Nowhere do you hear more mortgage horror stories than in the Wild West of private lending.

Stories abound of private lenders hitting borrowers with egregious fees or suddenly demanding repayment from borrowers who've paid as agreed but have few other options. Indeed, while private lenders are a lifeline to some borrowers, they're perilous if you get in bed with the wrong one.

Equitable Bank wants to help Canadians access the right lender. It sees a need to make private lending more transparent and reliable. So, this week, it's launching a new 40-year amortized mortgage, stress-tested at the contract rate.

The big question

How can an OSFI-regulated lender sell mortgages that don't meet OSFI stress test and amortization standards?

The Competition Bureau fed Canadians to the wolves when approving RBC's takeover of HSBC, and Conservative Leader Pierre Poilievre wants people to know it.

“We have far too much" concentration in mortgage lending, Poilievre told BNN Bloomberg today. "We have these monstrous, government-protected behemoths that dominate 90% of the mortgage market, meaning very little choice for consumers."

“Competition does not happen when the biggest player simply swallows the seventh-biggest player and Canadians are left paying the price.”

As MLN outlined last month, the Competition Bureau failed in its public analysis of HSBC's competitive impact on the mortgage market. Despite acknowledging HSBC's role in stirring up competition—a point no one's arguing—the Bureau insists Big 6 banks are usually too busy competing amongst themselves to pay heed to little ol' HSBC. Thus, HSBC's disappearance "is not likely to result in substantial lessening or prevention of competition," regulators claim.

It's hard to imagine a weaker justification to reduce competition from Canada's supposed competition protector. And note the subjective cover-their-backs qualifying language: "likely" and "substantial."

Poilievre noted that when RBC gulps down HSBC, pending Minister of Finance approval, HSBC's leading mortgage rates "will obviously disappear." He suggested the Finance Minister should force HSBC to sell itself to another non-Big 6 institution, one that doesn't reduce competition. Another option would be requiring RBC to spin off HSBC's Canada's mortgage arm.

Canadians have been forced to "take it" from the big banks, Poilievre says. Regardless of one's political leanings, it's hard to argue that HSBC isn't the most influential, consistently transparent, uninsured rate leader there is. Apart from brokers, no one else keeps the oligopoly as much on its toes.

The Cross-Border Implications of Runaway Treasury Yields

There's no mystery to how rate cycles usually work.

Policy rates go up; inflation comes down in a few years, then rates drop.

That's how it's supposed to work. But, investors worldwide are worried that this time may be different. To increasingly skittish U.S. bondholders, this doesn't look like a textbook cycle.

Buried in OSFI's consultation feedback on Monday was this line:

"Insured borrowers...are exempt from the re-application of the MQR when switching lenders at renewal."

Most mortgage advisors know that this switch exemption applies to grandfathered mortgages—e.g., insured mortgages that closed before November 2016. But, hold onto your amortization tables, folks, because here's a lesser-known fact that's leaving even the savviest mortgage gurus scratching their heads.

Every month, Bay Street economists play a game of economic bingo, and this month, they had their dabbers ready for a 4.0% inflation print. Instead, StatsCan pleasantly surprised us with 'just' 3.8%.

Almost all of Canada's economist herd is now moving in the same direction, predicting no change at the Bank of Canada's Oct. 25 rate meeting. Most forecast the next BoC move will be a cut.

Meanwhile, bond traders played their own game of Rate Hike roulette, slashing rate increase probabilities. By today's close, the #OIS# ball had landed on a 15% chance of a 25 bps hike next week.

But the bond market doesn't want us celebrating a BoC pause too wildly. The swaps market, often the party pooper, still sees a 70% chance of one more hike by next March. There are at least five party crashers convincing the market we haven't peaked on rates yet:

It turns out nine months is not only enough time to make a baby, it's enough time to answer regulatory feedback. After three quarters of nail-biting anticipation, Canada's bank regulator has replied to feedback on the B-20 mortgage guidelines it proposed in January.

