It’s 2005. The real estate market in Canada is entering a bull phase, just as the American one’s hitting its crescendo. Within 12 months, the government in Ottawa will carelessly toss gas on the fire by introducing 40-year amortizations and 0% down payments, just as the housing market Stateside falls to bits. The rationale: it’s different here. We don’t do sub-primes.
Or do we?
I walk into the inner sanctum of one of the largest mortgage operations in the country – the heart of a major bank’s originations and approval centre. This one institution has more than $90 billion in residential mortgages outstanding, and is doing new business hand over fist. The big new thing in 2005 – variable-rate, below-prime loans.
So, I ask the executive in charge of the mortgage business (who makes $750,000 a year and just spent over $200,000 renovating his kitchen in mid-town Toronto), how do you guys manage such a flood of new loan applications? He’s proud to answer. “Streamlining,” he says, “we just get real efficient.”
And then he tells me one way of doing this has been to eliminate appraisals. So, I wonder aloud, if no actual bank person ever visits a property to have a look at it, assess it and determine if the bank should risk loaning big bucks against it, on what basis do you approve the loan? How do you know if it’s a risk worth taking?
“Postal codes,” he says. “That’s all we look at.”
In other words, billions in new mortgage loans were being approved for houses which the lender would never see, never walk through, never inspect – and never care about, especially if they were high-ratio and high risk. Those were the homes for which buyers had scant down payments and took maximum financing. As I said, between late 2006 and the autumn of 2008, that might have meant no down payment at all.
Why would a so-called conservative Canadian bank be so reckless? Simple answer: CMHC.
The Canada Mortgage and Housing Corporation actually encouraged faltering due diligence and a growing appetite for risk by backing every high-ratio loan with insurance, even when the buyers had absolutely no money. Today that continues, but people buying houses now need 5% down (even though that can be borrowed or gifted).
Okay, so banks loan money to people without means to buy real estate at historically high prices. Sounds dodgy, especially when you learn they do it so cavalierly. Now the risk is shifted onto CMHC which insures the loan in the case the buyer rolls over. Thank goodness for that, eh? We can’t have the banks going down if Canada suffers a housing plop like the one chewing up the USA.
So what safeguards does CMHC have in place to ensure a property is not being over-mortgaged and the house is proper security for the loan being backstopped by the taxpayers?
Surely, with Canadians on the hook for about half a trillion dollars in CMHC-insured residential mortgages, the process is exhaustive and at least makes up for the slam-bang practices of the big banks. How long, for example, does it take the agency to review an application, match it against the property being financed, and then make a determination?
Seven seconds. Or less.
As a poster pointed out on this miserable blog yesterday, the agency is actually bragging to the mortgage industry that it, too, no longer bothers to appraise real estate. Using a fast-track system called “emili”, it all but guarantees a rubber-stamped loan in less time than it takes for a good whiz. In fact, we have a new national real estate slogan: “At CMHC, we love to say ‘approved.’”
Here it is, in their own pitch to mortgage brokers:
With more than 5 million transactions processed, emili is Canada’s leading online Mortgage Loan Insurance approval service. We understand how saving time is important to you – emili approves the majority of applications in seven seconds or less.
Relying on it’s extensive property database when assessing an application for mortgage loan insurance, CMHC is able to process an overwhelming majority of applications without requiring an appraisal, including applications for properties in rural locations and new construction, saving lenders both time and money.
At CMHC, we love to say “approved”. That’s why we consider every application on its own merit – there are no auto-declined applications. If your application requires further attention, our knowledgeable and experienced Underwriters located across Canada are dedicated to providing quality service and fast turnaround to try to make your deal work.
Applications can be submitted on emili Monday to Friday 6:30 am to 11 pm (Eastern Time), Saturday 8 am to 8 pm (Eastern Time) and Sunday 12 pm to 8 pm (Eastern Time).
Don’t you feel more reassured?
As I said here yesterday: We know mortgage rates will be rising, since they can’t fall any further. We know that already 70% of Canadians own real estate, so there is no big pent-up demand. We know taxes will only increase in a country with an historic deficit and an exploding debt. We know idiot 5/35 rules have allowed armies of people without money to buy houses. We know household and mortgage debt is extreme. We know the cost of living is rising and salaries aren’t. We know the Boomer geezers are house-rich, in need of retirement cash, and will soon dump.
And now you know more about Canadian lending standards.
205 comments ↓
Garth, nice wig. :)
I think I’ve found a picture of Garth’s bunker command centre (during play time).
http://tinyurl.com/6ggsu2e
One of the reasons why CMHC will be OK according to some is that the sucker homebuyers pay way too much for the insurance so the cushion is quite large.
We’ll see…
first!!!!!!!
We probably suspected it though. Where else could all this money be coming from?
My friend’s neighbor is a butcher. A butcher with a Porsche 911, two matching BMW SUV’s (one is for guests) and a big honking house. Not long ago he was busted on trafficing charges.
It always helps to ask where the money is coming from.
Garth,
Is that a picture of your long lost sister? The beard is similar, but I think she dies her hair! :)
The writing is on the wall, Canadian’s version of robo is emili, give us a few months now…. thx Garth! I have more info for my Canadian friends who are non-believers.
Greetings: I obviously missed something here. For some naive reason I thought the main criteria was the ability of the purchaser to repay the money, not the value of the property. CMHC insures a mortage/LOC without giving a shit about the financial ability of the borrower to repay. Is it any wonder the banks are screwing Canadians.
Hope that’s not you in fancy dress, Garth…
Hi Garth,
I was wondering if you could explain how property assessment values are determined. I had heard that real estate agents have something to do with it, which is hard to believe.
Who sets the amount and how is the amount determined?
Thanks,
dave.
first again
So glad I sold. My deal is firm now.
7 seconds? Geez
At CMHC, we love to say “approved”.
Didn’t WaMu used to have a similar tagline?
Seriously, why haven’t opposition parties raised this during Question Period? It seems like we’re sleep-walking into a repeat of Fannie Mae and Freddie Mac here…
Speaking of CMHC…
Its President, one Karen Kinsley recently had a letter to the editor in Financial Post in which she claimed CMHC was well capitalized with a strong balance sheet.
Her letter is here:
http://www.financialpost.com/news/CMHC+delivers+promise+mortgage+safety/4060548/story.html
I phoned her and challenged her on the point. I pointed out that her own 2009 CMHC balance sheet showed equity of $9 billion against assets of $273 billion . Or 3.4%. And against the $480 billion of mortgages that her letter mentioned (It adds off-balance sheet securitised mortgages I believe).
She said it was well capitalised because it had 200% of the capital that the Office of Superintendent of Financial Institutions requires.
I said okay what is your capital ratio. She said 200%. I said, no I mean what is the percent capital you have? She said percent of what. I said why of the assets of course or of the mortgages if you wish. She said it’s in the annual report. I said You don’t know? She said it’s in the annual report (I am going from memory here not her exact words). And she said the superintendent of financial institutions does not measure capital against assets. (I guess basic finance don’t apply…)
Basically she appeared to have NO CLUE as to the capital strength of her own balance sheet expect it was twice the regulatory minimum. (And if I understand it right, regulators require a cushion above minium so more like 150% of the so called minimum is the true minimum.)
So, CMHC has apparently abdicated any responsibility for its capital ratio adequacy to the Superintentent of Financial Instituitions.
Furthemore that superintendent bizarrely seems to believe that some thing like 2% equity would be adequate. (At least according to what I understood the CMHC president to be telling me) It’s truly scary.
Here is that balance sheet.
http://www.cmhc-schl.gc.ca/en/corp/about/anrecopl/upload/CMHC_AR2009_ConsolidatedFinancialStatements.pdf
I can’t wait to see the 2010 numbers. But for true humor we will need to wait until we get some mortgage defaults in 2011. Then we will watch CMHC’s equity melt like butter in a VERY hot skillet. Well, we won’t watch, ’cause they only report yearly… But in early 2012… we should see an ugly picture… Uglier than even some of Garth’s pictures!!!
Hey… what a coincidence: the U.S. had “The Subprime Loan Machine” (automated mortgage underwriting software) that led to the creation of the housing bubble:
http://www.nytimes.com/2007/03/23/business/23speed.html
The rise and fall of the subprime market has been told as a story of a flood of Wall Street money and the desire of Americans desperate to be part of a housing boom. But it was the little-noticed tool of automated underwriting software that made that boom possible.
Automated underwriting software spawned an array of subprime mortgages, like those that required no down payment or interest-only payments. The software effectively helped move what was a niche product only a decade ago into the mainstream.
The software itself, of course, cannot be blamed for lowered lending standards or lax controls. But critics say the push for speed influenced some lenders to take shortcuts, ignore warning signs or focus entirely on credit scores.
But – we’re different here! (no, really!)
7 seconds ! … where’s the red tape when you need some? LOL
> One of the reasons why CMHC will be OK according to some is that …
With the up-coming revenue induced gov hiring freeze CMHC will take years to vet each claim while the banks keep the “value” on their books, voila!
Remember the jingle “Countrywide is on your side” from Countrywide Financial in the US?
Well, CMHC is on the banks’ side. People will get screwed again – debtors will lose houses and taxpayers will have to pay for it.
Ahh, gotta love to pay for some people’s greed and other people’s stupidity. We’re prudent here, ya know?
BULLSHIT!!!
If 70% of Canadians own a home, there must be huge pent-up demand; the remaining 30%. Who says children can’t apply for a 5/35 mortgage? I bet the banks are cooking up a TV ad right now to shackle the kiddies.
Disgusting (no not your “drag” picture garth)
We, the taxpayers are going to end up bailing out the banks via CMHC backed defaults.
$500 Billion in CMHC garuntees? Are you kidding?
We’re screwed.
Any more blonde wigs in your bunker Variety Show Garth ?
That photo looks like a Security guard in a West End vancouver condo.
BestPlaceOnErf.
Oh, and 2005-era housing news from the U.S. is starting to sound eerily similar to Flaherty, Carney, and others in 2010-2011 Canada:
http://query.nytimes.com/gst/fullpage.html?res=9E04E0DD1738F930A25752C0A9639C8B63&scp=1&st=cse
He told the group that while it was possible that house prices were in a bubble, factors including a scarcity of land for building were among reasons explaining lofty prices.
Mr. Gramlich said the Fed was aware of regional disparities in housing prices and noted, ”We are always looking for signs that some relative prices are out of line.”
He also signaled some concern about the subprime mortgage market, which provides loans to people with poor credit. Subprime loans barely existed a decade ago and now make up about 25 percent of mortgages.
”This evolution of the subprime market has put a lot of people into homes while some of them are in trouble and may have been better renting,” he said.
”There is a problem in the growth of mortgage brokers who don’t have an incentive to make sure that a loan is repaid,” he added. ”The incidence of mortgage brokers without a stake in the game is getting pretty big. That has created a significant problem: brokers not doing careful underwriting and much higher delinquencies and defaults.”
Mr. Gramlich also said the Fed was concerned about the rising use of mortgages with low or no down payments. He said such loans were riskier than traditional ones and had caused concern among Fed economists.
Wait – didn’t CMHC grow from a small/niche program into the behemoth in the market over a 10 year period also?
(answer: yes, it did)
Hmmm…. I wonder who really ‘owns’ the mortgages and HELOCs these days? Are the issues surrounding securitization and vast electronic registry frauds of the Yanks the newest feature of our Globalized Home formerly known as Canada?
http://www.teraview.ca/automation/auto_coverage.html
Maybe somebody smarter than I can assemble the logic of ‘Over the Counter Derivatives’, ‘Off balance sheet transactions’ and Level III assets in our conservative Banks.
The wildly overburdened levels of government are going to need much more immediate funds to keep this ponzi scheme going.
http://www.ene.gov.on.ca/environment/en/category/climate_change/STDPROD_078899.html
Spidey sense is quivering.
The ‘no risk’ banksters and ‘something for nothing’ thieves have managed to bury the future of the booomers. The boomers have thrived and consumed the sacrifices of World War veterans and now proceed to attack the futures of their own children.
Multi million dollar pensions for Civil Servants, Prime Ministers accepting cash in envelopes, multi billion dollar untendered contracts, CMHC with virtually no capital to underwrite such vast sums, CPP investing in foreign lands and buildings with Wall Street partners, Union pension plans facilitating buyouts with same partners, financial advisors (HAHAHA!) operating on 8% compounding assumptions, cops removing name tags and indescriminately cuffing and detaining hundreds….OMG everyone who thinks they are smarter are utterly insane.
