to save for retirement. Reducing my ability to save now severely penalizes me for having opened a business and created jobs. With the proposed changes, I may have been better off working as a salaried employee and in doing so, not contributing to the growth of the economy in the same degree as I do now.

Recent Federal Mortgage Eligibility Changes

Who We Are:

Mortgage Professionals Canada is an industry association whose members include mortgage brokers, mortgage lenders, mortgage insurers and industry service providers. We have over 11,500 individual members and over 1,000 businesses across Canada.

The mortgage broker channel originates approximately 33% of all mortgages in Canada and approximately 50% of mortgages for first-time home buyers. This represents approximately $80 billion dollars in economic activity.

What the Changes Are:

  • All insured mortgages now need to be qualified at either the Bank of Canada benchmark rate (currently 4.64%) or the contract rate offered on the homebuyer’s commitment, whichever is greater.
  • Portfolio (‘bulk’) insurance must now meet the same criteria as those that are high-ratio insured. This means that amortizations greater than 25 years, rental and investment properties, refinances, and homes with values greater than $1M can no longer be portfolio-insured.
  • The proposed ‘risk-sharing’ model for lenders to share in losses of insured mortgage claims.
  • New capital requirements as of January 1, 2017 that require mortgage insurers to increase the amount of capital they need to hold in reserve.
  • The increase announced by CMHC for insurance premiums that consumers pay on unconventional mortgages. In some loan-to-value categories, premiums will be increasing by more than a whole percentage point of the value of the mortgage, effective March 17, 2017. This is the third increase in three years.


Canadians elected the government on a mandate to grow the economy for the middle class. Support for middle-class home ownership is an important way for to achieve middle-class growth. In fact, the 2015 Liberal platform recognized this in committing to “considering all policy tools that could keep home ownership within reach for more Canadians” (Liberal Platform, 2015, page 7,8). We would like you to call on the government to honour that commitment instead of making home ownership more difficult and further out of reach for more middle-class Canadians.

We are concerned with the negative economic impact that these changes are having on housing activity in Canada. We are also very concerned with the additional costs that these changes will place on the Canadian middle class by way of higher interest rates and reduced purchasing power. We have already seen banks increase their mortgage prime rates in part because of these changes, which will cost Canadians thousands more over the course of their mortgage term.

The reduction of portfolio mortgage insurance eligibility, in addition to the increase in premiums for this insurance due to OSFI’s recent increased requirements for capital adequacy is disproportionately affecting the competitive positioning of small and mid-sized lenders. These changes are reducing mortgage competition and affordability for Canadian homeowners and would-be homeowners.

Our membership has been vocal with their displeasure regarding the impacts that these changes are having, especially outside of the Toronto and Vancouver markets. There is a real and growing resentment that the activity in Toronto and Vancouver is negatively and unfairly impacting those in the rest of the country. We believe moving ahead with a risk sharing provision would be an additional burden on the market and will further the divide between rural and urban Canada.

The Canadian economy has seen only modest growth in 2016, especially for the middle class, and the housing sector is one of the few strong performers that has been driving this growth. We are concerned that, as the Bank of Canada noted, the introduction of the new rules will reduce growth in the Canadian economy, which will hurt the middle class.

What We Are Asking the Government to Consider:

  1. That in light of all of the changes that have been made recently and the uncertainty that the American election has brought that the government slow down and hit pause on the measures yet to be implemented, most specifically its proposed risk sharing provision. We believe it prudent for the government to take 12-18 months to examine and assess the impact of these changes.
  2. That the government adjust the November 30th change to allow for refinances to be included in portfolio insurance. If 80% LTV is unpalatable, please consider reducing the threshold to 75% or 70% rather than removing these products’ eligibility altogether.
  3. That the government decouple the stress test rate from the posted Bank of Canada rate. Instead, set the stress test based on a market rate, either by looking at the Canadian ten-year bond yields or having the Bank of Canada set a rate that is independent of the average of the banks posted rates.
  4. For the sake of ensuring competition is maintained in as fair a manner as possible, OSFI should require all mortgages to qualify at the stress test rate, not just insured mortgages.

Additional Resources:

A Statement From The President On Recent Federal Government Announcement

In early October, Finance Minister Morneau outlined mortgage insurance and qualification changes effective October 17 and November 30 respectively. Paul Taylor, President and CEO of Mortgage Professionals Canada released the following statement:

“Our members are concerned about the negative impact the changes to mortgage lending will have on Canadians ability to afford a mortgage and the negative consequences for the Canadian economy. These changes were announced with no warning to our industry and almost no consultation.

The qualification changes requiring all ‘insured’ (bulk or high ratio) loans to meet 25-year amortizations and be qualified at the Bank of Canada benchmark rate (currently 4.64%) will prevent many Canadians from becoming homeowners. It will also likely raise interest rates which will increase the cost of home ownership in Canada.

Additionally, the changes to mortgage insurance eligibility significantly impact our monoline lenders. It has the potential to severely restrict their access to capital and their ability to compete with the traditional banks. Additionally, the million-dollar purchase price limit effectively excludes many Canadian lenders from the highest property value marketplaces where consumers arguably have the greatest need for funding competition, accessibility, and availability.

As we continue to study the potential impacts, we have been in communication with the Department of Finance and are discussing the impact and unintended consequences to the marketplace these changes will bring.”

Letter to Financial Sector Policy Branch – June 24, 2016

With housing affordability and availability in Vancouver receiving increased attention in the media, Mortgage Professionals Canada has been concerned that government is considering making changes to mortgage eligibility. While we understand that cooling the escalating prices in Vancouver and Toronto is a need and desire of local residents, applying national strategies as a result of two regional markets could lead to unintended consequences.The Canadian economy is not uniform, and many regions in Canada are struggling to find economic growth and seeing prices stagnating or falling. We made a request to the Financial Sector Policy Branch to discuss potential strategies and their impact. The meeting is scheduled for August 8.

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