Pricks

In case, like me, you were cleaning your Hummer and missed the news, Canadian house prices are now overvalued by 23.9%. So says The Economist.

That’s a national average, covering Bathurst NB and North Bay ON, as well as the places where people actually live. Which means it’s likely closer to 45% in Vancouver and 35% in the GTA. In fact, just above every day that passes now bring another little hunk of evidence that this blog is not totally on crack.

But that’s not the topic. Well, almost not.

Those who believe my best-before date was in the Eighties, and that a US-style real estate correction in this country is impossible, often makes these points: (a) our banks are more conservative. (b) Canadians are cautious about debt. (c) We never had funny mortgages.

Those are myths, of course. And to help us prove this, we’re joined by the TD Bank.

Here’s the story: Starting last Monday the bank is registering all its new home loans as collateral mortgages, rather than conventional ones. If you have no idea what that means, you’re normal.

A collateral mortgage is a loan which is backed by a promissory note which is in turned backed by security. A conventional mortgage, as you know, is just a loan secured by a house. Normally the only people who are asked to sign collateral mortgages are folks who use their houses to arrange lines of credit with balances that can balloon, not a regular mortgage with a fixed amount owing and a standardized payment.

With a conventional mortgage there are strict rules about how much you can borrow determined by the value of the property when you take the loan. Not so with a collateral mortgage, because it’s actually a loan which is backed by your promissory note. That means you can borrow more than your house is worth.

Yes, just like those old fast-talking Ditech.com TV commercials offering American homeowners mortgages worth 125% of their home’s value – the ones we used to snicker at. Well, giggle no longer. TD is now shopping 125% collateral mortgages.

In fact, bank customers (I’m told) are being encouraged to ‘register’ for 125% mortgages when they sign up, even if they don’t need all that money. It’s just there, the pitch goes, if you ever need it. Kinda like a built-in line of credit you don’t need to reapply for.

(Of course, it should be lost on nobody that the bank just found a way around guidelines on loan-to-value ratios.)

OK, so much for the conservative Canadian bankers part. But it gets better. For the bank.

With a conventional mortgage it’s your house backing the loan, which means transferring a mortgage is simple, and can be done for a couple of hundred bucks. But collateral mortgages cannot be transferred, since they’re more akin to personal loans. That means one must be discharged and a new mortgage arranged elsewhere if you want to move. Since that can cost thousands, not hundreds, it pretty much ensures you won’t.

But it gets even better. For the bank.

With a conventional mortgage if you miss a payment there are standard procedures, which involve catching up in a timely fashion and maybe having to pay for a lawyer’s letter. But the terms of the loan remained fixed. Miss a collateral mortgage payment, however, and the bank has the right to slap you around with the imposition of a higher interest rate for the life of your loan. Just as the bank is registering these things with 125% principal amounts, so too is it registering interest rates as high as prime plus double digits. Just in case.

And it gets better. Guess for who?

When a collateral mortgage renews, and you don’t like the rate being offered, you can’t just walk away and get another bank to lend you the money to pay TD off. Instead, the collateral mortgage/promissory note – which is registered (like a car loan) under PPSA – needs to be discharged legally. And you pay. Or you capitulate and stay a bank customer. Additionally, a borrower may find the collateral mortgage gives the bank the right to dip into any of their other bank-held assets if they happen to miss a payment or two.

Says a mortgage industry insider: “TD Bank’s move is brutal for customers unless they are share holders of the Banks. None mention the true legal / security implications and how it increases the bank’s security and sticks customers with more liability.

“I am in the industry but we cannot speak out against this as strongly as we would like for fear of repercussions. Honestly think all banks are headed this direction, using TD Bank as a test case. Don’t think there is a conspiracy? Bet me.”

Finally, given Canadians’ track record with debt lately (look at the chart I published here yesterday), is it such a good idea to dangle a 125% mortgage in front of people who are horny for granite, stainless and flat screens? Is this entrapment?

So the next time some dinglenuts tells you we’re immune from real estate self-destruction because our banks are looking after our butts, just mimic a TD customer.

Pucker and turn green.

173 comments ↓

#1 Mark on 10.25.10 at 9:20 pm

Fun! TD called me up a couple weeks ago and asked me how they could serve me better. As a TD shareholder, I told them, “Deliver more profits! Squeeze those housing deadbeats! Take away all that unearned equity!

I’m sure it wasn’t a sort of response the TD CSR was looking for, but she was quite impressed and passed on my suggestions to management.

She even agreed that it was complete nonsense that housedebtors get better access to credit than businessmen like myself who create jobs and facilitate capital investment.

#2 Northern_dirt on 10.25.10 at 9:27 pm

So.. Buy bank shares? :)

#3 DiGiacomo on 10.25.10 at 9:30 pm

So as TD fiddles while TO burns, here’s what next week’s Calgary RE news is likely to look like: (and it’s not pretty)

I took a few moments to put together data from the last 30 days – again we’re seeing big unit shift and starts of price shifts compared to both a month ago (which were already bad) and October 2009.

Compared to October 2008, (when the big US crash really hit) we’re either even (ie +/- 2%) of October 2008 numbers for ave prices, and noticeably down for unit sales.

Will be interesting to see how the real estate PR propaganda machine spin these numbers!

Here’s a quick summary of what October RE number in Calgary are likely to look like, based on CREB’s 30 day data as of last night (numbers may be off by a day or two).

Notes to those not familiar with Calgary:
1) Calgary’s average prices peaked in 2007, not 2009/10 like Toronto / Vancouver
2) October has been the best month for weather here in Calgary since about May-June. So the “bad weather month” argument is out the window.

All data from Calgary Real Estate Board, all analysis and comparison by me during a coffee break. Full data source details at bottom.

All changes are the “direct” change between two dates – not some “annualized made up number”.

Apologies for any analysis errors on my part – feel free to double check and correct!

Houses:
Sept 2010 to the Last 30 days (most of Oct) – 16% drop in units, 4% drop in avg. price
October 2009 to the Last 30 days (most of Oct) – 38% drop in units, 4% drop in avg. price
October 2008 to the Last 30 days (most of Oct) – 3% drop in units, 1% drop in avg. price

House Price Data
Average Price: October 2008: 449,100
Average Price: October 2009: 462,465
Average Price: Sept 2010: 460,278
Average Price: Sept 24 – Oct 24: 442,351

Median Price: October 2008: 390,000
Median Price: October 2009: 410,000
Median Price: Sept 2010: 390,000
Median Price: Sept 24 – Oct 24: 386,750

Units Sold: October 2008: 820
Units Sold: October 2009: 1,285
Units Sold: Sept 2010: 958
Units Sold: Sept 24 – Oct 24: 796

Condos:
Sept 2010 to the Last 30 days (most of Oct) – 15% drop in units, 3% increase in avg. price
October 2009 to the Last 30 days (most of Oct) – 48% drop in units, 2% increase in avg. price
October 2008 to the Last 30 days (most of Oct) – 22% drop in units, 2% increase in avg price.

Condos Price Data
Average Price: October 2008: 289,148
Average Price: October 2009: 289,155
Average Price: Sept 2010: 284,028
Average Price: Sept 24 – Oct 24: 294,755

Median Price: October 2008: 268,000
Median Price: October 2009: 263,500
Median Price: Sept 2010: 265,000
Median Price: Sept 24 – Oct 24: 263,000

Units Sold: October 2008: 399
Units Sold: October 2009: 601
Units Sold: Sept 2010: 366
Units Sold: Sept 24 – Oct 24: 309

sources:

Sept 24 – Oct 24 2010 – Creb.com “Calgary Area Metro Statistcs” On October 25, 2010
CREB Stats – October 2009 (also shows October 2008 Data) – http://www.creb.com/public/documents/statistics/2009/package/res-stats-2009-October.pdf
CREB Stats – Sept 2010 – http://www.creb.com/public/documents/statistics/2010/package/res-stats-2010%20September.pdf

#4 Tim on 10.25.10 at 9:31 pm

So people are taking on riskier mortgages, the average home price in San Jose, Ca. is still over $500K despite the worst recession since the great depression. If we are in better shape here-and it seems as though we are- lower unemployment, fewer riskier mortgages, etc. then what’s the likelihood of a major correction in TO or Van?

#5 The Original Dave on 10.25.10 at 9:37 pm

I’m trying to think if this can trigger another rally in housing? Probably not. Considering that people would be getting 25% on top of what they spend on housing, rather spending 25% extra on housing. The money is already spent and excess funds don’t contribute into real estate values but do make debt levels even uglier for Canadians.

How is this legal? It’s madness. I’m going to email TD. Every one of you who disagrees with what TD is doing, take initiative and email them to let them know. What they’re doing will hinder Canadian productivity. More dollars will be required to service debt repayment rather than contribute to productivity and growth. Quite tragic if you ask me.

#6 Alberta Ed on 10.25.10 at 9:39 pm

We stopped dealing with TD when they screwed up our and several hundred other mortgage payments (and didn’t even tell our local TD bank management). Now there’s another reason. Maybe the Big F should have a look at this (ri-i-i-i-ght).

#7 unbalanced on 10.25.10 at 9:46 pm

Your posts are getting better and better. Thanks in advance. There are probably alot of people on here that know these complex mortgages. For me, you have just convinced me to buy bank shares.

#8 Brad Ormsby on 10.25.10 at 9:52 pm

Thank you Garth for bringing this to Canadians’ attention. Of course, most will never heed the advice. C’est la vie.

Yesterday’s video is scary: http://www.cbsnews.com/video/watch/?id=6987699n

Can it happen up here? With these types of “mortgages”, I believe 100% that it will. Thank God I bought preferred shares when Garth advised it was a good idea. 5.95% is hard to pass up when a CSB is paying 0.6% in 2010.

I look forward to what F has in store for Canadians with our version of “austerity measures” coming in the future. How can F not impose some sort of austerity measure? We’re $56B in the hole currently.

My wife & I are both employed in policing, both have “Defined Benefit” pension plans and we have $225,000 already saved (RRSP’s & non-sheltered investments) in our early 40’s, and we are still worried. I heeded Garth’s advice 3 years ago. I am glad I did. My wife and I will be fine.

This will not end well for most people.

#9 moremiles on 10.25.10 at 9:55 pm

Does that mean then that the banks are kind of doing an end run around present mortgage requirements just to keep RE up & pumping. One of those times you can say what are they thinking? & this will not end well. I agree with everything you say except that part about North Bay. It is actually a little piece of paradise but we’re keeping it a secret.

#10 Dodged-A-Bullit-in Alberta on 10.25.10 at 9:57 pm

Greetings: Not surprising that TD should lead off this travesty. Number of years ago, TD tried to dick us around on some short term interm financing when we bought our present home. After the dust settled, we totally removed ourselves from any business with TD, best thing we did!!!, even dumped their credit cards.

#11 Mark on 10.25.10 at 10:00 pm

#5 “What they’re doing will hinder Canadian productivity. More dollars will be required to service debt repayment rather than contribute to productivity and growth.”

No it won’t. Sucking the life out of homeowners will help Canadian productivity, as capital will be allocated away from housing, and more towards real industry that produces real things.