For those new to this story, OSFI is planning new rules (they call them guidelines) that make it harder for those with bigger debt loads to get a mortgage. The initiatives pertain specifically to uninsured mortgage underwriting at federally regulated financial institutions (FRFIs). Depending on what OSFI finally decrees, the implications could be significant for home prices, lender volumes and the options available to individual borrowers.

"Stakeholders were generally not supportive of additional debt serviceability measures," OSFI said today. "A key concern raised was the disproportionate impact that new, industry-wide measures could have on smaller institutions with unique business models."

"We believe additional measures are needed to mitigate the underlying vulnerability of a buildup in highly indebted borrowers," OSFI summarized. "We will therefore pursue targeted supervisory actions that will aim to limit FRFIs’ individual exposures to high household indebtedness over time."

Here's a quick summary of OSFI's responses and more on what the regulator has up its sleeve:

On Thursday, Canada's banking watchdog decided to throw some light on its looming mortgage policy changes.

OSFI hinted that one major mortgage underwriting restriction may not come to pass after all. If that proves true, the mortgage industry could breathe a bigger sigh of relief than a politician after a successful cover-up.

Here's what the regulator said...

Watch bond yields long enough, and you learn to expect surprises.

This time, however, it was one of the worst types of surprises: a terrorist-led atrocity.

The grim tragedy in Israel on Saturday blindsided bond yields, compelling global traders to reverse course and scramble into government bonds. Investors' intention, of course, was safety, so they fled to the financial world's #1 safe haven, U.S. Treasuries. That demand spilled over into government debt worldwide, pummeling yields (yields drop when bond prices rise).

The move in yields was forceful (see chart below):

For decades, homeowners have used leveraged investing techniques like the Smith Manoeuvre (SM) to turn dull old mortgages into tax-deductible debt, pay off those mortgages quicker and build more retirement assets.

Some of you use the SM yourself — or have sold mortgages (or want to sell mortgages) to people who use it.

If you're one of these people, read on because higher interest rates and regulations have altered the landscape. MLN spoke to three leveraged investing experts to get their updated takes and best practices:

• Financial planner and tax accountant Ed Rempel (link)
• Financial planner Jason Heath (link)
• Smith Manoeuvre Advisor Robinson Smith (link)

What's new/changing?

Compared to 2002, when Fraser Smith first popularized the strategy, two fundamental factors have changed, and both impact one's probability of success with the Smith Manoeuvre.

The cat's out of the bag. All the monetary tightening to date may not be enough—not if today's stunning job growth is any indication.

But don't worry, "just sit tight," central banks advise us. "Monetary policy takes time" — like waiting for your internet to load a video in the 90s.

Okay, sure, but those same central bankers have virtually no control over two critical drivers of today's hot employment data: fiscal and immigration policy (more on those below).

Markets have been holding their breath for months, waiting for North America's economies to roll over. And from the looks of today's Canadian/American labour numbers, they may start turning blue pretty soon. There's clearly more work to be done.

Remember Properly, that realty site that made guaranteed offers to home sellers?

What a great idea that was...until it wasn't.

Earlier this year, Properly ditched its "Sale Assurance" offering, its claim to fame, due to “unprecedented volatility in the Canadian housing market.” And there went its dreams of "transforming" the Canadian real estate industry.

When the curtains finally closed, Properly was sold for its most valuable remaining asset: its website. And, swooping in to scoop that up—allegedly for a bargain—was none other than online mortgage provider Pine.ca.

Here's what we know about the deal and the mortgage strategy behind it...

The other day, I heard a bond trader irreverently explain bond market action by coining the acronym: ISS.

a.k.a. "It's supply, stupid."

What it means is that bond traders are rapidly recalibrating their rate expectations, given the avalanche of supply hitting the government debt market, and expected to hit it.

Meanwhile, reckless overspending in Washington and Ottawa keeps pouring more gas on the fire—boosting both bond issuance and inflation.

Now, when it comes to when rates will peak, MLN has no crystal ball and Ms. Cleo isn't returning our calls. The Fed is the most qualified to speculate on peak rates, and even it is frequently wrong on timing and magnitude. Witness the continual upward revisions to its very own "dot plot" rate projections.