I have been stimulated enough. I can hardly wait for the cannibals.
“We know that already 70% of Canadians own real estate, so there is no big pent-up demand”
I think the big pent-up demand for houses is always there as most want bigger and bigger.
Ha Ha Ha. CMHC postal code approvals. Taxpayers prepare to shell out some big $$$$! Here is my own experience. Got a listing in 2006. Port Credit Mississauga. Wow! Cheap! Will sell in one day! Guess what? It is a shack, completely rotten, ready to fall. On a flood plain. Can’t build anything there, at least with reasonable price. Property worth 400,000 (land, can’t insure land with CMHC ) with 400,000 mortgage on it. CMHC approved with postal code. :-)))) But because current owner defaulted, somebody bothered to send an appraiser for the new to be buyer (who I informed during multiple offers about the problems. Do I need a lawsuit to get a commission?) Turned out the property is uninsurable and unmortgageable. Ready to fall down and be washed away if the name of the mayor turned out to be a new real hurricane. But what 400,000 for the taxpayers? Peanuts, they can do it. BUT SHOULD THEY? May be tax evasion is not such a bad thing?
Runaway train; bridge’s washed out; the scenery is nice.
Benjamin Tal at CIBC today on Lang O’Sleazy exchange basically said all is cool…some of the stats rolling out that debt was 7% of disposable income. I’m certain Tal’s employer is the institution Garth mentions in his blurb today. I know a mortgage broker at such institution that says CMHC is turning down mortgages left and right for so much as a single ‘negative’ on a person’s credit rating, including missed payments (even just 1) on any credit obligation. Yesterday a poster poignantly commented that, as he looks in his mirror in his rental apartment, earning 2x what a young colleague with two properties does, he wonders who the greater fool is. I hope that somehow people can afford all that they wish to.
Somepeople wnet out, took a shot, leveraged up on cheap money and worked through that low monthly to make big payments down. The same way mortgage interest deductability on interest only mortgages in the US enabled you to make that big, after tax annual chunky principal return (whether you did or didn’t). I’m stupid for not investing in a house I had under my nose in Ronces for $250,000 plus a likely $40-$50K in floor work…or a $450,000 5 story in Parkdale, south of King (“Crackoline Alley”) that would have returned me two to 4 times that money by today. On a low monthly…and to heck with the 35 years b/c I would have flipped it by now…or equitied out. I was younger, not stable at work, had come from a family that didn’t have a lot and here I was facing these big decisions on my own. So yeh -everyday I’m thinking I’m not just a fool, I’m an a$$hole for what I missed. And every day, I know that as a Canadian chump, I’ll just bite the effing bullet and pay the increased taxes and keep going without in order to help the CMHC pay off all those effing mortgages it financed for all those ‘suckers’ that levered up and reaped the windfall while I was too chicken to take a leap as well.
That’s the truth. I hope I’m wrong, but I feel the majority of posters here truly are like me…big fools b/c lesser people did what we only wish we did.
I’m out.
and you wonder why H tossed you out of the big house??… you were caught in his wardrobe closet again weren’t you??
cheers
How different are Canadian lending standards in regards to credit scores? Could we be different that way?
Dogs!
I can’t decide what to do. Please pitch in with your thoughts.
He – 35 ($75K including bonuses, matching contributions, etc.). She – 30 ($72K). 1 year old (daycare – $1,100/m). One lazy dog. Plus a baby-boomer parent who lives nearby (subsidized by us at about $350/m because rent can’t be afforded at market price).
Have an avg 4 bdr (2,100 sq/ft) SFH in North GTA. Paid $290K nine years ago (new). Put quite a bit of sweat equity into it. Now can sell for about $485K. Mortgage is $90K with interest costs below $300/m (fixed rate till mid 2014) + $350/m property tax. So, the home running costs are way below comparable rentals. However, it will need new shingles ($20K) + new (better) appliances/furnace ($15K) in about 5-7 years. Those costs need to be amortized too ($425/m).
The baby-boomer parent lives in a condo bought by us for $168K. Can be sold now for about $190K. Virtually full mortgage with 37-year amort left. Tax-deductible. So, if sold now would have no gains, no losses. However, that condo does provide our family with a valuable service by keeping our relative at a perfect distance for an acceptable cost.
To summarize by numbers:
Assets: about $635K in RE, $130K non-registered portfolio, $90K registered
Liabilities: tax-deductible $315K, bad non-deductible $136K (mortg, car loan, etc.)
Net worth: $430K (accumulated over 10 last years. No love money.)
So, on one hand I’d love to dump both properties for top dollar now, and move into a rental with a true in-law suite for the parent. The problem is I can’t find by myself any suitable ones to rent. We’re willing to shell out up to $2,700/month + utilities. The rental would need to be at least as good as our present home. After paying off debts that would leave us with as much as $350K to invest. That’s $1,500/m after tax @ 6% rate. Then invest and rent for a number of years until RE valuations return to historical averages.
On the other hand, it’s easy to just not do anything, and wise not to attempt to try to time the (RE) market. For diversification purposes $145K are already pulled (HELOC) and invested in stocks and bonds, and after first two very crappy years had satisfactory performance over the last 18 months. We can probably pay $500 to bank to re-appraise house for current value, and expand HELOC limit by another $60K. However, we’re already leveraged beyond our comfort level.
Current home size is adequate, and can be expanded if needed (basement + storage areas rebuild). Location is great; we love it (but of course somewhere there’s always a better one). The baby-boomer parent is steadily employed and lives nearby, so that situation is settled for the next seven or so years. Bad (non-tax deductible) debt will be eliminated in 6-7 years at the current pace.
So we’re doing alright. Unfortunately, we’re still invested too heavily into RE. Similar homes in suburbs of Chicago sell for $300K, but in Boston are priced about the same as here in GTA, and in Minneapolis just $75K less than our home.
Except for the purpose of monetizing the paper gains we have no reason to sell the house and move in the next decade or so. If we sell, then we’d need to have prices drop by at least 25% to really make this whole exercise worthwhile. While numbers, calculations, and voice of reason promise that 25% drop, the reality of what to come is never known for sure. After all the government has managed to screw true savers for the duration of our whole adult life, so what prevents them from continuing this practice?
While the property appreciation has been excessive it’s only about $140K above what it should be based on cumulative inflation since the time that we bought, and as such it’s not as insane as in Vancouver or other parts of GTA.
Also, the house in its current condition won’t sell for top-dollar. It is very practical in design and layout, but it doesn’t have the stupid things that attract Greater Fools. Actually, its sex-appeal is much higher in the Summer due to some awesome landscaping that was completed by us recently. All you can see now though is just the rabbit’s tracks and poo on the snow. The house is also a bit above the entry level pricing for the area, so it’s not precisely in the bulls-eye of the March-18th-buyers.
For $15K-$20K we can make the house look sexy, but then we would also get to sleep just four hours a day for the next few months. As a young family we don’t have time to spare to spice up the house for sale.
But then come nightly reads of this blog, and think that the chance of seeing my home priced for $300K five years from now is not totally out of the question. I don’t care that we already doing better than many others in absolute terms. If an average family gets screwed in the pending meltdown then I don’t want to be that average family. In real life it is not easy at all to earn and keep $150K or what might even be $225K (35% RE drop) unless one can successfully take advantage of a trend or a bubble. That money can buy a lot of property when it’s priced reasonably.
If it was easy, or we could get a better home – we’d sell and rent. It’s not easy and therefore do we don’t really want to go through this exercise. But can we afford not to do so? Dogs? Garth?
Harper is a real danger to this country, today and for the last five years. Believe me, more than you’ll ever know, you are not better off under five years of King Harper.
o-o-o-o-o-o-o-o-o-o-o-o-o-o
Trickle Down Economics one big sham.
There was always skepticism about claims that, as the rich became richer, income would “trickle down” to others.
What wasn’t perhaps foreseen was that the trickling would actually be in the other direction, and that it would be more of a torrent than a trickle.
But the evidence is now clear. Over the last three decades, the tables of the rich have overflowed, with barely any scraps falling off. On the contrary, there’s been a massive transfer of income and wealth from Canada’s middle and lower class to the rich.
The result is that Canada has become a highly unequal society.
This is bad news, since a growing body of empirical evidence shows that extreme inequality has a clearly negative effect on a wide range of health, social and economic problems, as well as undermining democracy.
http://www.thestar.com/opinion/columns/article/911829–canada-discovers-trickle-up-economics
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♥
So if we as taxpayers are on the hook for CMHC backed mortgages, and CMHC has only 2% equity, how long do we have before the equity is burned through (if we have this slow meltdown and increasing bankruptcies), and what recourse will CMHC have? How will we pay for this? A CMHC tax? What will the impact be on me?
HUGE BREAKING NEWS!!! Folks we are were on course for a 7% return on Real Estate in Vancouver this year which represents $140000 on that starter home in Dunbar. I am now changing my forecast to a possible 50% return in some neighbourhoods in Vancouver. The floodgates are wide open now. For Canadians if you can carry the mortgage grab as much money you can with 2 fists and buy like there is no tommorow. Junius’ lawyer friends in Dunbar are about to hit the stratosphere
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“One of the owners of a large west side RE company has a friend in Hong Kong who’s been living there 20 yrs. He says that the ‘official travel destination’ status from the Chinese government, combined with a restriction on investing in China RE, has opened the flood gates to dumping money into Vancouver real estate. He says ‘it’s only the beginning’.”
#4 i.see.debt.people on 01.26.11 at 11:27 pm
first!!!!!!!
==========================
NOPE!
==========================
#11 i.see.debt.people on 01.26.11 at 11:40 pm
first again
==========================
and NOPE again….
:o)
Read these recent listings for FACTS. Holy smokes folks 500K over ask!!!!!! 50% return just in 1 transaction. It’s WHITE HOT. The floodgates are opening. I gotta lie down this is just to overwhelmingly good to be true. Thank God for Vancouver
http://vreaa.wordpress.com/2011/01/23/white-hot-sentiment-people-want-to-get-in-they-want-to-get-in-bad/
Hey Garth, you are 100% correct. As a recent former appraiser, I know that the banks had a love-hate relationship with us appraisers for years. They berated us when we said no, and loved us to pieces for saying yes to the already over inflated values. Hell hath no fury like a mortgage department head at a large bank when us appraisers didn’t come in at their over inflated, over the moon, out of this stratosphere values. We would get booted off their list of ‘approved’ appraisers faster than a horny teenage boy having sex for the first time with his girlfriend. Yet, when the applicant defaulted, it was the appraisers’ fault for not letting the bank know and should’ve known. Bad appraiser, bad. It’s all your fault even though we at the bank didn’t do any due diligence, it’s still your fault. Let’s see what MPAC valued the house at for property tax purposes….loan approved.
“Auto-declined,” gotta love it.
“We bought the house and the value auto-declined.”
As for the ‘shortage of land’ in Canada: try driving across Saskatchewan, or any other province for that matter, and ask yourself if there is not enough land. This is a big country boys and girls.
#23 john on 01.27.11 at 12:02 am
So all these people who have houses and want to move into bigger ones just abandon the old one? Of course not. They need to sell it. Who do they sell it to? First-time home buyers are the source of new money into the market that allows everyone else to move up or out. You take them away and nothing moves, sales grind to a halt.
Take a good look at any pyramid scheme, its operation, and its components. Now compare to the used housing market. Spooky similarities.
prices of houses going down=fail theory!
–
#189 S.B. — “Earthquake drill a dry run for B.C.’s ‘Big One’”
Not only B.C. Neil Young’s song Hey Hey My My contains a line “. . . it’s better to burn out than to fade away”.
Interestingly, citizens of Pompeii died not from being drenched by steaming hot lava, but from the noxious gases which came from underground. Evidently, death was almost instantaneous.
Put these three links together, then figure out where RE and finance fits in. Stuff One / Stuff Two / Stuff Three.
The excess ice could be used to dampen Yellowknife when it erupts, but a colossal eruption is far more likely to kickstart a chain of events — the New Madrid Fault from Michigan through the GoM, the SAF along the west coast and smaller fault lines, such as Maple Ridge, about 30-45 mins. east of Vancouver.
The US, which is already on the brink of default won’t be able to make its payment obligations to China which, in turn, will be highly aggrieved at the US for its irresponsibility. It may try to take over whatever is left of this continent.