Shareholders will actually have better profits, profits that will allow them to invest in the next generation of growth instead of ‘investing’ in housing that doesn’t produce anything of value.

TD’s move is excellent, and if you write to TD scorning them, I will write to TD to applaud them.

#12 Grandpa Grinch on 10.25.10 at 10:01 pm

Probably the best and most informative post since you posted how to put your mortgage inside your RRSP. Far better than that “Sell Canada”, Buy USA” you were peddling a few months back. Glad to see the fibre kicking in. ;)

#13 Jon B on 10.25.10 at 10:05 pm

The colluding big 5 banks have long taken advantage of ignorant Canadians. Fortunately for the banks, there are plenty of ignorant Canadians to go around. Evil and greed are the big bank’s two most prominent assets.

#14 blase on 10.25.10 at 10:05 pm

this will not end well…

buckle up folks…

this is going to get interesting…

we live in interesting times…

(pounds forehead repeatedly into desk)

#15 joycer on 10.25.10 at 10:07 pm

Is the CMHC still behind the 125% loan?

#16 Basil Fawlty on 10.25.10 at 10:08 pm

The Economist says properties are overvalued 23.9%. Boy are those economists good at statistics, we are not overvalued 24%, but 23.9%. We are talking about the real estate industry here are we not? One would think we were speaking about the construction of electron microscopes, with numbers that precise.
In regards to house loans at 125%, that means one is underwater as soon as the documents are signed. This type of banking does not lead to the rock solid financial system continually bragged about by the glimmer triplets in Ottawa.
They will lend, print and spend every last nickel until the financial system collapses under it’s own creaking debt load. Same as it ever was, same as it ever was…

#17 fesnaris on 10.25.10 at 10:10 pm

FYI –
mortgage policies have not changed.
TD does not lend a client more than a maximum of 95% of the value of the house (90% for a re-fi). This is no different than other lenders.
The only thing that has changed is that it is a collateral charge and TD allows the customer to register a higher charge on title, than what the house is worth, ie. if someone buys and renovates a home, they can set up the original mortgage but register a higher amount, then when renos are done they can refinance everything in a new mortgage and not have to pay a lawyer to re-register a title.
According to a very busy R.E. lawyer he says of all the mortgages he does, it is about a 50/50 split between conventional and collateral charges already. There are pros and cons, nobody has to register for 125%, you can just register for the amount of your mortgage. But don’t bitch and moan about paying a new legal fee when you want to increase your mortgage or line of credit in the future to pay off the visa and mastercards that somehow got maxed out.

#18 T.O. Bubble Boy on 10.25.10 at 10:14 pm

@ #4 Tim:

Your spam machine is on “auto”… you posted that crap yesterday.

#19 Maxamillion on 10.25.10 at 10:18 pm

How long before TD starts collecting old mattresses on the street covered in feces and urine to sell them as refurbished. Isn’t that what they really want everyone to sleep on.

#20 dark sad person on 10.25.10 at 10:19 pm

Those who believe my best-before date was in the Eighties, and that a US-style real estate correction in this country is impossible, often makes these points: (a) our banks are more conservative. (b) Canadians are cautious about debt. (c) We never had funny mortgages.

Those are myths, of course. And to help us prove this, we’re joined by the TD Bank.

*******************

You’re best one yet G-

I hope this puts an end to the driveling fools on this board-that have been pumping these Canadian Banks as responsible lenders-
These Banks have every reason in the world to be irresponsible-
Encouraged by the crooks we have in Government and the BOC-
They are fully backstopped by the taxpayers and could care less who defaults-because it will be no skin off their ass-they will simply hand the debt over to CMHC-

The unseat “Harper” campaign-that’s going around?
What a friggen joke–
Unseat him and replace him with–who????

There isn’t one shred of honesty left in Government-
They’re crooks-they’re opportunists-
Those who default will be able to work the debt off in one of the Billion $ Prisons that the scuzzy sleazeball Stockwell Day is building with “your” money–
LOL—Paint me cynical–

#21 T.O. Bubble Boy on 10.25.10 at 10:19 pm

Now that Rob Ford has been elected mayor of Toronto, you can officially write off any hope we had of being “different”.

Watch how many people want to move to a place that is cutting every public service possible.

Jim Flaherty’s best bud is going to turn Toronto into Buffalo or Detroit or Cleveland… cities of the past with no hope for the future.

What’s the over/under on voter regret? 2 weeks?

#22 Happy renter on 10.25.10 at 10:19 pm

Can anyone advise if this new practice by TD is the same thing Manulife has been doing with their “Manulife One”?

#23 Ralph Cramdown on 10.25.10 at 10:21 pm

TD is also the home of the 33% mortgage. They call it the 5% cash back mortgage, for which you’ll have to pay the posted rate, versus their usual 95% LTV mortgages, for which they’ll give you a discounted rate.

The math is straightforward, if you subtract the interest you’d pay on the the 95% from the interest you pay for the privilege of getting your DP back, they’re charging 33.3% on that 5% back.

#24 Basil Fawlty on 10.25.10 at 10:24 pm

Hey Garth, mind if we bring some multimedia to the credit fiesta? May as well party, while Rome burns…

http://www.youtube.com/watch?v=_5VRhmgUNtM&feature=related

#25 DaBull on 10.25.10 at 10:29 pm

Miss a collateral mortgage payment, however, and the bank has the right to slap you around with the imposition of a higher interest rate for the life of your loan.

Not quite true.

Here is a response from a TD exec on Canada Mortgage Trends blog.

Before I go, I wanted to clarify a few facts about TD mortgage loans that are secured by collateral charges:

· Only one product at a time can be secured by the collateral charge — they remain exclusively mortgages and the collateral charge does not cover any other debt owed to the bank

· We can’t change your rate at anytime — the interest rate on the mortgage loan can only be changed if the customer signs a renewal of the mortgage loan (just the way a traditional mortgage works now)

· It’s not true that registering for up to 125% of the value of the mortgage ties up the equity, and the amount of the charge is not necessarily relevant. It depends on what steps the second lender chooses to take.

Sorry for the long post, but with all the incorrect assumptions out there, I thought it was important to be as detailed as possible. Your home is your biggest investment and it’s important to put a lot of thought into how you finance it and how you use it. Ask questions, talk to your bank and consider all your options.

Chris Wisniewski
Associate Vice President, Real Estate Secured Lending, TD Canada Trust

http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2010/10/td-mortgages-to-become-collateral-charges.html

He does not address the issue of a missed or delinquent payment. — Garth

#26 MKUltra on 10.25.10 at 10:31 pm

Garthie….so what you are saying is that these ‘new’ TD mortgages will allow people to buy more expensive homes…..AND if home prices fall, the bank can renew their mortgages (in 5 yrs) equal to the outstanding amount because they are no longer limited by the market (appraised) value of the house.

OLD school TD

2010 – mortgage $500,000 house value – $550,000

yr 2015 – mortgage outstanding $450,000 house value – $400,000

Summary: You can’t get a mortgage to cover the full $450,000 so I have to cough up $50,000 quick.

NEW age TD

2010 – mortgage $500,000 house value – $550,000

2015 – mortgage outstanding $450,000 house value – $400,000

Summary: You can still get a mortgage to cover the full $450,000 because the mortgage isn’t tied to the home value so you don’t need to worry about the $50,000 difference – awesome!!!!!!!!!!!!!

These new mortgage will lessen the blow of a house decline because home owners won’t need to worry about whether or not they will be able to refinance if there home values sink. This is the awesome news people!!! Let the bidding wars begin! yeee haawww!!

The bad news….this is basically a vote from TD Bank that home values will decline and they need a way to keep all the people afloat in their homes so they can keep paying their mortgages like hard working circus clowns. This is awesome news too!!! where can i get some of those juicy bank shares!!! TD! TD! TD!

#27 Priced Out in Toronto on 10.25.10 at 10:32 pm

The noose is being slipped around the neck of the people borrowing now. TD must think it’s the cat that ate the canary. Unfortunately, if this thing does go down, they may have just tied themselves to a mill stone and thrown it overboard. The American banks had some pretty good ways of holding on to the borrowers too… that’s why “Jingle mail” was invented.
CMHC insuring this??? Doesn’t sound like it.
Profits? You kidding me… long term TD may go down with the ship.

#28 BrianT on 10.25.10 at 10:33 pm

#11Mark-your textbook economics is working pretty well in the USA so far. The next bailout for your idols is estimated at as high as 7 trillion at this point, or about $70000 from each non-productive taxpayer-obviously money they don’t have, but who’s counting at this point?

#29 BrianT on 10.25.10 at 10:35 pm

The sheep are getting harder to herd-pretty well every important important political figure in Ontario said “you better not vote for Ford or else” and they actually called them on it.

#30 Hector's Corpse on 10.25.10 at 10:44 pm

For the last year or so sellers in Winnipeg have tended to list their homes on the low side with the intent of generating a bidding war. Data for the last seven months indicates buyers are wising up to the practice.

Although some homes continue to sell above list, the trend is definitely towards selling at or below list.

Here’s a graph plotting individual selling prices of homes expressed as a % above/under the list price. (April to October 2010)

https://docs.google.com/leaf?id=0B8plOjPwsSCJM2IxMWI0YWItOTA0Yy00YTg1LTg3ZTUtZWJjY2ZiZmQzYTdj&hl=en&authkey=COTmypcJ

If considering buying a home in Winnipeg, you might want to think twice about offering above what sellers are asking.

#31 Devore on 10.25.10 at 10:46 pm

#21 T.O. Bubble Boy

Now that Rob Ford has been elected mayor of Toronto, you can officially write off any hope we had of being “different”.

Watch how many people want to move to a place that is cutting every public service possible.

Maybe he’ll just raise your taxes so the city can pay for everything instead?

#32 Fritz on 10.25.10 at 10:46 pm

An excellent post once again! Thank God you are on our side! Where did you learn your incredible business knowledge as I thought your background was in Arts and Science (English)?

#33 Alan on 10.25.10 at 10:52 pm

Awhile back I said Garth has been trying everything to boost his “housing-crash-armageddon-disaster-strikes-sky-is-falling” storyline. I posted this list:


1. The damned affordability is not good.
2. The damned low rates will make inflation pop!
3. The damned jobs aren’t there to support real estate.
4. The damned deflation will be murder for sales.
5. The damned boomers will have to dump in droves.
6. The damned US is sinking so we gotta drown too.
7. The damned Greeks are protesting.
8. The damned leprechauns are gonna overrun us!

I had relented at #8 saying that Garth really hadn’t tried that one yet—but today, it’s the Green TD bank leprechauns that are after you. Ok. What’s number 9 gonna be? Can it get any more loonie (that’s a hint)?

What Garth forgets/omits in discussing this TD story is that it is precisely these kinds of moves that are going to drive the market higher. They may result in a crash, but by now, I figure most of you have given up on Garth being able to time out (LET’S HOPE). Heck, it could be four years from now. Or ten!

The similarly structured mortgage products when applied in the US in 2004-5 drove the market parabolic over the next few years. And if the underlying buyers in the area were stable (chicago, new york etc…) the prices remained very close to their highs even after the crash.. This is the case here in Canada.

