Scotiabank Strategy & Financial Objectives
Housing Market Structural Differences vs. U.S.
Regulation
and taxation
Canada
Mortgage interest not tax deductible
Full recourse against borrowers in most provinces (in Alberta and
Saskatchewan, recourse is only to the value of property)
• Ability to foreclose on non-performing mortgages with no stay periods
Mandatory default insurance for any mortgage with Loan-to-value >80%
CMHC insurance backed by the government of Canada (AAA). Private
insurers are 90% government backed
Insurance available for homes up to $1 million
Premium is payable upfront by the customer
Covers full amount for life of mortgage
• Customers with LTV > 80% must qualify at a 5-year fixed rate for variable
or less than 5-year term mortgages
•
Re-financing cap of 80% on non-insured mortgages
• Maximum 25-year amortization on mortgages with LTV > 80%
Maximum 30-year amortization on conventional (LTV < 80%) mortgages
Down payment of > 20% required for non-owner occupied properties
U.S.
Tax deductible mortgage interest
creates incentive to borrow and
delay repayment
Lenders have limited recourse in
most states
90 day to 1 year stay period to
foreclose on non-performing
mortgages
•
No regulatory LTV limit
•
Private insurers are not
government backed
Product
.
Conservative product offerings, fixed or variable rate options
Underwriting
• Terms usually 3 or 5 years, renewable at maturity
Extensive documentation and strong standards
40
40
Can include exotic products
(adjustable rate mortgages,
interest only)
30-year term most common
Wide range of documentation and
underwriting requirements
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