When YS’s alarm clock rings and it goes apeshit, Obama, Harper, RE and the economy won’t be front page news anymore. It may all culminate in 2012-2015, so a lot of boomers won’t have to get their SS / CPP / OAS.
BTW Garth (if it really is you) — You do look munningly stagnificent!
Blatantly clear now how intentional this has all been.
That the Conservatives are owned by an elite global business and corporate sector, and has represented ONLY their interests and not the voting citizens, of any political persuasion.
With their bailouts of financial institutions and corporations, their introduction of the new CMHC rules to take over all bank risk and liability, and now with their final push to reduce corporate taxes,they have completed what they set out to do – empty the public coffers to the sole benefit of these sectors.
Let the layoffs,reduced services,higher taxes and interest rates and declining real estate for everyone else begin, as they now plan their exit strategy by calling an election they have no desire or intention of winning.
Fait accompli. To them,we have ALL been Greater Fools.
Great article Garth!
wouldn’t it be a treat to wake up in the morning next to this sweet heart? (re picture of the day)
If I did, I would rather chew both arms off, so as not to wake him up.
emily? is that the same b!tch that answers when you call Bell????
it all makes sense now
Garth oh Garth, always setting the fox among the chickens, You could lead this bunch of reprobates anywhere. Can you provide us with the ratio of approvals verses mortgage applications to CMHC in 2010 and the primary reason for the declines.
Looks like CIBC is in damage-control mode:
“Canadians heeding message about debt: CIBC
OTTAWA – Canadians may be starting to get the message about the perils of mounting debt, suggests a new report from CIBC.
A new analysis by the CIBC shows that many measures of household debt moderated in the third quarter of 2010, just as the often-quoted indicator of debt-to-disposable income hit a record 148 per cent.
The paper says that alarming number was due to falling incomes in the July-September compared with the April-June quarter — when Canadians were getting juicy tax refund cheques from Ottawa — not because debt levels were rising.
In fact, behind the scenes, credit growth was already falling.”
http://money.ca.msn.com/investing/news/business-news/article.aspx?cp-documentid=27414143
So according to Mr. Tal, the 148% debt-to-income ratio is simply a statistical “coincidence.”
Hilarious. And obtuse.
Check out these quotes from the article:
“While the mortgage market expanded by seven per cent year-over-year — still faster than income growth — mortgage debt was a small portion of household assets, a function of improved stock market portfolios and better home values.
“I’m not saying debt is not a problem. What I am saying is the problem is getting smaller,” said economist Benjamin Tal, author of the CIBC report.”
“Responding to the report at an event in Oshawa, Ont., Flaherty said he acted because he was seeing some “excesses” in borrowing and was concerned a minority of homeowners would not be able to make their monthly payments once interest rates start rising.”
And then the writer adds this “gem”:
“The latest downward trend on credit will take some pressure off Bank of Canada governor Mark Carney to raise interest rates to keep Canadians from loading on too much debt.”
Seriously? ONE report and there is a “trend”?
Pathetic.
#23 john – but then who buys the “small” home off them allowing them to move up? Ownership % can’t increase forever… it’s capped at 100%, a value which cannot be reached given the amount of real-estate investors there are. Somethings gotta give… even F, the banks, and CMHC can’t concoct a scheme to raise ownership % to infinitely higher levels…
Garth, I was watching the noon news on Global Vancouver today. A realtor named Sarah Daniels who used to be the weather/traffic reporter with BCTV and now gets air time on the noon news(gee I wonder how that happened?) was on promoting the same thing you have been writing about. She was talking about the March 18th changes to mortgages and this is the time to get in if you are thinking of buying.
She then showed a couple of recent sales in Vancouver that both sold for more than the listing price. One for about 900K and the other listed at 1.68M and sold for 1.9M a week later.
This is insane and it’s getting promoted on the news in Vancouver!
Is anybody in Vancouver listening to you?
I hope so.
Thanks as always. I appreciate what you are trying to do.
F knows exactly what he is doing. CMHC is our economic stimulus plan. The housing boom creates millions of local jobs and pumps up spending due to the wealth effect. The Gen Y suckers now plunging into the market with 5/35s have plenty of time to recover after the meltdown.
Next: Federal election prior to the wheels blowing off.
Great posts Torontorocks and InvestorsFriend. Last time I checked CMHC f/s their loan loss reserves were tiny – something like 0.5% of total exposure. I don’t think those fools realize they’re the storge in the Tory plan.
#26 -Torontorocks – what a great post. Spot on.
I had coffee with a 23 year old kid the other day. He was expressing that he thought his friends were crazy for buying condos. I half-seriously told him he was crazy for not buying. Nothing to lose if he goes bust and all the upside if the bubble continues. I, on the other hand, can’t buy because I have money, so everything to lose.
Great post btw Garth. I have really enjoyed your posts in recent weeks as they are more about the inside scoop on the workings of the RE market, rather than tales of individuals.
Just more evidence real estate bubbles all over the world are orchastrated by banks to seize property, and ultimately pass losses onto tax payers as they reap all the kingo.
#23 john,
You said, “I think the big pent-up demand for houses is always there as most want bigger and bigger.”
Yes but moving up requires you find a buyer for your former house. This is why it is a ponzi scheme and collapses when there are no new buyers. It doesn’t matter if you want to move out when you can’t cash out your equity.
Nice try though.
Speaking of CMHC:
Data on CMHC rule changes to deposit % and amortization:
* 1954 25/25
* 1999 5/25
* 2003 remove the house price ceiling.
* 2005 5/30
* 2006 5/35
* 2007 0/40
* 2008 5/35
* 2010 BoC goes on record with plan to increase interest rates with delayed implementation, resulting in rush to buy
* 2010 tinkering with investor TDS criteria with delayed implementation
* 2011 5/30 using delayed implementation
* 2011 Fed election
* 2012 meltdown baby
sources:
http://financialinsights.wordpress.com/2010/12/15/the-great-mortgage-amortization-debate/
http://www.cmhc-schl.gc.ca/en/corp/about/hi/index.cfm
Plus this from City of Calgary internal analysis:
“Our analysis of CMHC rule changes on Calgary prices indicates that for every year that insured mortgage terms were extended beyond 25 years Calgary house prices rose by between $6,000 and $10,000. Between 40% and 70% of residential price changes in Calgary between 2004 and 2009 can be attributed to CMHC amortization rule changes.”
http://www.calgary.ca/docgallery/bu/finance/economics/policy_analysis/briefing_note_6_calgary_real_estate.pdf
#13 Peter Pan on 01.26.11 at 11:42 pm
…Seriously, why haven’t opposition parties raised this during Question Period?…
———-
Probably because the opposition MP’s all own real estate (maybe even in Ottawa as well as in their home riding) and don’t want to undermine the ongoing misguided confidence in the RE market. Same reason that reporters and news editors wouldn’t give the story any airtime anyway.
The guys in charge have covered their behinds enough now that they will be able to say: “we warned you all about the whole debt thing, your fault for not listening”.
It takes an independent, rational and unbiased patriot like Garth to shine a light on the giant turd under the elephant in the room.
If this doesn’t scare your Stanfields off, nothing will.
What really hacks me off is that instead of having Mr. Turner as our Finance Minister (where he should be, and this coming from a guy who thinks a lot of Politicos are full of Boehner) – we have a schmuck like Flaps Flaherty.
This Country is in for a very rough ride – but we have a lot of saps like BPOE, and a few other blog dawgies here that can’t see the forest through the bong haze.
Well – just you wait, my fellow dawgs.
The party is long over. Time to call a cab.
The Harley rides, and those jaunts in the Hummer sure add clarity to your writing, sir.
This post wins the award.
KILLER.
WRONG! Wrong on so many levels!
…and I’m just talking about the picture.
The CMHC scam is similar to when AIG got sucked in to insuring the other side of the subprime short scam. Pile a bunch of D grade high risk mortgages up and change the letter to an A grade and say that there is no subprime in Canada.
A mere 8 years ago it was taboo to go to CMHC, cause either you were classed as a total loser with pathetic credit, or you were in way over your head while being treated like a low life by the banker man. Now you are given a balloon and a sucker with a smile and told you’re on your way to riches on the property ladder, except there is only one rung at the bottom and your on it for a long frigging time. This game is so over.
I like the postal code assessments.
The inflated assessment on my property allowed me to get a way bigger HELOC to spend on commodities like rubber chickens and kinder surprises.
Good thing nobody came to see the house – It’s not saleable. I’m performing major renovations (Major structural modifications to house and foundation) -renovations are still underway btw. (It seemed like a good idea while I was watching houseporn star Mike Holmes do it)
Maybe CMHC can come over and help me figure out what all these wires hanging out of my ceiling are for?
Good Tymes
A fly on the wall insider reports that during a meeting held by H and the usual suspects H proposed a toast for a fine job done in diddling the mortgage rules…
To which F proudly jumped to his feet and declared he would like peanut butter and jam on his.
->The banks always win…
Mortgage rule changes positive for Canadian banks: Moody’s
““One potential unintended consequence of tighter mortgage rules would be Canadian consumers continuing to increase their overall leverage through other means, including unsecured lines of credit,” it cautions.”
http://tinyurl.com/4zpzlga
I find this all mind-boggling!! I had no idea any of this was going on!
>#3 Moneta on 01.26.11 at 11:23 pm
>One of the reasons why CMHC will be OK according to
>some is that the sucker homebuyers pay way too much
>for the insurance so the cushion is quite large.
>We’ll see…
actually doesn’t CMHC insure itself against anniliation using a Credit Default Swap (CDS) kind of mechanism?
As an engineer, trained in quality methods, I have to admit that computer programs are a good thing: the formula may be flawed, but at least it is applied consistently across the organization.
The glaring issue that I see here though, is that the algorithm applied by CMHC is not the same as the one applied by the banks. This is a regulatory timebomb. The sellers and the buyers mistakenly believe that they are on equal footing, because each looks at his own computer program, and sees that it is ‘in compliance’ with its internal targets and standards.
The problem is that each company’s internal standards have no relation to each other, let alone the goals of any regulatory body to which all players report.
Or to put it succintly, these computer programs are like two expertly tuned locomotives, each a humming model of perfection to the people operating them, but in the absence of a cohesive plan and and adequate regulation, each is steaming toward the other at maximum speed.
This will not end well.
You can tell that the two systems are similar, but different: one (the bank) looks at approvals by postal code. The other (CMHC), looks at postal codes and declines coverage (it’s how they know not to underwrite mortgages on condos in leaky buildings).
Same criterion, different standards.
>#17 MikeT on 01.26.11 at 11:55 pm
> – debtors will lose houses and taxpayers will have to
>pay for it.
[snip]
> Ahh, gotta love to pay for some people’s greed and
>other people’s stupidity. We’re prudent here, ya know?
> BULLSHIT!!!
Spend your money to buy myself mansion and porsches. Love it. Teeheehee.
Wow. You Canadians sound like you’re bigger bogan redneck house porn loving dickheads than us Aussies. I thought you were meant to be classy and boring.
I think the most we had in Australia was 30 years and a 105% loan, that’s been curtailed a bit. Now I think it’s 5% and 30 years at the most, I’m not going to look because it traumatises me. The outskirts of our cities are looking pretty precarious regarding prices, and those shit hole knockdowns in better areas that they want $800k for usually sit there for a long time. I keep an eye on Sydney.
If you’re interested in Australia http://www.refindhouseprices.com is fairly good.
The disaster starting to unwind here in Fort Saskatchewan Alberta already.
A bit of background: Even though the US housing Market was starting to tumble we were told (over & over again in the newspapers) in early 2007 that this was it for us here in Alberta. We were now the best place in the world to live as oil was scarce and in huge demand from the USA. This would never change. Possibly 6 bitimen processing plants to be built here even though no one had figured where we would find the water supply for this.
At the time there was some increased production at the refineries and vacancies went to 0.45 % at one point! The average price of a 3 bdrm bungalow was $440,000 here in Ft Sask ALberta! Massive amount of homes were built & condos. Now, this fall CHMC says vacancies are in the 10% range for Apartments & 15% range for townhouses. They don’t mention SFHs.
In any case there are dozens of the 3 Bdrm Bungalows now under $240,000 ( A $200,000 reduction!)
Talk about a USA type bubble of our own here! Many young couples have moved here to start a new life and have been left unemployed with a mortgage liability $100’s Ks over the worth of their property. I’m guessing we must be seeing a huge surge of Bankcruptcies in Alberta as we see the boom going to bust more Dramatically then in any other province-so far….