Be glad Garth didn’t teach you how to short real estate very effectively: those barrels can give you splinters!

#34 Crash Callaway on 10.25.10 at 10:57 pm

So the mules get to carry an extra 25% of fools gold in their saddlebags.
Shame on TD and any other entity that so brazenly enslaves their customers.

Mafia scum.

#35 Dan in Victoria on 10.25.10 at 10:59 pm

I found this very interesting its USA but…….

Deficit panel may suggest trimming mortgage deduction.

http://www.mortgageloan.com/deficit-panel-may-suggest-trimming-mortgage-deduction-8016

#36 nonplused on 10.25.10 at 11:01 pm

Unflippin-believeable.

I’m with #15, is CMHC behind these mortgages? If so we should riot like the French, not go quietly into that dark night like the Americans.

Interestingly, I know of a house that has sold 3 times in the last 3 months. In each case the borrower couldn’t get financing. Are the banks finally pulling funding because everybody and thier dog is turning bearish on housing? Or is this dude having really bad luck? I understand they will now start at the last sale price and lower the offer $10,000 every couple of weeks or so. That strategy works in a rising market, but in a fading market it can cause buyers to hold of for the next reduction. It’s kind of like playing those “cash bomb” games on the radio, only in reverse.

House around the corner finally sold. Original asking price: $1.4 mil. Deal got done price: $930,000. I was figuring there was value in the place compared to replacement at around $800,000 so still a ways to go yet, if things don’t overshoot. But at least the buyers probably didn’t screw up by more than 1 or 2 years salary, assuming they can get financing.

#17 I don’t buy your arguement. Everybody knows that renos don’t add dollar for dollar to the value of a house, so even if your scenario is correct the newly renovated house is still mortgaged for more than it’s worth. If CMHC is involved this is Canadian style mortgage fraud. Or more appropriately mortgage insurance fraud.

There are 3 reasons renovations don’t add dollar for dollar.

Reason 1: You didn’t do it right. Even if you used color schemes and appliances straight off Better Home and Garden, the buyer wanted a different scheme. Plus you might have done some dumb thing like paint all the oak, with pisses some potential purchasers right off. And not everyone wants to pay for a jacuzzi tub.

Reason 2: Even if it really looks nice, you have to depreciate everything according to the age of the house. The structure isn’t going to last any longer. So if you just pumped $40,000 into a 40 year old house expect something like $20,000 out of that investment. The only way you get the full value out is if you happen upon a buyer that thinks you nailed reason number one on the head and the wife thinks it’s perfect.

My landlord, for example, has a million dollar flip (that I rent from him), but he isn’t planning to spend $1 on upgrading the house even though he’s said he thinks it would be a nice place if you spent $150-200 grand on it. But he knows the buyer’s wife needs to pick out the granite and the value he is playing is in the lot, not the house, which might just get gutted no matter what he does to it.

Reason 3: Some people can’t afford to pay for your renovations, whereas they might have been able to make do with it the way it was. The more expensive a house is compared to the ones right beside it, the smaller the buyer’s pool.

Bottom line is you have to have an extremely good eye as a purchaser, do the renovations extremely well, and do them very efficiently (ie. inexpensively) to gain a whole lot that way. In other words you have to be a pro.

My take is that this is another increasingly desparate attempt to use housing to spur economic activity. Get everyone who buys a house to borrow 125% and renovate, and volia! Rona is busy. It won’t work, things are far to gone now.

Did you know that the Canadian leading indicators index has been lagging the US since 2005? Saw an interesting PIRA chart today. Not sure if that’s just the way it is or if that means something. I am not sure the indexes are identical. The unemployment graphs were interesting as well. Canada was flat at 6% until the crises with the US flat at maybe 4.5%. Then the crises hit and the US number went over Canada (as we all know) although both went up significantly. I wonder if we had more long term unemployed people to move to the “discourage workers” category and that explains the inversion.

#37 Devore on 10.25.10 at 11:01 pm

#28 BrianT

#11Mark-your textbook economics is working pretty well in the USA so far. The next bailout for your idols is estimated at as high as 7 trillion at this point, or about $70000 from each non-productive taxpayer-obviously money they don’t have, but who’s counting at this point?

Well, I don’t see YOU getting any bailouts, so I’d say their plan is going according to plan.

#38 RickOShea on 10.25.10 at 11:03 pm

excellent post – very informative…

i had no idea this crap was going down….

they don’t call these guys banksters for nothing.

#39 THEBESTPLACEONEARTH on 10.25.10 at 11:05 pm

This is great news, I LOVE IT. Everyday I keep wondering when things are going to stop getting better and now we get this wonderful news on being able to borrow more and more. The world rewards the borrower and punishes the saver. Anyone compared how much money they would of made borrowing to the max on housing over the last 10 years over keeping your money in a savings account. Remember if you borrow money for Vancouver real estate you win and if you save you lose by being priced out of the market forever.
Don’l listen to the Economist when it comes to Real Estate, these guys pumped Shiller a few years back stating “Vancouver is the bubbliest City in the world” Fools absolute fools and should be liable for all the renters who got kicked to the curb when real estate started its meteoric and ongoing stratospheric rise. Too infinity and beyond!!!!!!!!!!!!!!!

#40 Real Estate Realist on 10.25.10 at 11:11 pm

To All, and to you to Garth:

I am so frustrated by what I just read. Garth, I know you are doing your best with this post, but there are many things that you have said that are going to confuse a lot of people that already have collateral mortgages in place and where this new structure for the product does not apply. (I can’t comment about what you wrote that actually may apply to the NEW product, but I can comment about existing Collateral Mortgages.

The media is reporting on this subject very irresponsibly and are so very ignorant of the facts. I’ve just Scroogled “new TD collateral mortgage” and here is an example of a news report that came up that has too many incorrect statements to get into right now. Read it and be aware that the reporter is ignorant of the laws, and of the process in general. They are insinuating that there is only one type of Collateral Mortgage and this is how it works, etc. I’m sure these statements are being made everywhere today. Great. The kind of collateral mortgage that matters at this moment is the kind that is going to take millions of homeowners down over the next few years. People who are liable for those ones and who read this are going to be dumbfounded. Don’t worry folks, no PPSA registration unless the house is already gone, there was a shortfall, there was no way for you to pay for the shortfall, you didn’t cooperate with any form of payment plan at all, you didn’t go bankrupt, so the Bank had attach themselves to you in order to recover the remaining debt. They will either get a judgement and garnishee your wages, OR, they will register a PPSA and then possibly go after another asset that doesn’t have another lienholder already attached to it. Oh boy, I’m stopping here. Between Garth’s post and this article I’d be here all night. This is the WORST time for people to get wrong information. The worst.

http://gailvazoxlade.com/blog/archives/2230 (a tiny example of wrong information in this article is that there is no lien placed against the property, there is a mortgage placed against the property. Very different legal processes!) Ah, and the line about paying significant legal fees to get the h out of dodge…wow….lies. People, when you pay off a finite CM, ie, original amount + interest – payments, the BANK is legally obligated to discharge that mortgage from your property. It is their expense. This article, in all of it’s perceived professionalism and “looking out for the little guy” bs, was transcribed from the back of cereal box.

Here’s another one: http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2010/10/td-mortgages-to-become-collateral-charges.html (wrong, wrong, wrong – calling this new type of CM as if it represents ALL CM’s policies and structures. The branches phones are going to be ringing off the hook from current CM holders asking questions about comments in these articles make no sense to them.

My largest area of expertise is the legal structure and recovery of Collateral Mortgages. 600 branches, an entire Province, 31 days delinquent to restructuring them, to selling the properties to recovering the shortfalls, $20M(illion) per month, so I know what I am talking about. It seems that no one else does and the media is sure not going to explain it correctly, ever. The new product however may have these new processes in place, ie. a PPSA registration, etc, but that is not standard practice for the zillions of dollars worth out there in CM’s today, ie. the OTHER type of collateral mortgages which are VERY likely still being granted today as they are a hugely viable and necessary product, and OFTEN in first position people! Oh, there’s so much more, that’s one little point being put out there incorrectly among many, ie a PPSA registration at the onset.

Maybe more tomorrow, but I imagine no one cares to hear the rebuttal, or rather, clarification. Not your fault Garth. You probably got your info from the MSM and their ignorant way of presenting things. Love ya. I’m just astounded that you aren’t aware of the money out there is traditional Collateral Mortgages and/or how they work. Especially since I’ve referred to it here and there over the past few months, as well as tried to inform people about them and why they are going to be a huge factor in the mess coming. Those posts had nil to do with this new product, obviously.

Done for the day. Really disappointed. The public needs the right information to own their futures and make informed decisions.

#41 wes_coast on 10.25.10 at 11:11 pm

Wow. Its like putting out fire with gun powder. Let’s hope Garth will forward this info to F so they can bring in some legislation to prevent this before it takes hold.

#42 Constantine on 10.25.10 at 11:13 pm

Garth, isn’t this also a preemptive strike against the negative equity issue you’ve warned us about?

i.e. They can still re-finance you when you are underwater in exchange for a tighter grips on the nards.

#43 kitchener1 on 10.25.10 at 11:15 pm

STAY AWAY FROM COLLATERAL MORTGAGES!!!!!

What a freaking joke, the other banks will follow in short order.

Trust me, I know finance and this is all bad for the consumer. Notice how they are doing this for ALL NEW LOANS, regardless if you need the extra capital or not!!

This is a really great move for the banks and I hope the shareholders are happy but it really puts a much more liability on to the consumers, as well as getting around the loan to value ratios (to a degree)

Number 1 concern, what happens when you miss a payment? This circumvents our already very efficent foreclosure process. Garth is correct, read the terms, by the way, does anyone have a copy of the actual legal agreement– the huge multiple page document that you sign when you get a mortgage available for this new product?? If so please post it.

Im curious– how do they plug the numbers into CHMC and make them work? What good is a CMHC insurance premium on a promissary note? Is a govt crown backed corporation going to back these???

Someone please tell me, please, that CMHC is not writing insurance polices based on promissary notes and not charges against title. Cause that is just straight up insane.

insane like tinfoil, gold bugs, SHTF, conspiracy crazy time 1000

#44 Investx on 10.25.10 at 11:23 pm

Great post, Garth. Thanks for exposing the new collateral mortgage.

#45 Jim on 10.25.10 at 11:32 pm

In Alberta we have non recourse mortgages.

If other banks join TD in registering all new home loans as collateral mortgages will this mean that they can override the Alberta Land Titles Act?

It seems to me they would have to offer the customer a conventional mortgage as well or risk contravening the provincial government land titles act.

What say you Garth?

#46 Fiendish Thingy on 10.25.10 at 11:33 pm

@ #4 Tim-

So people are taking on riskier mortgages, the average home price in San Jose, Ca. is still over $500K despite the worst recession since the great depression.

