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.

Canada's banking watchdog is increasingly nervous about lender exposure to commercial real estate (CRE).  

It's so uneasy that it just sent banks its first-ever formal, public guidance on risk management for CRE lending.

"Commercial real estate is a top risk as outlined in OSFI’s April Annual Risk Outlook...," OSFI says. That's because CRE is cyclical. "There are greater risks of an asset not generating enough cash flow to justify its cost and losses—during and after an economic downturn," the regulator explains.

The other day a Global News newsletter subscriber stopped me on the cyber-street and asked if accelerating principal repayment is worth it. I'm sharing the answer here in case readers come across similar questions...or need an idea for a client CRM email.

The Question:

"I’ve heard that trying to pay down your mortgage is a financial myth. You need only pay your interest, and when you sell your house, the increased equity will put you further ahead than trying to pay as much of the principal as you can during the course of your amortization. It leaves you with more cash for other expenses. Is there any logic to this approach?"
—Global News Money123 subscriber

Millions of Canadians expected mortgage rates to peak this year. The historic ferocity of rate hikes, an over-leveraged consumer and a 530 bps drop in inflation made that a credible bet.

But there's a reason economic models and long-term rate forecasting don't work so well. They’re unable to price in the unexpected...such as:

After a 15-year marathon in the prime mortgage space, Home Trust is tossing in the towel.

The company—best known for being a non-prime mortgage leader—is canning its Accelerator prime mortgage lineup, effective November 15. It made the announcement to brokers on Tuesday.

According to an insider, the move was driven mainly by one thing.

Ontario's largest credit union (Canada's 2nd biggest) has pulled most of its products from the broker market.

That includes popular offerings, like:

• Contract rate qualification mortgages (which aren't stress tested the same as bank mortgages, allowing customers to qualify for bigger loans)
• Uninsured HELOCs (including Meridian's 70% #LTV# revolving HELOC, which is 5%-points more LTV than banks allow on revolving credit lines)
• Non-income qualifying mortgages.

But why did Meridian pluck these crowd-pleaser products from the broker market—while leaving them in its retail channel?

Whereas most reverse mortgage customers have wrinkles and grey hair, here's a company that will lend you money with no payments required, even if you're not old enough to drink in some countries.

The lender in question is Fraction, an innovator in the equity release space (a.k.a. reverse mortgage market).

In fact, it was so much of an innovator it had to shut down its unique lending model last year due to falling home values and "capital markets" issues. It soft launched again in July, and now it's game on, says Co-founder Hayden James.