Does anyone have any updated STATS for the Bankcruptcies & Mortgage defaults on a daily average? I heard 25 Foreclosures A DAY, and 30 Bankruptcies! IN Alberta!
No wonder our Premier threw in the towel!
[…] This post was mentioned on Twitter by Dave Samojlenko, Kevin. Kevin said: http://j.mp/dTAJZw #CHMC trouble ahead. Taxpayers ready and willing to bail out of course! […]
http://winnipeg.ctv.ca/servlet/an/local/CTVNews/20110126/bc-earthquake-drill-building-codes-110126/20110126/?hub=WinnipegHome
Van RE could quite literally come crashing down!
#23 john
Demand, as they say, is infinite. Demand represents wants, which are infinite. How big of a house someone wants is no more relevant than how many Ferraris someone wants in their garage.
What is relevant is demand at a certain pricepoint. At today’s house prices, how much of this demand do you think exists?
As I have said before , we are living through a script. Nothing happens by chance in a planned global society. The bankers are the play writes, the politicians are the actors, and the mainstream media is the director. We are bomb- barded with trivia and sensationalism on an hourly basis by media putting us under information overload. Yet the average person is left completely uniformed about what is really going on in the world. Why is that , is it just bad reporting? I doubt it.
We are lied to at a very early age by the education system. We are taught to be obedient little producers and consumers, and if we just work hard for 40 years we will have done our service to society. That lie is turning out to be very detrimental to the average person as they take the lies they have been taught and invest every available cent they have in housing.
Living through a script entails the population to have very little say in real issues. Did anyone on this blog receive a ballot in the mail to vote on globalism ? I think not. Did anyone here elect the IMF to run the world’s finances ? not a chance. You see, we get fed non issues and are left to squabble over them like a clutch of chickens. Should the HST be 14% or 12%, issues like that. Meanwhile the media keeps us in the dark . If they were truly there to report on important issues then things would be very different. How come they aren’t asking why massive Non Governmental Organizations(NGO’s), working with trillions of dollars on the side ; why do they have seats on government board to direct policy ?
Until people stop taking things at face value, and begin to ask why things are they way they are, we are doomed to remain sheep.
CHMC should be owned in part by the banks, thus they should suffer the wrath if they get carried away.
The current game is the banks goto the casino. Keep what they win and pass any losses on to the public.
Great gig they have going for them.
Also the banking industry needs more competition. The level of competition amongst the banks is a joke. It’s like one big bank with six different names….it’s a big joke.
Can’t recall the last figure you used for the Phoenix meltdown, but I think – if anything – it understates what’s going on here.
We’re looking at houses that are listed – listed – for 1/4 to 1/5 of what they sold for in 2006.
I ask myself: why would I pay $650K for a rat-infested mould box in British Columbistan when I could buy a house with a half-mil reno for $300K out of foreclosure (and others like it for lots less when the next down-leg gains momentum).
@ #16 tiger_baby
“7 seconds ! … where’s the red tape when you need some? LOL”
—
Yeah, exactly! Everything else even remotely connected to the government is mired in bureaucracy.
But speeding up mortgage applications somehow made sense, when neither side even appraises the property anymore? Wow, that was smart. Not.
Hey, we’re on a roll. Let’s use similar computer programs to start approving immigration applications too.
While we’re at it let’s replace all politicians and judges with computer bots as well. And the first people who should be put on trial for treason under the new computerized system would be anyone who was ever connected to setting up this financial train wreck in the first place.
If things implode and taxes skyrocket I’ll be telling revenue Canada to suck it. I’ve not been a saver and lived within my means just so some greedy, financially inept retards can be bailed out even more. If millions decided not to file what will happen? The government isn’t going to put us all in jail. This is the only way, voting for your favourite “team,” will change nothing. Starve the beast and it will die. All the bosses at the banks and CMHC should be flogged in public. Of course there’s always tall trees and short ropes. All those pricks will get away with it, sons of bitches. They should have everything they own taken away and be forced to live on the street.
We will not have a slow melt like Garth predicts, this stuff will happen fast and make the US crash look tame. My money is on BMO getting into lots of financial trouble, maybe even going under. As for metals, I like silver, a lot.
Buy supplies now, the Fed money printing is now kicking off the show and impacting the economy. This slowly nudges economic actors, like government owned banks, to decrease the desire to hold cash balances. This will continue to intensify as long as the Fed maintains its current money printing stance. It will, of course, ultimately result in severe price inflation, but in the short-term it looks like Fed manipulated happy days are here again. America’s double dip and Canada’s plunge off the cliff may coincide.
Oh yea, just how bad is it in the US? Have a look, and yes, this kind of crap will happen in Canada.
http://www.lewrockwell.com/rep2/austerity-in-america.html
Great post Garth…this will not end well
Garth,
Is being a contrarian mean you reject anything different (method to appraise) as bad? The postal code method I bet was an improvement over the old way as it is most likely is tied to mean sell values for the area with some additional statistical evaluation to boot. Yes it will over estimate some properties but an equal number will be under estimated. You constantly talk about the media running with conclusions without validating the data from which those conclusions are drawn. Did you do your due diligence on this one?
Yes. — Garth
Interesting commentary on Gold/Silver by John Embry:
http://www.sprott.com/Docs/InvestorsDigest/2011/MPLID_012811_pg003Emb.pdf
CMHC insures a mortage/LOC without giving a shit about the financial ability of the borrower to repay. Is
————
The thing is they are doing exactly what the Americans did…
Since historical defaults have been less than .5%, they assume that households are a good bet because they will do everything to keep their houses. Thus, the lenders’ conclusion is that lending standards have been too conservative.
The problem now is that they are still projecting less than .5% default in the future despite having changed the rules along the way.
Banking capital ratios are based on risk weighted assets where cash has a 0% weight, mortgages around 7% and business loans around 50%. Now is it any wonder that banks keep on doing mortgage loans but won’t lend to businesses?
“It’s 2005. The real estate market in Canada is entering a bull phase, just as the American one’s hitting its crescendo. Within 12 months, the government in Ottawa will carelessly toss gas on the fire by introducing 40-year amortizations and 0% down payments, just as the housing market Stateside falls to bits. The rationale: it’s different here. We don’t do sub-primes.” – Garth
Timing has a lot to do with the outcome of a good rain-dance.
Were not the 40 year amortizations brought in to help buyers better afford such rising home prices? Were they not, in-as-much, to counteract the effects of low interest rates meant to fuel the economy but backfiring on that idyllic dream of many a wanna-be homeowner. Were they not more in response to the pleas of “greater fools” than an instrument used against them?
Problem with meddling in economics is things don’t happen as fast as you’d like for them too. We are an impatient lot. When we don’t get what we want, when we want it, we tend to screw up what is on it’s way by demanding yet more. Like drinking from a hose the tap of which is controlled by someone on the other side of the house. It’s hard to time your demand for an appropriate flow which is too often either just a sparse trickle or a sudden unprepared for torrent. Law of diminishing returns – we are drowning in it; if you know what I mean.;-)
But twist those 40 year am.s to sound more of sinister plot if that is what you must do to rally your troops. I personally believe they were more a consequence of inept monetary management than competent manipulation and that, in my mind, is every bit as bad and reason to complain. Although it does not stir as much emotion as suspicion of sinister construct a cry for benching inept players might be more appropriate than wrongly accusing them of acts clearly beyond their intellectual capacity.
Really people they (our politicians) are just not that smart. I can well imagine how frustrating it would have been for Mr. Turner to have to have dealt with them when in office. That’s why he isn’t there anymore – like oil and water. A relationship doomed from the onset. Sadly the morons outnumbered and prevailed. The cancer within government is too great for the occasional single white blood cell injected to combat.
As George Carlin said “Your average person is really quite stupid and half of them are dumber than that”. No where is this more publicly displayed than in the ranks of our, mediocre at best, elected officials. But they are, after all, an accurate reflection of they who elect them.
Wise up people. You get what you give.
Timing has a lot to do with the outcome of a good rain-dance.
Were not the 40 year amortizations brought in to help buyers better afford such rising home prices? Were they not, in-as-much, to counteract the effects of low interest rates meant to fuel the economy but backfiring on that idyllic dream of many a wanna-be homeowner. Were they not more in response to the pleas of “greater fools” than an instrument used against them?
Problem with meddling in economics is things don’t happen as fast as you’d like for them too. We are an impatient lot. When we don’t get what we want, when we want it, we tend to screw up what is on it’s way by demanding yet more. Like drinking from a hose the tap of which is controlled by someone on the other side of the house. It’s hard to time your demand for an appropriate flow which is too often either just a sparse trickle or a sudden unprepared for torrent. Law of diminishing returns – we are drowning in it; if you know what I mean.;-)
But twist those 40 year am.s to sound more of sinister plot if that is what you must do to rally your troops. I personally believe they were more a consequence of inept monetary management than competent manipulation and that, in my mind, is every bit as bad and reason to complain. Although it does not stir as much emotion as suspicion of sinister construct a cry for benching inept players might be more appropriate than wrongly accusing them of acts clearly beyond their intellectual capacity.
Really people they (our politicians) are just not that smart. I can well imagine how frustrating it would have been for Mr. Turner to have to have dealt with them when in office. That’s why he isn’t there anymore – like oil and water. A relationship doomed from the onset. Sadly the morons outnumbered and prevailed. The cancer within government is too great for the occasional single white blood cell injected to combat.
As George Carlin said “Your average person is really quite stupid and half of them are dumber than that”. No where is this more publicly displayed than in the ranks of our, mediocre at best, elected officials. But they are, after all, an accurate reflection of they who elect them.
Wise up people. You get what you give.
I pointed out that her own 2009 CMHC balance sheet showed equity of $9 billion against assets of $273 billion . Or 3.4%. And against the $480 billion of mortgages that her letter mentioned (It adds off-balance sheet securitised mortgages I believe).
———-
I think the default rate in Canada has always been less than 1% so it is no surprise they will say they are well capitalized if they are using historical measures.
In the US, the default rate is now over 10%. So chances are it will go higher than 1%.
Anyway, they don’t really care about the reserves because if something goes wrong, CMHC will be used by the government just like Fannie and Freddie were. They were already hijacked in 2008 and it will surely happen again.
The thing is they are doing exactly what the Americans did
——–
When I say they I mean the whole mortgage lending complex.
Carefull now… That’s a slippery slope and before you know it you will slide from classy and boring to Mussolini. ;-)
500 Billion in CMHC garuntees? Are you kidding?
——–
500B insurance
400B guarantees
can’t wait to see the 2010 numbers. But for true humor we will need to wait until we get some mortgage defaults in 2011. Then we will watch CMHC’s equity melt like butter in a VERY hot skillet.
————-
If the real estate market tanks, banks will feel it first because I think it can take CMHC up to 2 years to pay out…. banks have to do everything in their power to collct first.
Get the popcorn!
@ #26 torontorocks
I agree with your sentiments, but disagree on the last point.
I don’t wish I flipped houses in a bubble and made money, and I’m pretty sure not many on here do either. I’m already making money in the stock market. And housing is NOT the stock market.
—
Most people just don’t understand how deep this goes yet. When the bubble bursts, the collateral damage goes far beyond just falling home prices.
When we eventually hit the wall a few other things will happen too. Some, Garth has already mentioned.
-housing prices falling
-boomers trying to finance retirement by selling
-negative equity for all newbie 0/35 – 5/35 types
-70% of Canadians have no pension
-rising taxes
-rising interest rates
Here’s where it accelerates.
-drastic reductions in both employment and sales/services in any trade or business related to housing construction. And also anywhere else these people spend their money. (plumbers, electricians, framers, excavators, concrete finishers, concrete producers and their suppliers, roofers, landscapers, developers, building material suppliers and retailers, tool supply companies, truck sales, trailer sales, construction equipment sales, fuel sales, etc etc)
-loss of growth also translates into loss of “current” federal and provincial tax revenues generated by that growth. (taxes were rising anyway, this will make it much worse)
As it unwinds it will exponentially eat itself to death taking our economy, and us, into the financial toilet.
How do any of the buy-now-pay-later house horny types plan to hedge themselves against all that?
At least in the stock market I can hedge my positions and limit losses.
– I can use stop loss orders
– I can buy put options
– I can buy inverse bear funds
Yet people think the stock market is gambling, but housing is a sure thing?