Median home price in SJ, May 2006 = $748,977
Median home price in Oct. 2010 = $480,750
Current inventory is almost twice (8,000+) the inventory in May 2006

Link:
http://www.housingtracker.net/asking-prices/san-jose-california/

Scroll down to “historical data”

I grew up in SJ and still work there; while there are plenty of Google millionaires, there are plenty more people hurting too. Lots of people in SJ used their HELOC’s as ATM’s to buy SUV’s, vacations, tech stuff, etc.

One woman I work with whose husband has been out of work for a long time tapped out her HELOC to help him start a business, get this…buying up bad debt (mostly credit card, I think) for pennies on the dollar, and then collecting what they can, hopefully for a profit.

The median price in my zipcode (95062) has dropped another 10% in the past month, although sales volume is down only slightly. I’m glad we sold last summer…

Still think Vancouver and Toronto will escape the bubble’s bursting?

#47 604genX on 10.25.10 at 11:36 pm

Estimated Greater Vancouver units sales for October compared to last year. Still well down but I can see Cameron Muir writing his next comedy routine about month-over-month sales well up.

Sales = 2,358 (-36.4% YoY, +6.2% MoM)
—> this would be 2nd lowest in last 10 yrs (only the melt-down of 2008 is worse)

New Listings = 3,915

Percentage of sold units to new listings for month = 60.2%

#48 McLovin on 10.25.10 at 11:38 pm

Hey everyone don’t beat up the “Big Banks”! Envision Financial (In the Fraser Valley BC) has been doing collateral mortgages for at least 5 years.

A little old aw shucks community credit union:

Envision Financial is a division of First West Credit Union, B.C.’s third-largest credit union with approximately $5.6 billion in assets under administration, 167,000 members and 1,150 employees.

#49 boomer62 on 10.25.10 at 11:42 pm

Presently, bank shares are expensive and their respective dividends are thin. TDs policy might help with future dividends, but I’m guessing its really about the Feds whom need help with their deficits and debt. The Feds can tax vicariously through the banks.

The smart kids will avoid the debt trap and just rent. The dummies will help the banks pay off our federal debt through their housing blunders.

AND

#19 Maxamillion
….no…just you

AND

#10 Dodged-A-Bullit-in Alberta
….get over it…they are running a business

AND

#6 Alberta Ed
…just send your payments to me…I’ll keep your local branch much better informed

#50 Marcus Aurelius on 10.25.10 at 11:48 pm

#29 Brian T:

Yes, Anger Finally Won – they were lined up around the block in my (central, upscale) ward, and if I could have, I would have voted 10 times for the (flawed, human, sweaty) man named Ford.

And now the hated LTT is going -eventually. PS – congratulations to the knobs who bought south of Steeles during the 2008-10 lunacy – you got to shove an extra major firecracker up your debt-ridden ass!)

But even that will not save the local residential resale market.

The one thing that the so-called victory by the Competition Bureau last week did not cover was the most important : access to or disclosure of real sales data, not fantasy-world list pricing. If you had the latter, for Toronto, you would see that detached resales in September and October are actually selling for 20-30% less than the fantastical Asking Prices that the real estate prostitutes are still listing. This is because Sales (such as they are) in that segment are being generated by folks who, for one reason on another, need to sell. Those vendors who refuse to acknowledge reality are simply pulling their listings. But the critical points are:

– $1M++ detached resales are going down hard. Remember that it takes more than $700K to buy the simplest roof over your head house-wise in a safer central Toronto area (i.e., no shooting outside, no drug deals on the corner, no multicultural festivals on the street, etc.).

-$400-700K condos in the best areas are holding, but condos in the suburbs are going to have a melt-down. No one disagrees with that in GTA real estate.

So – Fordism and respect for the taxpayer have arrived. Sandra Bussin now has to pay for her hotdogs on the boardwalk, beady-eyed Jane Pitfield and her ego are derailed, and George goes back to his buddy Dalton, with his eHealth bollocks securely between his legs. All is well again in the Big Onion. Now if we can only get those fargin bike lanes off Jarvis – the ones used by one or two bikes in the Summer and Fall rush-hour, before the slush and snow, so that drive times can add 40 minutes up to Bloor. Sanity returns…

#51 obert on 10.25.10 at 11:56 pm

#3 DiGiacomo,
The spin will be:
THE PRISES OF CONDOMINIUMS ROSE BY 3% IN OCTOBER! IS THE RECOVERY AROUND THE CORNER?
… of condos compring to previous month.

#52 Mark M on 10.26.10 at 12:07 am

The TD Collateral mortgages are OPTIONAL at this point, you still have the choice to go with conventional or collateral.

Apparently that is not true. — Garth

#53 bobbyford on 10.26.10 at 12:10 am

No land transfer tax or vehicle registration tax in Toronto soon. Houses will go up in price soon (before the big drop).

#54 Real Estate Realist on 10.26.10 at 12:20 am

I’m out of here for awhile.

Garth, I know that you are going to keep writing the best blog that I personally think this country has ever had the privilege of reading, and you have saved a lot of lives. From now on the story is going to be akin to waiting for an inevitable reverse split to happen and all the “ouch” moments will be something to watch. Until then, I’m spending too much time here. I’ll catch up in the future.

To everyone who will bother to listen, my God, do what Garth says and turn your assets into liquid and make eliminating debt your priority. Warren Buffett has always lived by something Ben Franklin said:

EARN A DOLLAR, SPEND 99 CENTS ~ RESULT = HAPPINESS
EARN 99 CENTS, SPEND A DOLLAR ~ RESULT = MISERY

#55 Nostradamus Le Mad Vlad on 10.26.10 at 12:20 am


“Pricks — Ditech.com. Those are myths, of course. That means you can borrow more than your house is worth (but the house is depreciating even as we speak, so now you can’t borrow as much as you could last night). OK, so much for the conservative Canadian bankers part. (All the banks are following instructions from GS and JPM). Just in case. (We go broke or the banks do?). . . some dinglenuts tells you we’re immune . . .”

Well, I’m no hasbeen dinglenuts, but if you have spoken the immortal and revered words Ditech.com, that’s all the evidence anyone needs to know that we are at the peak.

So, either fly off the mountain (is our collective name Icarus?), or sit on the sled and enjoy the trip down.

Somewhere around the halfway point, we will rush through the sound barrier, eliminating the mountain we’re sliding down on altogether. Then there is nothing, what we came into this world with and what we’re all leaving with.
*
#190 miketheengineer on 10.25.10 at 8:50 pm — “Put your tin foil hat on and bear down.”

Got too much food stuffed in my tin foil kilt to put it on! Thanks for the link. Yes, it is interesting that Obama will be in India for a nice jaunt while America sinks.

Then there is a new year / cycle in the Mayan calendar happening in a week’s time, the mid-terms . . . what else can be added to the mix?

Ahhh yes, the WH / Pentagon may have a false flag set up to shut down the US part of the ‘net Nov. 30. Lotsa goodies!

Cheers! Vlad
*
#24 Basil Fawlty — Great clip and it’s a terrific CD!

Currency Wars among controlled economies. In other words, the economies are already controlled by the elite who are setting up and having these currency wars between themselves. Who profits and who panics?

Thar she blows! Quite messy.

FFs and the occult One of Aleister Crowley’s wives divorced him, saying he wasn’t evil enough. Numerology is one of many parts that come from the Astral Plane (the second heaven).

Note the term ‘commodity hoarding’. Who is gathering up their nuts for the winter? China.

Speaking of hoarding . . .

Urban Legend or the truth?

Re- De- Take yer pick!

JPM is getting into copper ETF’s. No paper money left to squander?

#56 viTRifY on 10.26.10 at 12:25 am

Does this take CMHC (and the taxpayer) off the hook if the person defaults?

#57 Don on 10.26.10 at 12:26 am

If TD can’t get CMHC to insure this sort of loan (and surely they can’t, knock wood), I’m sure they can always securitize the loans, maybe even bundling them with insured loans to make the investment look more solid. What could go wrong?

#58 Wildroseblogger on 10.26.10 at 12:43 am

As far as the big five go, TD is by far the easiest to deal with for the average consumer. CIBC is probably the worst, you could drive to CIBC in a paid for Maserati, wave $200,000 in their face, and ask for an additional $100,000 to buy a house llisted at $300,000 and valued at $500,000, and they’d still look down their nose at you. They have the second worst customer service next to Scotiabank, which I believe is open M-F from noon until 1pm, but closed for a half-hour lunch break. TD, on the otherhand, is open late and on Saturdays, their people are absolutely fantastic and customer oriented, very knowledgable, and willing to use their common sense. I’ll never bank anywhere else, although I will threaten to everytime I’m negotiating rates. They’ve always matched/beat any rate quote I’ve recieved anywhere else- even once when re-financing my farm loan I got quoted a wicked rate from Alberta Treasury Branch, TD told me there was no way that ATB would quote so low. So I told them they didn’t have to believe me, and in that case would they please close down my accounts and write me a check for my balances? They took my word for the rate I was quoted and beat it by 0.09%.

I don’t know what devil’s game they’re up to with this collateral mortgage thing, but it does sound like they’re screwing the customer. I don’t think that will go over well long term with their business model, which is built around excellence in honest service. They will probably pay a penalty for this in the long run, but hey, who am I to say. Sounds like Joe Consumer is going to have to be even more diligent about educating himself so as not to get trapped. Hopefully, with the help of blogs like this and big-mouths like me, we can warn the good people about the dangers of mortgage products like these.

#59 El Magnifico on 10.26.10 at 12:47 am

To explain TD’s move and probably the other Big Four’s next move, it’s good to re-read Joel Bakan (a University Law professor that wrote the book “the Corporation – the pathological pursuit of profit and power”. Highly recommended reading):
-”The Corporation’s legally defined mandate is to pursue relentlessly and without exception its own economic self-interest, regardless of the harmful consequences it might cause to other”
-”The corporation’s unbridled self-interest victimizes individuals, society, and, when it goes awry, even shareholders and can cause corporations to self-destruct, as recent Wall Street scandals reveal”
-”Governments have freed the corporation, despite its flawed character, from legal constraints through deregulation and granted it ever greater authority over society through privatization.”

Would bank regulation be the answer?

#60 Andrew on 10.26.10 at 1:00 am

With Rob Ford elected as mayor of Toronto tonight, expect that Toronto will further decline as Ford makes a total fool of himself on the international stage and more businesses leave Toronto and move elsewhere. So much for Toronto being a “world class city”. Expect house prices to drop by 25-50% with the hollowing out of this city by that right-wing extremist.

#61 Peter Pan on 10.26.10 at 1:36 am

#27 Priced Out in Toronto,

Totally agree with you… The noose which is being fitted around TD Mortgage clients’ necks is being sold to them as a benefit. I can imagine some morons who deal with TD thinking the bank is being so nice to them for extending them this extra credit…

It’s like the lobster thinking “Why are there so many tasty treats at the end of this netted tunnel which ends up in a nice little wooden slatted box?”

#62 Utopia on 10.26.10 at 1:43 am

This is an interesting change Garth. Perhaps a spokesperson from TD will come and answer your charges right here on this blog.

In the meantime, I would suggest that the changes being brought forward by TD now are designed more for the impression that they (the company) will be able to convey to shareholders should the R/E market and TD’s mortgage portfolio actually take a tumble.

