Comments on: Ottawa’s bubble

By: Curious George

Curious George — Tue, 20 Oct 2009 18:23:31 +0000

Is there a way to find out how large a % of all outstanding mortgages is $5K down for 35 years?

Is there a breakdown on all mortages anywhere?

By: Finanzkrise

Finanzkrise — Tue, 20 Oct 2009 01:06:42 +0000

“The worst outcome slipped past us. There will be no neo-depression (an event I pegged as 20% likely). Government spending, crashed interest rates, global cooperation, Obamanomics, market speculation and massive public stimulus have spared us. So put that section of the book aside. But don’t lose it.”

I agree with Garth that a probable scenario is a very slow recovery, where debt overhang at all levels prevents a return to the boom years anytime soon. However, part of me still thinks that the scenario where deflation turns into a spiral, where debts and derivatives start to collapse en masse, swamping any government efforts to reflate the debt bubble. Probability at least 20%… Don’t put “After the Crash” away, indeed.

Can’t wait for the next book!

By: Soju

Soju — Mon, 19 Oct 2009 16:43:44 +0000

CMHC has always been around and has always done the same thing in good times or bad. They’ve even increased the amount of their premium not so long ago. It’s easy to grab anything out of thin air just to make a story out of it.

By: mattbg

mattbg — Mon, 19 Oct 2009 15:50:25 +0000

Is it really true that CMHC insures 100% of the mortgage? I thought they just insured the first 20% of the mortgage…?

Insuring 100% of the mortgage would seem like a very irresponsible thing to do, whereas insuring just the first 20% still gives the bank a stake in the lending decision and allows them to treat a CMHC loan as any other loan — the risk picture doesn’t change.

By: Zed

Zed — Mon, 19 Oct 2009 06:05:52 +0000

Re #133 and #169

While I do appreciate the irony that CMHC wouldn’t qualify to be insured by CMHC, I also would suggest that you are too kind to the state housing funder.

You must also consider the $450 Billion (news flash– being raised to $600 Billion) in CMHC mortgage guarantees. If you think of the risk portion of those guarantees as 50% of the total value then CMHC’s capital base is really between 1 and 2% of total capital at risk.

At that ratio CMHC compares unfavourably to Lehman Brothers.

—-

On a second point, Garth, I understand that the Liberals were not the place for you to run, but someone has to be bringing this issue into the national debate. For the good of the country, you have to run. Start your own party if you have to or run as an independent.

By: Mike

Mike — Mon, 19 Oct 2009 05:13:53 +0000

Well after reading this article, you just confirmed that the BUBBLE will never burst. I mean if the banks are garanteed money no matter what , why would they stop lending it? I believe there is a bubble and sometimes hope it will burst for some reason. This goverment is responsible for what is happening and what will be happening soon…….it’s time folks to do something about it!!!!

By: Farley Mohawk

Farley Mohawk — Mon, 19 Oct 2009 02:20:42 +0000

The Globe article about the CMHC contained another nugget which I hadn’t seen mentioned before.

It says the banks are taking CMHC insurance out on mortgages that do not require it (having more than 20% down.) This allows them to resell these loans to other investors (presumably freeing up capital to make still more lousy loans.)

So the banks have three different ways of dodging the risk in crappy mortgages – CMHC insurance on high-ratio mortgages, selling iffy mortgages directly to the government, and using the CMHC insurance to make their mortgages palatable when resold to other investors.

Given that the whole fiasco in the US is derives from the fact that the people originating the loans did not bear the risk of default, we have clearly learned nothing. Or perhaps better to say we have learned even more ways to make the same damn mistake.

By: Peter Wiener

Peter Wiener — Mon, 19 Oct 2009 01:57:42 +0000

# 181 JMK

Where is the exaggeration about a bubble and a crash?

Fact: Average Canadian RE sale price is over 7 times the average income of the buyer.

Fact: The same American metric reached 5.3 times income whereupon it collapsed and the average home is now down 30% from the peak nationally and up to 65% down in some markets, despite the tax benefits, higher incomes and lower mortgage rates the Americans enjoyed during their bubble.

Fact: You are ill informed.

Come back to comment when you do some homework hotshot.

By: char

char — Mon, 19 Oct 2009 00:12:09 +0000

Anyone can default, including the CMHC. After a real estate collapse there may be sufficient anti-bank rage to fuel a taxpayer revolt. Or at some point, there may be not enough income left to tax.

By: Swag

Swag — Mon, 19 Oct 2009 00:07:17 +0000

Garth so anonymous people(claiming to be loan officers) post anecdotes on an internet blog and that presents meaningful information about all mortgages in Canada, while the fact that the average homeowner owns 70% of their home is meaningless?

But I guess I’m not supposed to question that information since they’ve agreed with you…

You still haven’t recommended that your readers sell their homes; why not if we are in a bubble?

I’ve said it many times. Sellers are geniuses. BTW, anonymous people like…you? — Garth