Now who is the greater fool?
Maybe they’re right. It is different here. The general population doesn’t seem to be any good at math or lateral thinking anymore.
It’s a good thing ‘free’ lessons are on the way. There are a few million people here who desperately need to learn the hard way. It’s just too bad that the rest of us get to pay for their expensive ‘education.’
For those who think the optimism out of Davos is grounded in reality. Here is the real state of affairs by Marc Faber in Switzerland.
http://www.youtube.com/watch?v=cCDRBUO3CBQ
At the 9:12 mark of the Faber interview, the headline on the screen is “only liars attend Davos”. Nuff said.
banks have to do everything in their power to collect first.
———
That’s where yesterday’s comment about bank bulking up fits in:
“As the number of write-offs mount, look at job postings at banks – there building there back office in non-performing loans.”
Patience. It’s only a matter of time now before the chickens come home to roost.
I’ve not been a saver and lived within my means just so some greedy, financially inept retards can be bailed out even more.
————
They took their chances and so did you.
There is no golden book out there that says that savers are right and always win. History is littered with epochs where savers were crushed. Different times call for different measures. The world moves in cycles.
It’s a dog eat dog world out there. We’ll see who wins.
The name of the game in this recession is deleveraging.
It’s happening in the US
http://scottgrannis.blogspot.com/2011/01/households-continue-to-deleverage.html
but not here.
Don’t tell me that won’t be a severe problem for Canada down the road.
It’s a dog eat dog world out there. We’ll see who wins.
————-
I think Canadians have been coddled a little too long and are in for a rude awakening.
….billions in new mortgage loans were being approved for houses which the lender would never see, never walk through, never inspect..
And some criminal (including notary and real estate agent) across Canada know those facts, because theirs a scam that a lot of people in the real estate industry are aware , it consist to: buy cheap house sale back quick to a other name, that will lose the property (poor person usually) at 80000$-120000$ more. This scam is only possible because of nobody from CMHC come see the property combine with poor landing standard. Only LA PRESSE news paper in Montreal, covered the story, one time, in many many years.
We are entering the new era of McGarthyism.
“Are you now or have you ever been a Realtor?”
(Ok, this was well before my time but I thought I’d throw it out there :) )
It is quite clear that we have a structural environment that is characterised by money-for-nothing-policy, extremely lax standards, an absence of regulatory discipline, a complicit and fully enabling federal institution in the form of CMHC, a thoroughly ignorant and highly exploitable population of willing dupes ( supply approaching the point of exhaustion – only the least able are left to draw into the market), and an unprecedented number of people looking to exploit every angle of the situation.
What we have here is an ideal environment for, stupidity, fraud and corruption to flurrish in and at some point the cockroaches are going to come stampeding out of all corners of this market.
The whole system is just too easy, too simple, and too obvious not to be fully taken advantage of by the unscrupulous. And if you don’t think we have our fair share of those types among us, and in and around the RE development, mortgage, housing and commercial property markets and related retail investment markets you’d have to be naieve in the extreme.
When this thing cracks … its going to be a hell of a mess.
Thanks, Garth. Unfortunately, this “puppy mill” approach to reviewing mortgages won’t change until Canada gets a painful real estate correction.
S&P Cuts Japan Rating As Budget Woes LingerBY WILLIAM SPOSATO
TOKYO–Ratings firm Standard & Poor’s on Thursday downgraded Japan’s sovereign debt rating by one notch to AA- from AA, saying that it expects the country’s fiscal deficits to remain high and noting there is a lack of a “coherent strategy” by the government to tackle the issues.
http://online.wsj.com/article/SB10001424052748704721104576106821451581998.html?mod=WSJ_hp_MIDDLETopStories
So Garth, did you use Japan as reference wrt a host of high inflated prices including housing?
Where will this end USA Canada after England, Ireland Greace and Portugal?
2011 is indeed going to be one hell of a ride.
…And here’s Mervyn King, speaking the truth which is there is no way out of the debt crisis other than either outright default, or inflation, or austerity…
BoE Governer is speaks the truth.
“Postal codes,” he says. “That’s all we look at.”
You will laugh (or cry) at this true story. We knew of 20 homes flipped based solely on a single Postal Code. Those homes were in the BEST community, but on the WORST street in that community facing heavy traffic.
The buyers got loans for millions, now the homes sit for less than $500k, many selling for $300-360k.
All based on Postal Code “richness”… now if an bank appraiser actually showed up and looked where the home was, they would have laughed.
@ 44 ted23
“Can you provide us with the ratio of approvals verses mortgage applications to CMHC in 2010 and the primary reason for the declines.”
2010 would only be a start. It would be an interesting thing to see a chart documenting approvals vs. applications for the last 20 years or so. I bet their is a huge bump 2005-2009 with the bump starting to decline in the later half of 2009 into 2010.
Banksters and CMHC are actually looking at motgage applications? I don’t believe it. How many not approved, eleven?
Lots of neighbours and friends in Hamilton still being approved for whatever they ask for. HELOC’s behind every government energy rebate being doled out.
Most of our postal codes $uck. (Don’t ask about house and car insurance rates in this town.)
Robo-approvers -Saddle up and click your pen tops!
#32 TheBestPlaceOnEarth “HUGE BREAKING NEWS!!! ”
Vancouver soil unstable, Vancouver homes sinking due to Liquefaction “Moderate to High” says Gov’t of Canada:
http://gsc.nrcan.gc.ca/urbgeo/geomapvan/geomap8_e.php
http://en.wikipedia.org/wiki/Liquefaction
Being a real estate appraiser I can show you the GIANT flaws in the CMHC- “emili” program. I remember when it was first introduced in the 90’s and said then, how can a high ratio mortgage be secured without having someone looking at the house. The funny thing now is that we are getting way more CMHC appraisal requests, maybe someone there has seen the light.
The real estate pimps here in the Okanagan are getting nervous as this market takes a downward shift.
for the recorded, it just isn’t done by “postal codes” alone. The postal codes allow the system to pinpoint your area and then the program take the sales within the area and tax assessments and compare it to your home or the home you are purchasing.
Great news…Now you can skip payments on your mortgage often…effectively bringing back longer term amortizations….The banks always win.
http://tinyurl.com/5v9v5zd
http://tinyurl.com/5t2pfbp
TD Collateral Mortgage…Run! Don’t walk…AWAY…
http://gailvazoxlade.com/blog/archives/2230
#29 Pilgrim for Knowledge
Relax and enjoy your life. What kind of roof costs 20K? Steel?
I did a new roof on my $500K house in Waterloo in 2007. Bought 30 year shingles for $1400 and hired a 57 yr old roofer that been doing roofs for 30 years. He charged me $2K. Total cost of rook was about $3900.00.
He did a fabulous job. The quotes I got from roofing companies ranged from $6k to 8K.
Appliances and new furnace $15K? Who says.
A nice new furnace could be had for 4K and who needs those stainless steel appliances that everyone has and are a pain in the ass to clean. You can get some decent appliances under 5K.
You are overestimating the cost of the stuff you need. Stay in your home and enjoy your family. The only day that is guranteed to you is today.
>(who makes $750,000 a year and just spent over $200,000 renovating his kitchen in mid-town Toronto)
Oh you quaint little Canadians. In the U.S. he’d be making $75 million for being an short-term thinking greed machine. If you are going to really modernize your banking system, I’d look into upping this unfortunate man’s pay for the hard hard work he does.
Obligatory classic SNL http://www.youtube.com/watch?v=0md1sLlsQGA
#71 Bruce on 01.27.11 at 5:17 am
CHMC should be owned in part by the banks, thus they should suffer the wrath if they get carried away.
…………………………………………………………………………….
I don’t agree.. Instead get rid of the CHMC, let banks take on the risks of the mortgages themselves..
(There is no way they’d allow for the current state of risk in the RE market via overextended personal finances.. They are in a sense lending out money, now, with almost no chance of default.. win win, for the banks)
Housing market will fix it self.. (Granted those holding 35-40 year mortgages or a huge net worth in housing will be screwed.. )
I think they used the wrong Acronym with “emili”. More to the point it should have been ” E L E ” Extinction Level Event.
2011
NBC is reporting Housing Forcloseures are about to get worst this year as opposed to last year as more and more homeowners become strapped for cash!
Couple this to boomers reaching into OAS for another
$46 Billion per year and growing!
Oh well all is good in Canada as Harper and Co diggs deep to give Quebec $5.5 Billion from inside or outside over the table or under the table for majority. And big tax breaks for big business. How cool is that?
Also news from Wall street … Investors looking for ways to move money as the Stock market appears to going sideways, Sidways .. now where did we here that last year?
#109 AG Sage on 01.27.11 at 11:19 am
>(who makes $750,000 a year and just spent over $200,000 renovating his kitchen in mid-town Toronto
Check these dudes out AG!
The top 25 earners were paid a collective $25.3 billion. The lowest earner on the list earned a puny $350 million — a shanda! — making it embarrassing to even show his face at the country club. (What a loser).
http://www.ritholtz.com/blog/2010/04/top-10-hedge-fund-managers-2009-salary/
Are they top who knows …. CEO’s are small potatoes at the bar in thier club.
I’m thinking: what can we do to stop CMHC from insuring mortgages with a high probability of default?
Write to my MP? Try to get others to do the same? But it will be equivalent to asking the fox not to eat chicken – the politicians can hold onto their seats as long as there is no crisis, and CMHC tightening their rules drastically will bring a sh|tstorm that will make politicians lose the cushy jobs they have…
How to stop this madness???
#8 Dodged-A-Bullit-in Alberta on 01.26.11 at 11:35 pm
>For some naive reason I thought the main criteria was the ability of the purchaser to repay the money, not the value of the property.
This is recourse vs. non-recourse in a nutshell. The bank is far more powerful than the buyer and they and the buyer need to settle on a fair contract. That’s tough to balance out given the disparity in power. The bank has access to more information, more lawyers, accountants, money, distorting ad campaigns . . . If they aren’t willing to take the property in exchange for the IOU, they shouldn’t issue the IOU (IMHO, i.e. the loan should be non-recourse.) It’s secured debt, secured by the house. Tilting the relationship in favor of the bank by securing it also on future earnings is quite a tilt in favor of the bank.
But you are undoubtedly correct. The bank is betting on the borrower (and insurance). And that works splendidly until the market tanks. Then the bank is going to relearn the meaning of “blood from a stone”.
IMHO, the CMHC is the root cause of the real estate bubble. So much so that I prefer to call it the “CMHC bubble.” Next up is the student loan bubble, the China bubble, and maybe a 80 cent loonie. Got greenbacks?
29 Pilgrim
Agree with Cory108
Roof won’t cost more than $2 sq.ft. all in, for avg. house in that area. Probably between 3-4 grand for you tops.
#87 – for clarity, not flipping houses. what I mean is that should I have chosen to I could have upsized/upgraded to my hearts content, b/c I could have sold that $300,000 Ronces house (after upgrades) for say $600,000 a few years later, taken whatever residual was there and upsized to something else, or stayed put, as opposed to NOW having to go in and pay $600,000 or $800,000 for that same house. I know that had I jumped in I would have been just fine.
You guys are dreaming if you think the govt is going to take the hit instead of the banks.
It will be the banks that will take at least 50% of the hit when it all falls apart.
Remeber, CMHC is a federal govt program, they will just review and investigate every single case were they have to cover the loss of the banks and when on t is not crossed or i dotted, they will not pay out.
It will all fall on the banks books and they will have to go after the buyer as loans are recourse.
Really, you think the govts are going to take a huge hit on this?? Wont happen– it can;t happen politically.
The CPC will be out for 10 years minimum if that happens.
pity the poor kids that trick or treat at Garths place.
emili? looked like sailor moon is changing sex.
I had to look it up:
http://www.cmhc-schl.gc.ca/en/hoficlincl/moloin/moloin_009.cfm
best free education on the net
thanks Garth
Banks are weasels and people insist on living above their means, that’s big news. Canadians who couldn’t qualify on a rental application a few years back now own spiffy homes. Eeerily like the USofA but of course it’s different here.
An entire generation has been told they’re entitled to everything by government and finacial institutions and whine like babies when they can’t get something instantaneously.
Why should banks or CMHC care? When the shit hits the fan, the idiots who live above their means-so pretty much everyone, will get hammered by both their ‘friendly’ bank and CHMC. This happened here in Edmonton in the 90’s. I made a lot of money off of that.