I can certainly understand the concerns from some quarters that this move is a strategic bank ploy to ensure greater leverage over it’s lending base however that does not actually add up for me. It is never good business to screw your customers,…..especially openly.

TD is in the business of banking. They are also in the business of posting the healthiest results attainable, soothing investors, assuring shareholders of continued value and continuing to build up and expand on core business.

If they have built more latitude and “wriggle room” into the lending process to ensure that homeowners do not end up in foreclosure then that act will tend to suggest to their board and all others that they were in fact a responsible lender (at least in comparison to all the others big banks).

This is just my first take at what is happening here and I will have to look deeper into this tomorrow. It is clear though that most banks and most public companies want to put their best face forward and this potentially risky move may actualy pay off over the long term if we can ride out the looming R/E market dip and come out healthy on the other side.

At the end of the day, investors will compare statistic, charts, graphs, foreclosure figures and assess potential losses while comparing each of the banks, one to another.

Would not coming out at the top of the list be a real and legitimate goal of TD?

#63 gold bugger on 10.26.10 at 1:44 am

Garth, your best post ever, as far as I”m concerned.

Mark’s economics are quite solid. Money that should be invested in productive capacity is being spent on non-productive housing.

However, servicing all that debt merely enriches the douch.e.thingies who run the banks, with a few dividend crumbs tossed shareholders’ way. And there’s no guarantee those dividends will be reinvested in productive capacity. They may be used to, yes, buy a house.

We need to eliminate the CMHC so that taxpayers are not on the hook for mortgage loans to delinquents. Moral hazard, and all that.

And we need to blow open the doors to banking competition in this country. The guy at the orange bank should be allowed to open street-level branches. Anything less is consumer-killing, cartel-perservin protectionism.

#64 tran, Calgary on 10.26.10 at 1:57 am

Economist survey shows Canadian real estate overvalued by 23.9 per cent

http://www.canadianbusiness.com/markets/headline_news/article.jsp?content=b4935555

“Japan are 34.6 per cent cheaper than their fair value”

#65 State of Mind on 10.26.10 at 2:20 am

You know, I used to be proud of the fact that Canada WAS different, we WERE smarter and we HAD more wisdom when it came to debt and money than other countries.

But Canadians are showing in record numbers we are different, we are not as smart nor wise on the hole. We are no longer the peace keepers of the world nor the light in the fog. I guess that is what happens when you become a country who’s citizens are enslaved by debt.

That truly really makes me sad to realise.

Really.

As for TD’s collateral mortgage, for shame on you TD Bank. I’ve had their Mastercard for 17 years (Platinum), TD just gave me the chance to submit a protest vote towards their banking actions.

After 17 years, I’ll cancel my Platinum TD card at the end of this month and go elsewhere.

#66 Mel on 10.26.10 at 2:39 am

Here’s an interesting comparative analysis of the Down Under housing bubbles – New Zealand and Australia:

http://www.unconventionaleconomist.com/2010/10/dont-forget-new-zealand.html

#67 Aussie Roy on 10.26.10 at 3:24 am

Garth it may be useful if you haven’t already covered it, the big difference it makes when interest rates rise because house prices are many more multiples of annual income than the last high interest period. Also how rising rates also means buyers will be able to borrow less due to interest rate increases. If as in Canada, some say “in our day we paid >15% on our mortgage,” while not realising that 15% on 3 times annual income is much less than 8% on 8 times annual income. It may also be good to point out to your readers if LVR goes from 95% to 90% that the amount you can borrow (against your deposit) is actually much less than a 5% drop. I think most people dont understand how this works.

Aussie Update.

http://www.theage.com.au/business/property/super-saturday-soft-its-a-buyers-market-20101024-16z6n.html

http://www.theage.com.au/business/fixedrate-mortgage-costs-increase-variables-next-20101026-171z3.html

http://www.news.com.au/money/interest-rates/savers-the-losers-while-rates-stay-steady/story-e6frfmn0-1225943556896

#68 branden on 10.26.10 at 3:34 am

the economist piece is here: http://www.economist.com/node/17311841?story_id=17311841

garth….how about some more link love for your sources in the future.

#69 Just a Tech on 10.26.10 at 5:35 am

This should be all the proof you need that buying anything is unwise right now. I guess if you sign the contract it will fly but this seems fraudulent and has a touch of extortion.

#70 warptweet on 10.26.10 at 6:18 am

DOES THE TD MORTGAGE INCLUDE A FREE PAIR OF HANDCUFFS?

#71 OttawaMike on 10.26.10 at 6:45 am

I apologize for vandalizing your blog today Garth but here are a couple of links explaining the gold bubble we are in :
http://www.businessinsider.com/reasons-why-the-gold-bubble-will-burst-2010-10#but-heres-why-people-will-keep-buying-12

http://www.businessinsider.com/9-ways-that-gold-is-a-religion-masquerading-as-an-asset-class-2010-10

Gold bugs entering stage right in 3…2..1.

#72 X on 10.26.10 at 6:57 am

So you are saying that we should deal with mortgage brokers to find traditional mortgages in the future (after the big banks change to collateral mortgages) to limit our debt/liability risks?

#73 Moneta on 10.26.10 at 7:00 am

Did you mention the part where the feds changed the bankruptcy law (just like Bush did in the US) ?

http://www.bankruptcy-canada.ca/trustees-talk/tag/new-bankruptcy-rules

The US did this in 2006. Here are the effects:

http://www.calculatedriskblog.com/2010/09/personal-bankruptcy-filings-down-from.html

So how is canada different again? Because it just seems to me that our leaders have been doing everything Bush did, with a 3-year lag.

#74 Moneta on 10.26.10 at 7:03 am

She even agreed that it was complete nonsense that housedebtors get better access to credit than businessmen like myself who create jobs and facilitate capital investment
————
Of course it makes sense. Homeowners will eat Ramen noodles before missing a payment on their homes. Real estate always goes up. It’s the best investment on earth. They can’t go wrong with real estate.

#75 LHHW on 10.26.10 at 7:04 am

So homes are overvalued and affordability is dropping and TD is willing to give out 125% of the value through a collateral mortgage. So as the post outlines, it increases the banks secured assets and passes more liability to the customer. As some posters already mentioned, if CMHC will also be back stopping these mortgages then the ultimate liability is on us, the tax payer. Outrageous.

#76 T.O. Bubble Boy on 10.26.10 at 7:06 am

@ #31 Devore:

Maybe he’ll just raise your taxes so the city can pay for everything instead?

You’re assuming 2 things:

1) That I pay property taxes (I cashed out of the RE ponzi scheme in Toronto, and rent these days)

2) That Rob Ford can do math — based on his mis-quoting of all the spending dollars he believes that can be saved, he sometimes moves the decimal place one way or the other.

That being said, there is room for property taxes to go up, based on comparisons to other GTA burbs.

#77 Moneta on 10.26.10 at 7:10 am

More dollars will be required to service debt repayment rather than contribute to productivity and growth. Quite tragic if you ask me
———
Our financial system is based on growth. Debt needs to be created to inject new money in the system to generate that GDP growth. New money also needs to be created just to finance the interest on the debt. After a while, banks own everything. It’s mathematical. That’s when the system implodes and resets.

We’re just about there no matter what we do.

And when we elect people who promise no taxes, it only implies more deficits, more money printing and an acceleration towards the reset.

#78 Jenerous on 10.26.10 at 7:12 am

So TD Economists suggest in their report last week that Canadian debt to income levels MUST be reduced in order to avoid deleveraging and general mayhem, and yet the bank itself empowers the average moronic consumer to pile more on? Such sleight of hand makes my brain hurt.

#79 Brian1 on 10.26.10 at 7:33 am

I stopped reading the Economist for a while because they seem hell bent on giving an optimistic view. I’m glad it doesn’t bother you. The 29% is handy.
Craig Alexander, last week on Lang Oleary, said house prices would rise 5% per year or realize a gain (something of that nature). I think Drummond has retired and I bet he is relieved. Till now I have always thought that TD was the most forthcoming of
Canadian banks.
G&M’s computer version of Saturday’s story has a disclaimer which led me to assume a freelance writer was employed. Correction was welcomed.
Your reminder of how you are basically mortgage free is the example others should look at(from yesterday’s comments referring to the 30% examples). You have set the example, I think. No need to sell your house and rent.

#80 AM on 10.26.10 at 7:37 am

#22 Happy renter on 10.25.10 at 10:19 pm

In response to your questions about the Manulife One, your “loan” is secured against your house and the max is 80% of appraised value. Look at it like a line of credit account secured against your home. I don’t think they will touch anything that requires CMHC.

From a business standpoint, TD is on the ball with their 125% collatral mortgages. There will be a lot of desparate people in the coming months that will need this kind of financing, not to mention the bulls that look at this as an opportunity to further leverage leverege themselves in this “best time to buy” environment.

#81 mattbg on 10.26.10 at 7:38 am

In addition to the Economist story, I noticed Phil Soper changed his tune when it came to whether or not you need a full-service real estate agent:

“In a slowing market, where it might be more difficult to sell homes, I don’t think you will get a significant shift in market share away from full-service realtors,” said Soper. “But it would be interesting to see if there is a shift in a few years when the market is stronger.

http://www.moneyville.ca/article/880464–deal-means-cheaper-real-estate-fees

#82 Moneta on 10.26.10 at 7:39 am

Here is a response from a TD exec on Canada Mortgage Trends blog.
———-
All in all, this mortgage product reduces the homeowner’s negotiating power down the road, especially in a weakening real estate market.

The fact that they are going 100% into this only demonstrates just how much they are preying on the masses. They are taking advantage of the fact most people do not understand mortgage contracts (the same US experience) and their mass delusion that real estate can only go up.

#83 Mean Gene on 10.26.10 at 7:46 am

The TD mortgage change sounds like the bank has two carrots to offer, one they drop in front of you and the other they stuff up the wazoo when you bend over.

#84 Victor on 10.26.10 at 7:47 am

#8 Brad Ormsby

“Thank God I bought preferred shares when Garth advised it was a good idea. 5.95% is hard to pass up when a CSB is paying 0.6% in 2010.”

Hi Brad, can you provide more info on the type of preferred shares you purchased? I am thinking of buying some bank preferreds and any advice is appreciated.

#85 Bullion.bunny on 10.26.10 at 8:16 am

Rob Ford has been elected…….thank GOD. Let the tax cutting and government chopping start. How about cutting city hall by 50%, that would be a great start. Toronto is 500 million in debt so far…..how about reducing that to zero. Rob Ford is right “the spending party is over”, fire up the chain saw and lets get at it.

#86 dark sad person on 10.26.10 at 8:17 am

Oooops–one of the fabulous 5 involved in fraud?
Nawww–can’t be–

********************

Kathy D. Patrick is a Houston lawyer who spends her Sundays teaching children about God. The rest of the week, according to one attorney who knows her, she can be “as frightening as a pit bull on steroids.”

That’s bad news for issuers of mortgage-backed securities like Bank of America Corp. Patrick represents bond investors including the Federal Reserve Bank of New York and BlackRock Inc. who are seeking to force the bank to buy back bad home loans, claiming the debt failed to match contractual promises about its quality.

