The Canada Mortgage and Housing Corporation (CMHC) has been asking realtors for months to keep homebuyers in the dark about whether the properties it sells are part of a foreclosure, the National Post reported Wednesday morning.
The story comes from journalist Garry Marr who says the move is part of national CMHC policy, which, Marr explains, upset Quebec realtors who were worried that hiding foreclosure information would be unethical.
And so the Quebec Federation of Real Estate Boards challenged CMHC on the policy. The Post quotes a statement the Quebec group sent to its members:
“Because the repossession field is currently a mandatory field in the brokerage system you have no choice by to indicate ‘no’, which goes against ethical rules stipulating that real estate brokers are obliged to publish information that is truthful and verified.”
The Quebec federation and the CMHC resolved the issue by making it no longer mandatory to reflect the foreclosure status of a home, based on the seller’s instructions.
“The issue raises a larger concern about why CMHC is acting now to tighten up its practices for foreclosures,” Marr writes.
Is the Crown corporation simply being prudent, not letting potential buyers know a property is part of a distressed sell so they can put in a low-ball bid? Or are they getting things in order in case the market collapses and they are forced to sell properties that are backed by government insurance?
“In Canada, anyone buying a home with less than 20 per cent down and borrowing money from financial institution covered by the Bank Act must get mortgage default insurance. CMHC, which controls about 75 per cent of the insurance market, is ultimately backed 100 per cent by the federal government,” the article explains.
By limiting the information on whether a property is part of foreclosure, the Crown corporation could avoid a scenerio where the buyer knows it has to sell. In the US, foreclosed properties have sold at big discounts, Marr points out.
The CMHC responds
By Wednesday afternoon, CMHC vice president Mark McInnis issued a statement on the Crown corporation’s website “to clarify a number of inaccuracies in Garry Marr’s article.”
McInnis says there is no legal requirement that the seller disclose the reason the property is being sold, and that the CMHC has not directed realtors to breach any legal or ethical standards.
“When CMHC assumes ownership of a property due to borrower default it lists the property using a licensed real estate broker. In an effort to seek the best return, CMHC requests that brokers do not include, on the property listing, that a home is a foreclosure,” McInnis’ statement reads.
“The fact that CMHC is the seller and the reason we are selling is always disclosed to prospective purchasers who are considering an offer on the property,” it continues.
To be fair, this is something Marr noted at the end of his article. Back to the Post:
The Quebec Federation of Real Estate Boards, while leaving brokers the option about publishing the information, indicated brokers will ultimately tell people CMHC is behind the sale when asked.
“The broker has to give the information once anyone is interested in that property,” said Chantal de Repentigny, assistant director of media relations with the federation. “The only thing that has changed is they have the choice to do it on the listing.”
As for the “situation in Quebec,” McInnis says the Quebec federation uses an electronic listing form that has a mandatory field for repossession. The federation was advised, McInnis says, by the Organisme d’autoréglementation du courtage immobilier du Québec (OACIQ) — the group responsible for enforcing Quebec’s Real Estate Brokerage Act — that the electronic listing form was no longer mandatory.
Again, this is something Marr pointed out when he wrote: “The two sides resolved the issue by making it no longer mandatory to reflect the foreclosure status of a home, based on the seller’s instructions.”
So here’s a question: does the foreclosure status even matter if the CMHC is the seller — or should that fact make it obvious that the home is a repossession?