I used to try and explain to people how easy it is to get into debt and how hard it is to get out. From my own experience no less.
Now I don’t bother because everyone seems to be a millionaire sans furniture in their house. I admire your persistence.
#77 BrianP,
The point is that the postal code system may have been faster but it is not more “efficient” in the long run because an appraisal provides a more accurate value of the property.
What this really represents is a typical relaxation of traditional standards in a rapidly rising market. If the market had been moving at traditional rates it never would have occurred to anyone to make it more efficient. There would be no need. However with the market shooting up there became a need.
This thinking is what has caused the mess in the US with all the forged documents in the mortgage business. The CAUSE of the relaxations was the rapidly rising market which lead to the NEED for efficiency which was supported by the BELIEF it would never end. Since it never ends there is no need for proper appraisals because values will go up forever.
Much like the US we obviously feel into the same trap. Postal codes instead of proper appraisals was just another example of why it is not different here.
This is where the “it is different here” crowd is so wrong. First of all, they think our lending practices were much more conservative then the US. Not true. There may be some differences but most of the elements were here as well. Most importantly, they do not understand that little of this is revealed until prices fall. 5 years from now no one will question that we had lax standards in Canada as well. It is just a matter of time before it is fully revealed.
Prior to joining CMHC, Ms. Kinsley was Vice-President and Treasurer with two real estate development companies.
Ms. Kinsley received the Award of Excellence in 2004 from the Canadian Home Builders’ Association in recognition of service to Canada’s home building industry. In 2006, she was inducted into the Canadian Mortgage Hall of Fame by the Canadian Association of Accredited Mortgage Professionals in recognition of her service to the Canadian mortgage industry.
Read more: http://www.financialpost.com/executive/women/wxn/detail.html?id=177#ixzz1CFkodUt9
>#32 TheBestPlaceOnEarth on 01.27.11 at 12:22 am
I notice that you are only ever putting someone else’s money on the line with your propaganda.
How about a bet? I’ll bet you a box of gourmet cookies that by dec 31st 2011, the SFH MLSLInk HPI for all areas of Vancouver, as determined by the Vancouver Board of Realtors, is $725,000 or less. (My rough estimate, barring panic action by the government, is actually $653,000, but this is a bet so I’ll leave a little margin for their actions.)
Willing to put your own cookies on the line, there, propaganda machine?
Oh Dear, Garth, that picture!
Are you implying that some folks want to be something they’re not?
Those greater fools who have no down payment, and
moderate incomes, have no business living in $400,000
houses. It’s as much pretend wealth, as your little dress-up masquerade.
I can’t help thinking that the little f’s announced change in guidelines is a big shoutout to the banks. Let’s face it credit card products are far more profitable than mortgages to bankers. Check any bank’s financial statement and you will see credit card products as the most profitable product. All this proselytizing about Canadian\s personal debt load yet no mention of policy aimed at reigning in the instant plastic industry….and dewy eyed youngsters wander into future shop and find themselves working out the logistics of transporting the 60 inch flat screen (theirs at 28% interest) home in their newly leased Chevrolet Cruze.
TD Bank shakes their head and says it wasn’t us that precipitated the changes…in fact we’ve just introduced a policy to register all new mortgages at 125% of the property value….and save their customer the expense of registering a new mortgage when they do the inevitable equity take out. My predicition, 2011 will see a big increase in personal bankruptcies.
Canada is not HK or Singapore.
Canada is a country with plenty of land. Or is it
a country of plenty?
My Credit Card company have been calling me for quite some time about the 0% APR loan… Well after reading all the things going on, i took it…..well why not…
0% APR for almost 2 years…well who cares….I took all I could around 20K and topped me and my wife’s TFSA….
It’s a wonderful world.
http://www.ft.com/cms/s/2/bf72e51e-2a13-11e0-997c-00144feab49a.html?ftcamp=rss#axzz1CFqj8SV5
Missy Bunny appears to be having a bad hair day.
“Remeber, CMHC is a federal govt program, they will just review and investigate every single case were they have to cover the loss of the banks and when on t is not crossed or i dotted, they will not pay out.”
kitchner,
So true, CMHC is ultimately an insurance company and anyone who has dealt with insurance companies on any major payout will know they are ruthless bastards that will find any which way to weasel out of paying and put the blame on someone else. They are the scum of the earth and to never be trusted. When this all comes home to roost it will end up in courts and inquiries for the next 20 years. Banks will take the hit in the end with all their MBS’s crap paper.
We’re finally getting to the good part. Storms of contradictory BS are blowing in from all directions. I am as hooked as a housewife on a soap opera.
I liken it to last year’s grey cup. I didn’t care whether Saskatchewan or Montreal won as long as they gave me a good tight game with lots of twists and turns. And so they did.
Great football and great financial drama. They look very much the same to me these days. I’ll be taking in the Bears and Bulls game this weekend. Hope to see you there.
emili sure is an ugly monster
Garth,
you mention how taxes will rise because of deficit spending. Well, you can add crumbling infrastructure to that as well.
“The Federation of Canadian Municipalities reported in 2007 that Canada has a municipal infrastructure deficit of $123-billion, amounting to around $9,000 per household.”
Many universities around the country are crumbling as well. The fact that our deferred maintenance costs have risen over decades to $617 million is of concern to the University of Saskatchewan and to the provincial government.
Government revenues also plummet with a housing bust. With cities like Saskatoon doubling spending in 5 years, the years of 4% property tax increases might be a thing of past within a decade.
http://saskatoonhousingbubble.blogspot.com/2011/01/expect-taxes-to-soar-in-next-decade.html
Expect taxes to soar in the next decade
TheBestPlaceOnEarth, again, you don’t get out much do you?
In the US, the recovery is well under way, as jobless claims demolish all expectations. They’re blaming… why, the weather of course. This is the same excuse used last year, as snow was blamed for weaker than expected economic performance, including jobs. I thought they’d get more creative, but recycling is the name of the game, people’s memories are so short.
CHMC making policy changes now, is too little too late.
I boggles the minds of the desparate homeowners clinging to their precious equity, and continue to chant its different here… We are not going to follow the US, our housing prices are not going to drop.
I honestly think CMHC and the Bank’s have discovered the secret to maintainng housing prices in Canada…
Keep distracting Canadian’s by making policy changes that give reason to keep buyers buying and existing homeowners reason to refinance.
Loss of 40 year amortizations, and qualifying variables and every other shorter than 5 year term mortgage at a higher posted rate…. Pepole rushed in to beat the deadline.
Implimentation of HST.. Everyone moved their July closing dates into June…. Banner Month for June, demand has increased… July worse month on record due to HST…
Removal of 95% refinances, reduced to 90%, demand for Refinances shot up…
Now Having the worse month on Record in July, we now have something to make October, November and December’s figures look like they have gone up. Even though they are way down since this time last year, compared the Jul , (the worse month on record) our numbers are up.. We must be climbing out of the recession…. (Are We ??? or have we just been sold a bill of goods?)
Now we have new changes reducing 90% Refi’s to 85%, and removal of the 35 year amortizations, to make it harder for new homebuyers to qualify for these mortgages they shouldn’t be getting….. And what is happening, not slowing down but picking up, get in before its too late, which will force up demand, giving the real estate boards further ammunition that real estate sales are going up….. No Recession!!!..
So as long as we keep scaring homebuyers to beat the deadline, I guess the breaking of the bubble will be delayed???
But what happens when the true affect of tightening of credit takes effect, and the number of qualifiable home buyers goes down, what about when the realitiy of only being able to consolidate upto 85% of your home value, and the home equity ATM is showing insufficient funds??? ANd you are still maxed out on your credit cards ??? What happens then…
Well then maybe the 25 year amortization becomes the maximum and we have a whole new set of reasons to hurray up and buy….
There is the secret as to why the housing prices in Canada has not dropped like in the States, Canadians are SHEEPLE and can be “GOATED” into thinking that Housing prices will only ever go up…. So get in now before its too late…. And don’t worry, if prices drop, its not your fault, you were too inexperienced to know what you were doing. Its the Bank’s and Mortgage Broker’s fault for allowing you to get yourself in that mess..
ok, let me guess, was it rbc?
#119 Kitchener,
You said, “You guys are dreaming if you think the govt is going to take the hit instead of the banks.
It will be the banks that will take at least 50% of the hit when it all falls apart.”
I wish this were true but I don’t believe it.
I was involved in another industry where banks relied heavily on Federal guarantees through the EDC. I watched the same process take place where the lending standards of the banks dropped and the EDC allowed the credit to expand beyond industry fundamentals.
The banks have been collecting the EDC policies for years. There is no issue. Sure the banks are taking some minor losses around the edges but nothing of real concern.
I am not optimistic that the CMHC will do anything but roll over and write the cheques.
#131 wetcoaster,
Again, I agree with you as my experience with private insurance companies is that they are scum. They will do anything to avoid payouts.
However I do not have the same experience with gov’t insurance companies as I mentioned above. I have my strong doubts that the CMHC will stand up to the banksters.
Extended Tunisian family members now in Canada expected to buy 30 different million dollar plus homes in Canada now that they landed here in a private jet.
Billionares coming to Canada . Because it is so easy to get in. That is why it’s different here. Ask the 550,000 people per year! Half aren’t even included in the stats in that they are non-permanent residents.
Just did a “Google” of the forclosure situation in the US.
You know, the courts rejecting the forclosures in many states because of the bundling into packages through a computer program that is NOT in compliance with state laws on reporting transfers of holder ownership.
Guess what? The last date that this is reported is Late LAST year.
Are we seeing a cover-up??????
7 seconds is about the same amount of time a purchaser takes to buy now a days. Good to see that the same due diligence is being applied in the supply chain economics. A lot of snap decisions going on. Greed and envy can do that to a person and obviously a society. Cheap credit creating a nightmare for many. I wonder when someone is going to realize that healthy growth is not based on credit. We all going to feel this one. Some more than others.
Moving must be similar to giving birth- You can forget how painful it is until you’re experiencing it again
BUT, then there’s the afterjoys of something new ahead, work completed, relief, while at the same time, still some bumps along the way, oh the trials, oh the hopes for the future (airy voice, eyes glossing over)
Foreclosures up in most U.S. metro areas: report
Read more: http://www.cbc.ca/money/story/2011/01/27/us-foreclosures-increase-report.html#ixzz1CGRWzeOa
Not a good time to ‘vultch’ on US property apparently. Double dip is here. ( From Urban Survival site)
Foreclosures Rising
Remember earlier this week, I was telling you how the rate of foreclosures would start picking up again this year? Well, not to say “Told you so!” but I did…
RealtyTrac® (www.realtytrac.com), the leading online marketplace for foreclosure properties, today released its 2010 Year-End Metropolitan Foreclosure Market Report, which shows that while foreclosure activity increased from 2009 in 149 of the nation’s 206 metropolitan areas with a population of 200,000 or more, the metro areas with the 10 highest foreclosure rates all posted decreasing foreclosure activity from 2009 and six of the top 10 also posted decreasing foreclosure activity from 2008.
California, Florida, Nevada and Arizona cities accounted for 19 of the top 20 metro foreclosure rates, with Boise City-Nampa, Idaho the lone exception at No. 20. Boise also was one of only three metros in the top 20 where foreclosure activity increased from 2009, along with the Florida metro areas of Deltona-Daytona Beach-Ormond Beach at No. 13 and Tampa-St. Petersburg-Clearwater at No. 17.
“Foreclosure floodwaters receded somewhat in 2010 in the nation’s hardest-hit housing markets,” said James J. Saccacio, chief executive officer of RealtyTrac. “Even so, foreclosure levels remained five to 10 times higher than historic norms in most of those hard-hit markets, where deep fault lines of risk remain and could potentially trigger more waves of foreclosure activity in 2011 and beyond. Meanwhile foreclosures became more widespread in 2010 as high unemployment drove activity up in 72 percent of the nation’s metro areas — many of which were relatively insulated from the initial foreclosure tsunami.”
And no, I haven’t started to look for a cheap rental to buy – yet. If there’s one more leg down, I can only assume prices will keep falling for a while.
Too Big to Fail, is a phrase that Canadians better get used to.
Mr. Turner you ask, “So what safeguards does CMHC have in place to ensure a property is not being over-mortgaged and the house is proper security for the loan being backstopped by the taxpayers?”