Her law firm, Gibbs & Bruns LLP, is a 30-lawyer outfit that says it specializes in “bet the company” litigation. This month, it reached a settlement with JPMorgan Chase & Co. and Bank of Montreal stemming from an alleged fraud at a Canadian gold company. Earlier this year, Goldman Sachs Group Inc. and UBS AG settled with the firm over the sale of $550 million in mortgage-backed securities. Patrick reached that settlement on behalf of her clients just two months after filing suit.

http://www.bloomberg.com/news/2010-10-26/fed-blackrock-hire-pit-bull-on-steroids-to-get-bad-mortgage-bond-refund.html

#87 SpaceMonkey on 10.26.10 at 8:23 am

#35 Nonplused,

I have to agree with…

“But he knows the buyer’s wife needs to pick out the granite and the value he is playing is in the lot, not the house, which might just get gutted no matter what he does to it.”

When my parent’s put their house on the market, they put in beautiful, good quality hardwood flooring throughout the main floor. We found out from our old neighbours that a week after we moved out, the neighbours ripped out and scrapped all that beautiful wood and put in a different wood floor.

#88 theletterM on 10.26.10 at 8:27 am

MLS changes hardly a change at all:
http://www.financialpost.com/opinion/columnists/CREA+cartel+broken/3726617/story.html

#89 fesnaris on 10.26.10 at 8:27 am

#35 non-plused: You are mistaken. I repeat the lender will never lend more than the value of the property. Yes you rarely get dollar for dollar on renos. The property will need to be rappraised to get more money.

For everyone jumping off the ledge, if you house is worth $100,000 then the bank will only lend you maximum $95,000. You can register a charge for $125,000 on title. (as far as the homeowner is concerned this is done behind the scenes with lawyers, lenders and government land registry office)
If sometime in the future your house rises in value to $200,000, you can apply for an increase to your mortgage or Line of credit (to buy preferred shares maybe?) If by an appraisal your house is now worth $200,000 then you can borrow up to $125,000 (total) without having to pay a lawyer to register a new charge on title.
CMHC is still only going to insure mortgages to 95% maximum loan to value. They will not advocate a lender giving a client any more than 95%. This is not at all similar to what happened in the U.S.

#90 SM on 10.26.10 at 8:40 am

Excellent post. This is the kind of information the average family badly needs. It does make me wonder what the banks are forecasting in our future to instigate this kind of dramatic move…

#91 dark sad person on 10.26.10 at 8:46 am

#87 fesnaris on 10.26.10 at 8:27 am

CMHC is still only going to insure mortgages to 95% maximum loan to value. They will not advocate a lender giving a client any more than 95%. This is not at all similar to what happened in the U.S.

*************
Geezzuzz and the current-LTV ratio is etched in stone somewhere?

#92 bruce corell on 10.26.10 at 9:10 am

Toronto Board of Trade. As a member and involved in quite a few seminars we are privy to some information many of you are not. As a person close to many that have lost their life savings in the early 90s please take note.
If you have more than 50% of your assets in real estate you are in extreme jeopardy. Diversify quickly. These days are not what many of you believe. There is a debt crisis world wide that will effect us for many many years. The magic number is to reduce your debt to 25 -33% of your assets. Anything more and many of you will never replenish this in your life time.
Make a note of this debt clock and check back next September. Next September your share will double.
http://www.debtclock.ca/
All we can say is you all so this coming…..Good luck we will all need it.

#93 Got A Watch on 10.26.10 at 9:34 am

“Now that Rob Ford has been elected mayor of Toronto, you can officially write off any hope we had of being “different”.

Watch how many people want to move to a place that is cutting every public service possible.

Jim Flaherty’s best bud is going to turn Toronto into Buffalo or Detroit or Cleveland… cities of the past with no hope for the future.

What’s the over/under on voter regret? 2 weeks?”

“With Rob Ford elected as mayor of Toronto tonight, expect that Toronto will further decline as Ford makes a total fool of himself on the international stage and more businesses leave Toronto and move elsewhere. So much for Toronto being a “world class city”. Expect house prices to drop by 25-50% with the hollowing out of this city by that right-wing extremist.”

hahahahahahahahahahahahhahahahaha

Sounds like we have some bitter Lieberal and other associated leftist vermin on the Blog. Don’t worry morons, your buddy Dalton McDipshit is up next for the chop.

Have some cheese with your whine.

Go Rob, kick some socialists where it hurts – right in their entitlements.

#94 Brad Ormsby on 10.26.10 at 9:45 am

#82 Victor.

My advisor is with RBC Dominion Securities. I asked him about bank preferred shares and ironically, he put me onto a large grocery chain that has its own banking system. Some guy named Galen runs the company. The preferred share price was 1/2 of The Royal’s and the dividend was more.

I am doing The Smith Manoeuvre on my mortgage (Garth does not support it, but it does make the mortgage interest tax deductible, which Garth DOES believe in). The stability of the preferred shares in that case is an excellent investment. It is only a portion of that whole investment account though. It works as my fixed income portion, even though it is a stock.

liquidity + dividends = WIN.

#95 OttawaDaddy on 10.26.10 at 9:46 am

Bruce Corell:

Thanks!

What do you make of the Fair Pensions for All blog?

How do we get politicians to understand that DB pensions will help kill us?

#96 timbo on 10.26.10 at 9:52 am

Very good blog and a great video on how things are going to go.

http://whispersfromtheedgeoftherainforest.blogspot.com/2010/10/more-on-inflation-and-why-we-will-see.html

#97 Tom on 10.26.10 at 9:59 am

Apparently our bankers have turned into investment speculators. Remember when your Banker was prudent, wise and honest. Now it appears they are slippery and slick. Short term gains with no concern for the customer or the stability of the bank. This is exactly what happened in the U.S. Be warned we are treading the same path. It is time for the Bank Act to be amended.

#98 MythBuster on 10.26.10 at 10:04 am

This blog is not on crack – but it gives me a high every time I read a new hilarious entry on it. Why? It’s the pleasure of FORESIGHT!

Keep it up, Garth!

Those who do not act on what you say are going to feel it.

I wonder, did I cross the ‘line’ of propriety?!

#99 eddy on 10.26.10 at 10:12 am

inflation is built into the system. The TD mortgage move will help inflate the RE market even more. If the next 40 years are like the last 40 years (res RE price inflation), the average house in Toronto will be 8 million by 2050. That’s what the calculator says

#100 The Analytical One on 10.26.10 at 10:24 am

#87 fesnaris: thank you for the only rational voice in the array of the emotional “sky is falling” type of comments.
By the way, it’s nothing new, the RBC, for example, had similar offering with its HELOC product for years already and it has been great for investors and like minded business people as a source of leveraged capital.

#101 dark sad person on 10.26.10 at 10:26 am

Can anyone see a pattern developing?

Let the Banks die and kill the Unions and let the Market unwind this madness-
The Market wants to see bodies floating–
The Market is never denied its wishes–ever-

**************************

UK spending review: how did the banks get off so lightly?

Two years ago this month, a pale and visibly shocked Gordon Brown promised that “irresponsible behaviour” by Britain’s bankers would be “punished”. The prime minister was angry at the level of public money needed to support banks, which eventually ran into hundreds of billions, after the credit-fuelled system expanded out of control in the run-up to the banking crisis of October 2008.

Two years on, as the taxpayer endures more pain while the government that replaced Brown’s axes £81bn from public spending, the banks have returned to practices they enjoyed in the good years, seemingly bearing few scars of the punishment promised. After the coalition unveiled its £2.5bn-a-year bank levy yesterday, unions were quick to seize upon the apparent unfairness in the treatment of banks while the poorest and most vulnerable in society were being hardest hit by George Osborne’s austerity Britain

http://www.guardian.co.uk/politics/2010/oct/21/spending-review-banking-city

#102 Future Expatriate on 10.26.10 at 11:08 am

Talk about the kiss of death…

#103 BrianT on 10.26.10 at 11:13 am

#70Ottawa-funny you should mention Altucher-I don’t know who he owns to get touted as an expert on Yahoo but this guy is a joke.

#104 BrianT on 10.26.10 at 11:16 am

#96Tom-You and your crazy conspiracy theories-next you will be telling us that the Bank of Canada is run by Goldman Sachs.

#105 dark sad person on 10.26.10 at 11:18 am

#99 The Analytical One on 10.26.10 at 10:24 am

By the way, it’s nothing new, the RBC, for example, had similar offering with its HELOC product for years already and it has been great for investors and like minded business people as a source of leveraged capital.

*************************

So you’re saying-if you HELOC out at 125% of your LTV at the “peak” of housing prices-where the price index chart below indicates (where we are in comparison) and a year from now–the prices (here) are where the US index shows today-
This is a “great strategy” for investors?
Why am i not following the logic of you “two” wise investors?

http://calculatedriskimages.blogspot.com/2010/10/case-shiller-composite-home-prices.html

http://calculatedriskimages.blogspot.com/2010/10/case-shiller-cities-august-2010.html

Of course HELOCs have been set up as collateral mortgages for some time (as my post referenced), but the news here is that all TD residential mortgages after Oct. 18 will be collateral charges. This is a dramatic change. — Garth

#106 BrianT on 10.26.10 at 11:23 am

#92Got-It is very important for liveability that TO have garbagemen making 120K and cops pulling in 200K with overtime and after work gigs. That just covers the employees who might actually leave the office cubicles-hard to say how many thousand 100K TO workers spend all day at work on blogs like this one but a fair guess is that it is a pretty high %.

#107 RB on 10.26.10 at 11:45 am

Garth:

If this move by TD makes it harder to get rid of your mortgage, will this prevent people from selling? (Thereby taking supply out of the market and pushing up housing prices)

#108 eaglebay on 10.26.10 at 12:00 pm

Collateral mortgages (loans) have been around for a long time. Even the big banks are doing it. It’s only another consumer product.
The choice is ours. We go for it or we don’t. The government (socialists) should not have anything to do with it. Half the posters on this blog want government intervention. We all know what happens when the government interferes with the so called “free market economy”.

#109 David B on 10.26.10 at 12:09 pm

Strange thing happened the other day, someone I know who had good credit (good home almost paid for) with little or no debt found a new dream home (LOL) and they went to their bank (CIBC) (just to investigate a new really big loan). The bank person told them it was quite big and under their new rules a larger downpayment would be required … “OR” they could go to the TD Bank!

Hello, hello? guess they all really go to same Christmas Party.

#110 dark sad person on 10.26.10 at 12:11 pm

Of course HELOCs have been set up as collateral mortgages for some time (as my post referenced), but the news here is that all TD residential mortgages after Oct. 18 will be collateral charges. This is a dramatic change. — Garth

***************
I understand that-
My point was-to the people who think that taking out a HELOC “forever debt slave” loan and exercising the new 125% LTV- is a good move-
Because-if the value of your collateral (home) LTV plummets (and it will) it is not a wise move-
At one time-it was a good play-when RE value was climbing-but not anymore-

#111 CTO on 10.26.10 at 12:15 pm

#91 bruce corell

Bruce, that debt clock should be placed on one of the billboards at Dundas Square in T.O.
I believe in would have a great effect there as the people down in that area are convinced DEBT is here to be embraced like a gift for the entitled!

