We start today’s comedy blog with a repeat performance by Cam Good, the man with the yellow helicopter who (more than anyone) has helped fuel the flames of racial tension in the city that real estate is destroying. Yes, Vancouver. First he hired a helicopter, stuffed it with Asian-Canadian guys from the suburbs and buzzed White Rock with a bunch of TV reporters in the back, telling them these were ‘investors from China.’ But that was a lie. They were local realtors.
Then he got the yellow whirligig, packed it again with Chinese (this time the right stuff), loaded in the TV reporters and assaulted Victoria, landing at a $14 million estate. It’s a private listing, he said, cuz that’s the way billionaires operate. In fact, he told reporters, there’s a private listing service (PLS.ca) just for them. Another lie. It recycles stuff that isn’t selling on MLS. By the way, Cam Good owns PLS.ca.
Now he’s brought the Groupon approach to selling condos. Cam’s promoting a new company, Condoday.ca, which bulk-sells condos to groups of strangers, so they can all get a discount off the (inflated) list price. He brought a bunch of TV reporters into a sales room and had them interview buyers, like Tara Fluet, “Investor from White Rock.” Lie. Tara works for Cam Good. And BTW, he owns Condoday.ca.
Smart guy? You bet. I like that. But the fact each untruth was reported as undisputed fact by the Vancouver media shows you what a bush league town this really is. Below is an example of how Global TV drank the bathwater. No wonder the implosion there could be epic.
On an even funnier note, various house pumpers have come by this pathetic blog in the last few days to tell us that never, ever in Canada will somebody with a mortgage have to pay money to renew it. This was in response to the recently-published OSFI guidelines on banks and mortgage lending. OSFI is the federal banking cop, and like everyone in Ottawa these days, it’s panties are in a twist over people doing the kind of stuff yesterday’s blog was about.
The bank regulator is proposing far more scrutiny of both buyers and properties, no more cash-back mortgages (which are used as deposits by people without money) and a new LTV policy. That’s ‘loan-to-value.’ It means if you got a mortgage for 95% of the value of a property, when it comes time to renew the loan, it still cannot exceed that LTV. So if the property fell and the owners were in negative equity, no renewal unless they cough up the difference.
Absurd, say the realtors. Never happened. Never will. (And they come here because they understand clearly almost every recent 5% buyer could be in this situation in the next two years.)
Actually, this is what OFSI said this week in a post-budget statement: “Elevated household debt levels not only make households vulnerable to adverse shocks but continued low interest rates could encourage even higher household indebtedness. Consumers could become a source of negative domestic influence if they take action to rein in spending to address their indebtedness.”
Yup. And it’s exactly why the regulator thinks it makes sense for people who can’t afford to own homes not to have them. (Isn’t that a rad idea?) So if that means making them sell instead of shouldering mortgages larger than the value of the real estate, perhaps leading to mortgage default, so be it.
This happens now, of course. Lenders are under no obligation to renew a mortgage, and some don’t. Soon this could be a significant story, as it is in Britain.
In the UK the bank cop has come up with strikingly similar reforms, called the Mortgage Market Review. When implemented next year, millions of homeowners now in negative equity would be faced with no mortgage renewal. Incredibly, this group now includes half of all those who received mortgages between 2005 and 2011.
All borrowers would have to pass a mortgage rate ‘stress test’, interest-only payments would be banned and self-declared income would not qualify for a loan. The idea is to curb the excessive lending which took place during the British real estate bubble (a lot like ours) and force lenders to ensure owners can pay mortgages from their income, assuming no future jump in the value of their homes.
Says the Brit media: “Millions of homeowners will become ‘mortgage prisoners’ next year, ‘trapped’ by loans taken out during the boom years. Controversial new rules, from the Financial Services Authority, Britain’s financial regulator, which will revolutionise the mortgage market, are expected to come into force next summer… In particular, there will be some existing borrowers who will be unable to remortgage to obtain a better deal despite the fact they require no extra borrowing and their personal circumstances have not changed since taking the original mortgage.”
See what I mean? The radical idea is not withholding money from people who bought a losing investment. It was giving a loan in the first place to those who had no skin in the game. The moment a country like Canada, Britain or the US allowed its banks to extend 95% or 100% financing to borrowers without assets so they could buy houses at historic prices, we kissed poor prudence goodbye.
Americans learned their lesson. The Brits are now. Soon us.
Now, who wants a nice copter ride? Plenty of room. The Chinese guys left.