The answere is quite simple, tax payer backed. Can a Fannie Mae and Freddie Mac happen in Canada……you bet. Will it, I hope not. However I am not that optimistic.
Gold bugs must be freaking out right now as gold dropped one Benjamin in a month. There is news that SPDR Gold Trust is unloading some of its gold.
Is it just me, or have there been more listings on MLS in Toronto since Flaherty announced the mortgage rule changes? Moreover, there a couple houses listed at lower-than-what-I have seen or come to expect?! Not sure this qualifies as ‘price adjustment/correction’. Just an observation.
Gee people are beginning to get how the banks and CMHC works.
Its like a pyramid scheme, as long as there are more sucker buying in. It will fund the guys on the above. But as soon as the Pyramid scheme begins to fail, with no more people feeding the people above, thats when you’ll the structure start to lose integrity.
so far there are people still, buying in. If the last of the fools gets in by March 18. And then nothing, then you’ll see the pyramid start to lose integrity.
Please tell me if I’m wrong. I’m bothered by the media saying Canada is constraint by a shortage of land. Are we being fed will bull crud or is there some truth to the story
Canada has 9.9 Million or 9,900,000 Square Kilometer of land with a population of 34 million people
Hong Kong is 1,078 square kilometer with a population of 24 Million
And germany which has about 3 times our population but only a land mass of 357,000 square km
http://europa.eu/abc/keyfigures/sizeandpopulation/howbig/index_en.htm
Perhaps emili is an acronym.
Enormous Mortgage Insurance Liability Increase
Job Description: Attack Ad Writer
three day week work
fundraising
6-fig $ incentive guarenteed by the Canadian Taxpayer
===========
I just watched a really good Slovenian movie called Call Girl. It is about a 23 year old who goes into prostitution to buy a condo in the nicest part of town…and believe it or not I thought I spied a granite counter top on the set for the appartment. Her life of course goes downhill with her poor decisions and she sells the appartment to find happiness in life.
Hmmmm…house lust does carry across cultures!
The realtors must be having fits right now. LOL
Just looked at 5 ‘new listings’ in the area of Victoria I sold in/am interested in repurchasing in.
All 5 are ‘new listings’ result from falling outside of the the ‘3 day’ OM parameters. In reality all 5 are simply relists. In addition, all 5 were taken off the market between 3 months and 1 week ago.
1 relisted $500 HIGHER than before.
4 relisted at least $30,000 LOWER than before.
Victoria’s market has most definately changed. Many new listings, some sales.
The month end stats will be interesting.
Two persons A and B have zero money, they decide to make a few bucks.
Person A buys house for X dollars (5% cashback from bank makes it essentially 0/35), then person B buys it for X + 200K. Person A and B just poketed 200000 CAD. YEs person B declares bancrupcy, but who cares about
canadian taxpayer (ala CMHC). Is this scenario possible?
What you do not realize about Best Place on Earth is that he is a wanna be home owner in BC who is masqerading as a smug property owner. Hello People!!!! He is living in his Mom’s basement .
When this all comes home to roost it will end up in courts and inquiries for the next 20 years. Banks will take the hit in the end with all their MBS’s crap paper.
——-
Every currency in history has been debased. Go look at BNP Paribas and tell me how many times it has failded, been picked up by governmetn and been IPOed.
Banks always take the hits in the end. Not the bankers but the shareholders.
The TSX is 79% financials, energy and materials… how much higher will it go?
#139 Junius…
I had mentioned this some time ago…
In a conversation I had with a friend who is a middle management type at RBC (I think he is responsible for mortgage sales in Western Canada), and this conversation is from summer time (out golfing) so my memory is a bit foggy.
I think what he told me with respect to CMHC insured mortgages that default, is that CMHC does go back to the bank for a very detailed review of the file. If they feel the bank did not do their due diligence then yes they can revoke the return of the funds. If they do give the funds back to the bank, CMHC then goes after the home owner who defaulted for the funds.
Take that for what it is worth as it is anecdotal and just one comment from one guy from one bank.
Studied for years to come…
syllabus outline for the next education /training course
The fiancial weather report from the cloud:
…………”Of course, there is much work the Commission did not undertake. Congress did not ask the Commission to offer policy recommendations, but required it to delveinto what caused the crisis. In that sense, the Commission has functioned somewhat
like the National Transportation Safety Board, which investigates aviation and other transportation accidents so that knowledge of the probable causes can help avoid future accidents. Nor were we tasked with evaluating the federal law (the Troubled Asset
Relief Program, known as TARP) that provided financial assistance to major financial institutions. That duty was assigned to the Congressional Oversight Panel
and the Special Inspector General for TARP.
This report is not the sole repository of what the panel found.
A website—www.fcic.gov—will host a wealth of information beyond what could be presented here.
It will contain a stockpile of materials—including documents and emails, video of the Commission’s public hearings, testimony, and supporting research—that can be studied for years to come.”
http://c0182732.cdn1.cloudfiles.rackspacecloud.com/fcic_final_report_full.pdf
Reading through the CMHC financial reports, I’m wondering if any of the debts they have insured have been re-insured through derivatives. Can anyone with a better knowledge of financial statements comment on the presence or lack of default insurance in CMHC’s portfolio? Perhaps it’s impossible to tell from these documents?
Columnist slams the ‘meltdown ‘ strategy’.
http://www.theglobeandmail.com/globe-investor/investor-education/investor-clinic/beware-of-phony-math-when-borrowing-to-invest/article1882641/page1/
There are some in the financial buisness who have some ‘splainin’ to do. It’s disgusting that any industry should allow these sharks of any ilk….(realturds, mortgage brokers, banksters etc) to use deceptive math to bilk youngsters and seniors the way they do.
Realwhores are probably the worst…but…theres plenty of scum in the pond.
#159 Mr. Plow,
I understand. I hope you are right.
Political pressure could also play a role in the process. I just believe that the banks are so powerful and the process so corrupt it will be swept under the rug.
If I were a bank I would argue that the gov’t put pressure on them to approve the mortgages. This is the entire reason that Flaherty dropped the down payments and increased the amort years. I have a hard time believing there isn’t lots of correspondance and information the banks could through up to cause the CMHC trouble in a legal dispute.
#10″Dave in Victoria” strikes a very good point, one I’ve often wondered about too.
Property assessments, it seems, are determined by the real estate industry, which is driven primarily by commissions. A property owner is at the mercy of the “greater fool” who comes along and buys the rediculously overpriced home next door. A higher selling price equals a greater commmission, which equates to a higher property assessment, which then raises property taxes in the neighborhood….
Can you expand on this Garth?
1) there’s a reason it’s called a ‘pre’-approval; because during the actual approval, they will require co-signors for ‘fringe’ buyers
2) to date CMHC has been a ‘cash cow’ for the taxpayer
Meanwhile … as the elite sip hot chocolate in Davos while stroking the fur of the beaver tails more banksters were arrested in Iceland today . It seems fraud is a crime over there.
#161 Gerry,
No, the CMHC insurance has not been reinsured nor has the insurance risk been ceded to others. However, yes, they have securitized many of these mortgages.
Thus, the CMHC could indeed default on the servicing of these securities, which would have the effect of having offloaded the risk to the investors. However, a more likely scenario is that the CMHC would be funded from the Federal Gov’t to cover any shortfall in servicing the securities
Note that the Federal Gov’t is not obliged to pay off the CMHC debts, but a failure to do so would severely damage investor confidence in Canadian public securities (whether from the provincial/federal gov’ts, or from gov’t agencies like the CMHC).
#63 prayforcrash on 01.27.11 at 3:17 am
Wow. You Canadians sound like you’re bigger bogan
________
splain bogan, please
The entire anglo world and much of the rest went for this cr*p.
The major non-participants were Germany & India, although farmland in India farmland had a trememdous runup until around 2008, for the same reasons as everywhere else – easy credit. They didn’t go to the “regular” extremes we’ve seen.
is that sailor moon or a marooned sailer?
156 Alex on 01.27.11 at 4:38 pmTwo persons A and B have zero money, they decide to make a few bucks.
Person A buys house for X dollars (5% cashback from bank makes it essentially 0/35), then person B buys it for X + 200K. Person A and B just poketed 200000 CAD. YEs person B declares bancrupcy, but who cares about
canadian taxpayer (ala CMHC). Is this scenario possible?
———————————————————
Possible is Alberta…..and it has happened many times in the past few years.
Even some bank and loan people were in it. Hurray….free money
#162 realpaul
It is hardly “slamming” anything. If you wish to dispute the math that borrowing to earn a lower rate of return than your loan interest is a bad idea, then perhaps you should whip out a calculator and show us how it’s done.
Wait! No auto declined applications but auto approved applications are ok?
@(low density) Sam
Well traditionally a ‘bogan’ has been your standard lower class dumb yobbo but this site I’ve linked to below has very much broadened the meaning to things like simply believing what the main stream media say, enjoying music from people such as your Michael Bublé and Kings of Leon. Now anyone can be a bogan rich or poor, white or black.
http://thingsboganslike.com/2010/02/15/85-residential-property-investment/
http://thingsboganslike.com/the-full-list/
Good point though pretty much every country bought into the housing bubble.
Liar Loans data base http://www.canlii.org/en/on/onsc/doc/2008/2008canlii6648/2008canlii6648.html
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http://en.wikipedia.org/wiki/Alberta_Agenda
The Alberta Agenda is a loosely-organized political movement initiated by a letter written by prominent Albertans, including Prime Minister Stephen Harper and 2006 Alberta PC leadership candidate Ted Morton, urging Albertan Premier Ralph Klein to fully exercise Alberta’s constitutional powers. The letter was published by the National Post on January 27, 2001, in the wake of the Alberta-based Canadian Alliance’s defeat in the 2000 Canadian federal election.
The letter has been referred to as the Firewall Letter from its use of the phrase “build firewalls around Alberta,” a reference to the computer software programs which block unwanted intrusions from outside sources. Its main recommendations were:
Allowing the province’s contract with the Royal Canadian Mounted Police to expire in 2012, establishing a provincial police force to take the RCMP’s place. Alberta had a separate police force from 1917 until 1932.
Withdrawal from the Canada Pension Plan and establishing a separate Alberta Pension Plan. Many Albertans believe that given the province’s youthful demographics, staying in the CPP makes little sense since a separate “APP” would provide higher benefits for a lower premium.
Separate collection of the province’s income tax, as opposed to letting the Canada Revenue Agency handle tax collection. Alberta already collects its own corporate tax.
Klein personally responded to the letter, but rejected implementing the authors’ requests for the duration of his premiership.
The Alberta Agenda should not be confused with Alberta separatism, as the Alberta Agenda’s proponents reject separatism and claim their policies, if enacted, would not weaken Canada but would strengthen it, because all the above ideas are constitutional
Ted Morton?
http://en.wikipedia.org/wiki/Ted_Morton
#131 wetcoaster on 01.27.11 at 1:43 pm
“Remeber, CMHC is a federal govt program, they will just review and investigate every single case were they have to cover the loss of the banks and when on t is not crossed or i dotted, they will not pay out.”
kitchner,
So true, CMHC is ultimately an insurance company and anyone who has dealt with insurance companies on any major payout will know they are ruthless bastards that will find any which way to weasel out of paying and put the blame on someone else. They are the scum of the earth and to never be trusted. When this all comes home to roost it will end up in courts and inquiries for the next 20 years. Banks will take the hit in the end with all their MBS’s crap paper.<<<<<<<<<<<<<<<< think so eh…well these high risk mortgages are already sold as investments guaranteed by CMHC to ensure investors receive timely payments on their investments……….so were f..ked!
Garth, love your purse! Block the shots with your shield and then hit them with your purse! That will teach ’em!!!
WOW is this country ripe for a new political party..never in my lifetime have i ever seen such total disgust for our political parties………..Mr. “H” is traveling the world preaching accountability and SPENDING our money…MR “F” thinks he has pulled a fast one..and our opposition appears to be completely oblivious to the the bubble which is swelling more day by day ready to burst…..and here we sit paying the tab while they grovel at the trough with NO ONE with the balls to make a stand and look after our interests and do the job they were selected for………
Nearly 1000 new listings in SFHs the Jan here in Edmonton… The market is correcting right on target another 12%-15% decrease AGAIN this year?!?