#112 The Analytical One on 10.26.10 at 12:18 pm

#104 dark sad person: if I understand your scenario, you are saying that (let’s go back to fesnaris’s numbers) if at the time the house was appraised as 200K I took a mortgage/HELOC combination worth 125K, and then the house dropped back to 100K how is it great that I own more than the value of the house? Well, it’s not great, but the point is it’s no different than as if you refinanced a conventional mortgage to be worth 125K at the time the house was worth 200K. I believe what we discuss here is the pros and cons of collateral vs. conventional mortgages, and not the doomsday scenarios per se.

#113 joseph on 10.26.10 at 12:21 pm

What Garth does not mention in the article is that Canada being overvalued by 23.9% is significantly lower than the other countries in the story. Australia and Hong Kong are overvalued by 60%! Does anyone really think that Hong Kong and Australia is going to fall by 60%? If the economist is right then they may fall 15-20% and Canada would fall by 8-10%.

If Garth was right regarding the shifting mentality and the wiping out of the middle class then we would be seeing this in Calgary RIGHT NOW. Calgary is down 15-20% from 2007. Do not look at the averages, look at individual sales of units over time. People don’t care. They continue to spend, live in their homes, rent them out if they need to move or take the hit and sell. I lost probably $40,000 on one of my rentals, so what, I just made $40,000 on Probe mines that hit $1.25 today, they were trading at 6 cents last year. I’ll take that over Garth’s preffereds…

Regarding TD, just another reason to use a mortgage broker. These collateral loans are crap, you don’t have to take them, so what’s Garth’s point even? That a company is offering a crappy product, that the public does not have to buy… I mean its good advice to people to let them know about it, but its not earth shattering news that a company is selling a bad product that hurts the consumer.

#114 Moneta on 10.26.10 at 12:25 pm

#99 The Analytical One on 10.26.10 at 10:24 am

By the way, it’s nothing new, the RBC, for example, had similar offering with its HELOC product for years already and it has been great for investors and like minded business people as a source of leveraged capital
————-
Then out of the other side of his mouth he’ll be telling us there’s no subprime in Canada.

#115 fancy_pants on 10.26.10 at 12:25 pm

Looks like TD has found another delightful spread to offer. Just another position to exploit the sheeple. So much to offer in so many ways!

Bend over sheeple, you are not yet excused. Enjoy the pig in lipstick while it still looks pretty.

tick.tock.tick.tock.

#116 BrianT on 10.26.10 at 12:28 pm

#107Eagle: I guess you missed the part about the taxpayer eating the loss on these scams. Do some research on CMHC.

#117 CTO on 10.26.10 at 12:32 pm

#39 THEBESTPLACEONEARTH

What are you?
Some kind of Automatic Gobbles Machine!?
Did the Real Estate people hire Google to design you?

#118 fesnaris on 10.26.10 at 12:35 pm

#104 dark sad person
So you’re saying-if you HELOC out at 125% of your LTV at the “peak” of housing prices-where the price index chart below indicates (where we are in comparison) and a year from now–the prices (here) are where the US index shows today-
This is a “great strategy” for investors?
Why am i not following the logic of you “two” wise investors?

I REPEAT:
the bank will not lend you 125% of the value of your property. If the property market tanks by 25% then when you apply for a HELOC you will only be approved for 80% of the new lower value of the property, Regardless of the total amount of the collateral charge. A collateral charge is only something that allows the bank to hold security for the loan or line of credit you are approved for.
All current mortgage policies remain as is!

#119 Victor on 10.26.10 at 12:49 pm

#93 Brad

Many thanks for the insight. I will do some further due diligence on this tonight.

Cheers.

#120 bruce corell on 10.26.10 at 12:51 pm

The new TD mortgage…INCLUDES A FREE SET OF HANDCUFFS
The rumors are true…TD Canada Trust will begin registering all mortgages as collateral charges after October 18.

What does this mean for the consumer? Well, there is some good but mainly it’s bad..…

a collateral mortgage is normally registered for floating or revolving debt such as a secured line of credit. It allows for the balance to float up or down.
TD will register a collateral charge for 125% of the loan amount… this will allow the client to come back at a later date and apply to increase their mortgage if needed….
in theory, it sounds great…no legal fees required in the future if you need to refinance… and easy approval…
BUT HOLD ON…

a COLLATERAL MORTGAGE is NOT portable…meaning you cannot transfer to another institution…you will lose some leverage to negotiate the rate when your mortgage matures…
and if you wanted to increase your mortgage in the future, you would need to reapply for approval…let’s suppose you don’t qualify in the future..not because your situation changed but because the Bank’s lending policy changes…this happens regularly….you would now have to seek out an entirely new 1st mortgage as no other lender would register a 2nd mortgage in behind a collateral first mortgage (at least none that I am aware of)… that could mean penalties, definitely legal fees and other costs….
It’s obvious that a big reason TD would be doing this is to improve mortgage retention.. this makes it less appealing to leave TD because of the costs….
BOTTOM LINE…this type of mortgage limits your options..it doesn’t expand them.. you MAY save on legal fees..but that’s not a big enough reason to go with this product..
My advise to anyone looking at a TD mortgage is to be careful…make sure you understand all the terms, conditions, the differences and the limitations…you be the judge… is this a good thing for the client or is it a good thing for the Bank?? Will other Banks follow? Some might say this is like putting handcuffs on the client… I tend to agree… FANNIE MAY HERE WE COME

#121 Cattle Country on 10.26.10 at 1:04 pm

I am in full support of the TD. I am in industry. Transferring a mortgage cannot be cheaper or easier than it is today. All the banks can use a service provided from First Canadian Title that can cancel your old mortgage and get a new one in place for between $300 to $500. No one actually transfers an original mortgage document anymore. Why would I want the terms and conditions of the previous mortgage holder? Registering for a higher amount also does not mean we lend to them just ‘because’ we have a higher limit registered. If in the future the people have equity to lend against and they can service the debt we can lend them more money. When you need a vehicle why not borrow against your home. I am looking to buy a new vehicle and Ford offered my a rate of 6.9% on a brand new vehicle ( much higher on a used vehicle ), $1000 incentive to go with Ford credit. Why would I not tap into my home equity and get a loan for Prime – .75%. Debt is debt whether I add it to my mortgage or I have a loan on another asset such as a vehicle that costs me more. By the way, First Canadian can have a new mortgage registered ( if you already own the property of course – this is not for purchase ) in as quick as 3 to 5 days. I use the service all the time – awesome! So, do not ever think the TD has you locked in for life. As long as you are not in a 5 year term you can leave at anytime you want – Collateral or Conventional. Keep up the great work Garth. I read your blog every day! Sorry I missed your last trip to the Okanagan.

#122 Coho on 10.26.10 at 1:16 pm

I guess the TD and soon to be big 5 are finding new ways to carve a bigger piece of the pie for themselves. They must be tired of the BoC taking the lions share of profits.

Exploitative practices? Make money on the backs of others. It’s the western way. Who cares, as long as the stock goes up and it pays good dividends. Buy them bank stocks, but don’t stop there. There’s surely money to be made investing in biological and chemical weapons companies.

Come on people, lets keep building our prison cells. Weld them bars on. Jane holds while Jack tacks. Fit them straight. Weld them solid. The banks are giving us the tools and we are building the cells. What great teamwork!

#123 AxeHead on 10.26.10 at 1:27 pm

Thanks for the education Garth, rarely can you find this sort of ‘warning’ from anyone or anywhere these days.

And…I enjoyed the addition of ‘flat screen’ TVs to the Granite and Stainless icons.

#124 jess on 10.26.10 at 1:29 pm

potential /actual (wasn’t Lloyd’s nationalized?)

…”A buy-to-let landlord has won a long-running legal case against a surveyor judged to have overestimated the rental income on a new-build flat, paving the way for future challenges from other aggrieved investors.

Emmett Scullion, a self-employed builder from Portsmouth, bought an apartment in Cobham, Surrey, to augment his pension. The property was valued at its asking price of £352,950 in a valuation by local surveying firm Colleys, now part of Lloyds Bank. The survey said the flat could be let for £2,000 a month.

Scullion bought the apartment in 2002, based on the figures given in the valuation, but found he could let it only at about 50% of the surveyor’s estimate. He sold the property in 2006 at a loss, a full year before the downturn in the housing market.

He subsequently took legal action against Colleys, claiming the surveyor owed him a duty of care, and was awarded £72,000 this month. The damages cover his loss of rental income and the transaction costs of purchasing and then selling the flat.

Legal experts say this could encourage other buyers to take similar action…”

http://www.guardian.co.uk/money/2010/oct/24/buy-to-let-rent-surveyor-case

#125 David on 10.26.10 at 1:30 pm

Those gimmick riddled mortgages with high LTV ratios did not work out so well south of the border. Truly amazing that so little is learned from the failure of other financial institutions. The financial panic of 2008 and its’ causes and consequences did not leave any lessons to be learned.
Sounds like another variation on the sub prime and offload the risks scheme which devastated the US financial system. Its a dumb idea well beyond its’ past due date.

#126 kitchener1 on 10.26.10 at 1:31 pm

#112 Joesph

yea, thats right look at Calgary, only reason Canada has not seen the middle class hurt really bad is because of easy access to credit. Look at the personal debt charts. easy to support your lifestlye when credit is easy.

When credit contracts or people refuse to accpet it, watch out below.

# 119 Bruce Corell

Great write up about the difference in the mortgage product vs conventional. People will still sign it anyway. They are clueless, ask your friends in the biz about how many people actually read the mortgage documents, its something like 1 person out of a 500 mortgages.

#120 Cattle Country

You must work for a bank!!

This is pure finance crack, why would I, as a consumer, bundle in my new car purchase into a HELOC or Mortgage product?? Its plain stupid, great for the banks and there employees, more volume = better bonus but for the consumer its just dumb, here is why:

The new car will be worth 50-60% less in 5 years. Now you bundle that purchase into a mortgage term that has an ammort of 25 years???? The shorter the ammort the better it is for the consumer. ALWAYS.

Works great when RE prices rise, works really bad when prices stagnant or go down.

Think about it this way, you cant afford to finance a new car at 6.9% over 5 years, you have no business buying a new car.

Is this the advice you give to your clients?

#127 Moneta on 10.26.10 at 1:33 pm

Transferring a mortgage cannot be cheaper or easier than it is today. All the banks can use a service provided from First Canadian Title that can cancel your old mortgage and get a new one in place for between $300 to $500
———-
We’ll see how accomodating they all are when real estate weakens. That is always the part people forget to consider.

And yes debt is debt. But cheaper car loans will just make more expensive cars.

#128 dd on 10.26.10 at 1:54 pm

#8 Brad Ormsby

“Thank God I bought preferred shares when Garth advised it was a good idea. 5.95% is hard to pass up when a CSB is paying 0.6% in 2010.”

Thank God I didn’t. My silver gains are up 30% over this time.