#150 bigcheese–i think you answered your own question about running out of land—this subject has been discussed several times over the last year and was put to bed–or so i thought
#162 April (from last post)–the tri-cities are made up of Pt. Moody–Pt. Coquitlam and Coquitlam–the RE boards numbers for these areas were printed in the local rags (Tri-city news and the Now) up until last Jan/Feb–we now seem to be included in the overall Greater Vancouver RE board numbers –the real numbers must be really bad!!!!
i don’t think New West is much different–some areas will always be more expensive than others –watch the condo market,it’s the first to go
the market here has been declining since last Mar/Apr
#177 john m,
Amen. Zero leadership in the opposition. Liars at the helm. Depressing.
Multi million dollar pensions for Civil Servants, Prime Ministers accepting cash in envelopes, multi billion dollar untendered contracts, CMHC with virtually no capital to underwrite such vast sums, CPP investing in foreign lands and buildings with Wall Street partners, Union pension plans facilitating buyouts with same partners, financial advisors (HAHAHA!) operating on 8% compounding assumptions, cops removing name
tags and indescriminately cuffing and detaining hundreds….OMG everyone who thinks they are smarter are utterly insane.
I have been stimulated enough. I can hardly wait for the cannibals.
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Just watched a 6 part PBS series on Auschwitz:
Any lessons learned…
A panel at the end of each episode discussed it on many fronts.
Genocide was tabled after one episode.
The panel’s consensus is the world never learned any lessons that would prevent genocide, but all the world learned was that is happened before Auschwitz , at Auschwitz, and will happen again ie the moral virginity was popped long ago ..
The old saying about either learning from History or doomed to repeat it, is IMHO, a red herring to place the masses that preventative measure are set in place.
On the economic genocide front, its simply best analogized as a ” nice day at the beach having an CMHC umbrella ” before the Tsunami hits, thats all F C and H are doing…blowing smoke, delaying the inevitable, the bag of tricks is exhausted.
The insider vultures are set up for the carnage….
So, if two guys with a computer and a postal code algorithm maintain a database for CMHC and mortgage brokers for 7 second approvals, who else has access to this database?
Are property tax assessments made using the same database? Do real estate agents have access to the same information and use it for recommending asking prices to their clients? How in the hell could one contest their tax assessment and win if this were the case. If so, there maybe something seriously wrong here, but then I am making a couple of assumptions.
If the appraisal process is that loose then what about that final step for securing a mortgage…home insurance? Do insurance companies actually physically inspect the homes to see if they are are insurable? Are 1958 bungalows with original furnances, water heaters, 30 year old asphalt shingles, no GFI’s ,smoke detectors or grounded outlets insurable? I am just wondering because I left Canada in the 80’s and my mother is thinking of selling her house and I have told her that maybe facing several issues.
Is Emili the ugly Canadian stepdaughter of The Derivatives Beast?
CAUTION: Author mentions Das Kapital and Karl Marx. Your visit to this site may result in your inclusion on North American Perimeter and Security and Prosperity Partnership databases (just another Working Group, don’t be a doomer – http://en.wikipedia.org/wiki/Security_and_Prosperity_Partnership_of_North_America ). Exercise your current right to free reading at your own risk.
http://emsnews.wordpress.com/2011/01/27/congress-cant-kill-the-derivatives-beast/
(One of my daily stops on the left side of the aisle. Lew Rockwell gets so boring)
Long pig recipes being prepared now.
We know that Canadians hold over $1 trillion in cash. We know that this is bigger than all our mortgage debt. We know that unemployment is improving. We know that the BoC will keep rates at the lowest level in a century. We know that Canada is fiscally sound – top of the G7. We know that the CAD is king. We know that being Canadian in Canada is the best!
So I opened Rawinder’s link at #123 and discovered that Garth had chickened out and used the wrong face for Emili’s picture.
And then I thought that I was looking at the Captain of the Titanic after he had ordered ”Full speed ahead!”
And then the gravity of comment #14 hit me. Must have been quite the conversation, Shawn.
Hi Garth, still travelling to Calgary? ;)
Good news an article
Remove fluoride from water: committee
Last Updated: Thursday, January 27, 2011 | 9:48 AM
CBC News
A committee at city hall voted Wednesday to ask the province for permission to remove fluoride from Calgary’s tap water. (CBC) A Calgary city council committee is recommending that fluoride be removed from the drinking water.
Read more: http://www.cbc.ca/canada/calgary/story/2011/01/27/calgary-fluoride-water-supply-vote.html#ixzz1CHqZbhH0
An earlier post suggested that holders of gold should be shaking in their boots after a $100 adjustment in the Comex spot price. In fact gold is down just 6% after a 30% rise in spot after year end ‘dressing the books’ by institutional managers…..barely a flick.
What you really want to be looking at is the revenue ‘guestimates’ of gold producers at any price above the cost of production…..it’s staggering !! These estimates have given your average gold mutual funds returns of close to 100%……and the earnings for the 4th Q fiscal year won’t be out for another 6 weeks.
Think of the market like a bellows….breathing in and out…without which the flame would die. The reason that bullion has increased incrementally every year for the past 10 ( since the initial M3 switch was set to ‘full blast’ in 2001) is because that the increase in the money supply has the direct effect of debasing the purchasing power of every single dollar you own. This is also why every commodity, gold not withstanding has increased by the same amount. Gold happens to be a headline item. Automobile prices and houses have also doubled (or more) in the same time frame……why?
The reason that gold companies are so highly levered to the publics perceptions are that a) they are hyped by the battle being done to supress the price of the metal itse;f because it causes the efforts of the government economists to sell their policies…and b) they are continuing to show themselves as wildly profitable at any price over the cost of production. This fact, as would be the case of any ‘widget maker’ attracts investment by osmosis so that they will continue to be bid up by investors hoping to share in the profits.
The headline price of gold is meaningless if you understand the mechanics of the market. Stop watching TV and start learning how to interpret a balance sheet is the best suggestion I could make to the novice.
BTW…insider buying is increasing. Check out INKS or go here.
http://canadianinsider.com/
GLTA
You wish. — Garth
Note that the Federal Gov’t is not obliged to pay off the CMHC debts, but a failure to do so would severely damage investor confidence in Canadian public securities (whether from the provincial/federal gov’ts, or from gov’t agencies like the CMHC
———-
Government debt will also take a hit if they pay out.
Stuck between a rock and a hard place…
“ungrounded outlets” and “she maybe”
#77 John m
**********
Hear hear. Maybe we can take a lesson from Cairo and Tunisia.
Probably not, we are Canadians and we have a democracy and they don’t. YET!!!
#175, if the CMHC were to delay payout on their legal obligations, or cause undue hardship to bankers, the bankers will simply stop lending. Crashing the housing market, and reverting it to an ‘all-cash’ market.
I think you underestimate the sort of power lenders wield in this relationship. They will not be bent over by a bunch of bureaucrats who were mentally retarded enough to issue the insurance/guarantees in the first place.
But… according to this CIBC report, all is good with consumer debt levels: http://www.moneyville.ca/article/928287–canadians-reining-in-household-debt-cibc-report-says . See, we’re increasing our consumer debt at a slower pace!
Garth,
Excellent Post!
So a dude goes to the bank and get a mortgage insured by cmhc for which he pays the premium, and when the dude defaults on the mortgage the bank gets paid their money (Dude insured the money through CMHC) then CMHC comes after him for the money they paid the bank!!!!
WTF!!!….WHATS THE POINT OF CMHC AGAIN?….
What kind of twisted legal scam is that…REALLY WTF?…
Thank goodness i have no interest in real estate ownership
Edmontons toast.
http://2.bp.blogspot.com/_PRH6JEp9ogE/TUIVvS5aMVI/AAAAAAAAAPE/ySq-QFajqSw/s1600/Residential-Value-Family-Income.jpg
#190 ballingsford on 01.27.11 at 9:34 pm
#77 John m
**********
Hear hear. Maybe we can take a lesson from Cairo and Tunisia.
Probably not, we are Canadians and we have a democracy and they don’t. YET!!!<<<<<<<<<<<<< democracy huh?…we have a group of politicians running our country who even refuse to tell us how much they are spending and on what?…. and yes there is a lesson to be learned as we watch where we are heading..amen
refinow #137 said Implimentation of HST.. Everyone moved their July closing dates into June…. Banner Month for June, demand has increased… July worse month on record due to HST…È
No silly worried realtor who is trying to make up reasons why housing wil never fall in Canada. The fact is sales in the GTA crashed over 20% for the month of June since there was no rush of homebuyers . Talked to people in the biz and they are say that nothing is selling and that sales will be down for January unless things turn around for the rest of the month(for the GTA).The ponzi is coming undone and the criminals and those who have vested interests are worried. Why else would they spend all there time on greaterfool spreading propaganda.
#193, “So a dude goes to the bank and get a mortgage insured by cmhc for which he pays the premium, and when the dude defaults on the mortgage the bank gets paid their money (Dude insured the money through CMHC) then CMHC comes after him for the money they paid the bank!!!!”
Yup. The usual result of defaulting on a CMHC-insured loan is personal bankruptcy.
Or skipping the country if you have somewhere else to go.
Hi #186 S.B., thanks for that hopeful news. :)
Have you seen this 59min YouTube video yet?
He knows his stuff! I watched it today.
http://www.youtube.com/results?search_query=Professor+Paul+Connett%3A+Your+Toxic+Tap+Water&aq=f
BOOYAH! Folks everywhere you look Vancouver is on fire right now. 2011 red hot. It’s story after story of SUCCESS! Riches unfolding by the hour. WOW!!! Thanks for all the links to the continued SUCCESS Vancouver is experiencing. Champagne wishes and caviar dreams folks. It’s Happening NOW. Even Eckhart Tolle the Power of Now bought a home up at UBC. He could live anywhere but wants to live in the NOW.
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th, I was watching the noon news on Global Vancouver today. A realtor named Sarah Daniels who used to be the weather/traffic reporter with BCTV and now gets air time on the noon news(gee I wonder how that happened?) was on promoting the same thing you have been writing about. She was talking about the March 18th changes to mortgages and this is the time to get in if you are thinking of buying.
She then showed a couple of recent sales in Vancouver that both sold for more than the listing price. One for about 900K and the other listed at 1.68M and sold for 1.9M a week later.
This is insane and it’s getting promoted on the news in Vancouver!
Is anybody in Vancouver listening to you?
I hope so.
Thanks as always. I appreciate what you are trying to do.
Great post Garth. And here we thought China was the only country that directly manipulates its markets. Seeing as the tax payer is on the hook we should all go out – buy whatever the system will give us – and when we’re all under water – wait for the bail out. Or. We could elect someone that can pass legislation today that will alter the CMHC’s liability to an amount no greater than the premiums they collected. Funny thing about doing business with the government – they can legislate the rules of the game. Let the banks get stuck with the fallout. Their profits Their risk. Their loss. If not – I want my tax payer funded home too.
185 Memories – last I heard there is only about $40B in Canadian cash. There are however about $1T in CDIC bank deposits. And lets go with a little less than $1T in Canadian mortgages. What can you deduce from that?
I work in the appraisal industry. This has been something that has worried myself and fellow appraisers for a number of years. Especially for values in rural communities. I live in Newfoundland where some towns that are over 300 Km apart share the same postal code yet the markets can be different in each. So how does this affect Emili or any other automated value program??? Scary!!
#194 Throwstone,
You wrote
“So a dude goes to the bank and get a mortgage insured by cmhc for which he pays the premium, and when the dude defaults on the mortgage the bank gets paid their money (Dude insured the money through CMHC) then CMHC comes after him for the money they paid the bank!!!!
WTF!!!….WHATS THE POINT OF CMHC AGAIN?….
What kind of twisted legal scam is that…REALLY WTF?…”
I think your point is that it is wrong that he pays the premium, but the bank is the beneficiary?
What do you suggest? That he pays the premium, elects to default, and the CMHC gives him the money directly?
Can you see the problem with that scenario? Anyone could simply pay the 2% premium, hide their assets, default, and collect the money for a free house.
The insurance is to protect the bank, in the same way that a spouse might pay a premium on their life insurance which exists to provide a benefit to the person harmed by their passing (ie their spouse).
In this case, the insurance exists to protect the entity harmed by a default (ie the lender).
As an insurance process, it is standard procedure. Although I fully agree that the gov’t shouldn’t be providing this insurance in the first place.
Thank goodness i have no interest in real estate ownership
Whoops!
wrt #204, the sentence at the end “Thank goodness i have no interest in real estate ownership” was from the op who I quoted from, and not me. I didn’t intend to leave that at the end of my post.