Maybe some day you will understand the difference between income and an unrealized capital gain. — Garth

#129 Nostradamus Le Mad Vlad on 10.26.10 at 2:04 pm

#27 Priced Out in Toronto — “The noose is being slipped around the neck of the people borrowing now.”

Yes. The hanging takes place at renewal time (2011 onward), and that is when TSHTF big time.

#59 Andrew — “. . . and more businesses leave Toronto and move elsewhere.”

There is plenty of room in the western provinces for the businesses to relocate, and as plenty of jobs are now gone forever, there are lots of individuals to choose from.

Welcome to Western Kannaduh!

#64 State of Mind — “. . . we are not as smart nor wise . . . no longer the peace keepers of the world nor the light in the fog.”

S’right. We have become the fog, no longer seeing beyond our own egos, the “I’ve got a bigger house than yours” attitude. As long as this attitude prevails we’re playing right into the elites’ hands.

Have a civil revolution, get rid of politicos and the BoC, then take charge of our own lives as individuals working for the betterment of the whole.

#68 Just a Tech — “. . . all the proof you need that buying anything is unwise right now.”

Well said! Avoid debt and taxes like the plague.

# 71 Moneta — “. . . that our leaders have been doing everything Bush did, with a 3-year lag.”

The CPC changed the bankruptcy laws to follow dubya’s lead, so now includes ‘Secured loans and leases cannot be terminated due to bankruptcy’.

Sheeple might want to read this over a couple of times (whether they understand is a different matter), because now that we are in the final stages of hooking the middle class into irreversible debt, the next thing is to go after the prudent ones who did not fall into this trap of cheap credit.

Any boomers who have savings will watch them dwindle through taxation, higher cost of necessities of life, living and the like.

Chances are good that CPP / OAS / GIS will be transformed into a single payment, enough for Timmy’s and smokes but not much else.

One possible way to avoid exorbitant bank fees and taxes is to have one’s investments increasing via DRIPs, and having just enough in savings / chequing accounts to cover the basics.

More high rise condos will be built in order to house the sheeple, as it is far easier to control them when they are all in the same location. Look at Europe; the vast majority there are locked into living in sky boxes for their lives.

#76 Moneta — “That’s when the system implodes and resets. We’re just about there no matter what we do.”

IF or when the US takes down the ‘net Nov. 30, ‘owzabout the first or second week of December? Sheeple till be too focused on Xmas / Boxing Day, their holidays and presents to be interested with anything else on the planet.

#79 AM — “. . . a lot of desparate people in the coming months . . .”

Noted. See above.

#91 bruce corell — “If you have more than 50% of your assets in real estate you are in extreme jeopardy. Diversify quickly.”

Excellent post with straightforward advice. Doesn’t get much simpler than this. Sell with the option of renting back and invest the net proceeds.

#93 Brad Ormsby — “liquidity + dividends = WIN.”

Great line and post!

#100 dark sad person — “Can anyone see a pattern developing?”

Clearly. A takedown of massive proportions, beginning in Iceland and Latvia, then spreading across the world.

Well, at least it is sunny but cool here!

#130 Bill Gable on 10.26.10 at 2:12 pm

Who needs The World Series, when we have Mr. Turner batting cleanup.

I am wondering what Banks are seeing, that they are scared of, hmmmm…?

This is getting grisly, and yet my RE hypnotized friends don’t see any problems – because, heh, this La La land.

Time for a TV show – Garth Gets REAL…..

#131 dark sad person on 10.26.10 at 2:29 pm

#117 fesnaris on 10.26.10 at 12:35 pm

I REPEAT:
the bank will not lend you 125% of the value of your property. If the property market tanks by 25% then when you apply for a HELOC you will only be approved for 80% of the new lower value of the property,

********************

I agree with that-my point was-if you are approved and borrow today-HELOC the max-based on the today’s LTV 125% assessment-you can borrow more then your house is worth–and if the housing market tanks “after” the line of credit is granted-you are even deeper underwater-
The only way these things will work for the borrower-is if the market gains–then–it would be a good vehicle-to use-

My other point was-Banks have a vested interest in creating/expanding more debt to consumers–because of the CMHC coverage–they cannot lose-in fact-it is in their best interest-to extend the loan to the max-when there is no downside for the Banks-

****************

The main difference of the overhaul is a switch to collateral-charge mortgages, which are similar to lines of credit. The bank is encouraging employees to approve customers at 125 per cent of a home’s actual value with certain conditions-

http://www.canadianmortgageprofessional.com/news/td-bank-overhauls-mortgage-program/65521

*******************

How Much Can You Borrow?

Borrowing levels depend largely on how much a house is worth. In a strong housing market, like the one experienced for much of the early 2000s, homeowners can usually tap up to 75% to 80% of the newly appraised value of a residence (this is known as the loan-to-value ratio), minus the remaining balance on the first mortgage. So if a house is worth $400,000 and the owner owes $240,000 on the first mortgage, then that consumer could borrow up to $80,000, assuming, of course, that the payments can be met.

Some bankers, however, are more aggressive than others. A loan-to-value ratio of 95% to 125% of equity isn’t uncommon.

http://ca.quote.com/personal_finance/articles/real_estate_living_equity.jsp

#132 timbo on 10.26.10 at 2:33 pm

if you or you know a friend who is planning on buying a timeshare or property outright in the US give them these two links and of course Garth’s.

http://www.washingtonsblog.com/

http://www.msnbc.msn.com/id/21134540/vp/39582228#39582228

Buying in the US right now is throwing money away. Those r/e markets are going to tank with all the fraud in the air.

#133 Tom from Mississauga on 10.26.10 at 2:40 pm

The perfect product for refinancing an underwater mortgage. So they figured a way out of the troubled future of real estate. Maybe I’ll switch from the preferreds to the common!

#134 Be A Man on 10.26.10 at 3:04 pm

Just a clue for those who might be clueless re: collateral mortgages.

TD announced this in Oct 2010, but other big banks have already had this for at least half a decade if not longer. RBC, for example.

And people are making a fuss over this? Funny.

No news is no news.

Collateral mortgage are not news. Making 100% of all residential mortgages into collateral charges is big news. — Garth

#135 morpheus on 10.26.10 at 3:22 pm

Two big differences with a conventional mortgage vs a collateral one.

1.) Conventional by there nature have a declining balance. Collateral mortgages do not.

2.) Conventional mortgages are compounded twice a year. Collateral are done monthly.

The negatives seem to far outweigh the positives for the consumer. For TD however, it’s peaches isn’t it.

#136 Devore on 10.26.10 at 3:45 pm

#75 T.O. Bubble Boy

1) That I pay property taxes (I cashed out of the RE ponzi scheme in Toronto, and rent these days)

If you live there, one way or another you do.

2) That Rob Ford can do math — based on his mis-quoting of all the spending dollars he believes that can be saved, he sometimes moves the decimal place one way or the other.

He’s a politician, not an accountant. He sets policy, he doesn’t run the place single-handedly. And I don’t think he’s as stupid as you seem to think. Can you remind me who the mayor is?

#137 The InvestorsFriend (Shawn Allen) on 10.26.10 at 3:54 pm

A few people mentioned CMHC…

Nothing TD does will change the CMHC rules which fix maximum loan to value ratios allowed when CMHC insurance applies and nothing they do can change laws that require mortages over 80% loan to value to be CMHC insures…

So not sure we will see any 125% loan to value mortgages. Not 125% at the outset anyhow…

But if TD can get you to sign a personal collateral note in addition to the CMHC insureance that is all good … for them.

This could lead to more competition between banks, Shop and compare folks, shop and compare.

Garth hit on excellent points that this might make it harder to transfer a mortgage. That is exactly what banks and every other company want, sticky customers. Captive even.

#138 Dodged-A-Bullit-in Alberta on 10.26.10 at 4:05 pm

Greetings: # 120-Cattle Country “when you need a vehicle, why not borrow against your home?”

“Debt is debt, whether I add it to my mortage or I have a loan on another asset such as a vehicle that costs me more.”

Using your home as an ATM to buy a depreciating asset that produces no off setting income is a fools game. With a good credit rating, and as a home owner, I would expect my own bank to give me a vehicle loan at a rate better than FORD without having to use the house as security. For what its worth, there is not a chance in hell that I would ever buy a NEW vehicle under any circumstances, borrowed money or otherwise. My wife and I have used HELOC in the past, but have done so to do upgrades to our property only.

#139 David B on 10.26.10 at 4:09 pm

An American journalist by the name of Joe Klien who just returned from a 30 day road stated on CNN that the housing crisis is much larger than most suspected. He said far too many had everything invested in their home and even those who still have have their home are living with the fact their value as sank to unacceptable levels. What is worst, they see no future for the first time in their lives. not good

#140 Got A Watch on 10.26.10 at 4:11 pm

I was accused of exaggerating when I called the Banksters financial criminals, and that it was mostly the Big Banks aka US Primary Dealers and other Big Wall St Squids who packaged and sold the toxic paper.

Well, h/t to Market Ticker for the link:

Assured Guaranty Sues Deutsche Bank Over Mortgages

“A unit of Assured Guaranty Ltd. sued affiliates of Deutsche Bank AG over $312 million of mortgage- backed securities that the bond insurer guaranteed and says were “plagued by rampant fraud and misrepresentations.”

Assured Guaranty Corp. is asking a judge to force the bank to repurchase the loans, on which the insurer has already paid almost $60 million in loss claims and sees the potential for tens of millions of dollars more, according to a complaint filed today in New York state Supreme Court against DB Structured Products Inc. and ACE Securities Corp. The bond insurer, backed by billionaire Wilbur Ross, is also seeking reimbursement for the claims paid and for future losses.

“The entire pools of loans that Deutsche Bank securitized (and to a large degree originated) in the transactions are plagued by rampant fraud and misrepresentations and an abdication of sound origination and underwriting practices,” Assured said in the complaint…

Assured said more than 83 percent of 1,306 defaulted loans examined in one of the transactions, ACE’s Home Equity Loan Trust, Series 2007-SL2, breached Deutsche Bank’s representations and warranties. In the second deal, Home Equity Loan Trust, Series 2007-SL3, 86 percent of the 1,774 loans breached the agreements, Assured said.

John Gallagher, a spokesman for Deutsche Bank in New York, declined to comment.”

Yes, you read that correctly.

LOL – ‘This was merely a clerical oversight. Our internal review has found nothing, and I mean nothing, wrong here. These securities were packaged with only the highest care, full due diligence, and complete transparency with which we treat all our clients.’

FraudClosureGate continues to spread like a wildfire after a dry summer. Many Big Banks will be burned to the ground. Reports are reaching the MSM now, like CNN etc, as even Bankster friendly industries (advertising $) start to turn on them.

This is the ‘No Litigator Left Behind’ Act of 2010. Settlement hungry lawyers will strip the carcasses of the Banks to the bone.

#141 Devore on 10.26.10 at 4:22 pm

#93 Brad Ormsby

My advisor is with RBC Dominion Securities. I asked him about bank preferred shares and ironically, he put me onto a large grocery chain that has its own banking system. Some guy named Galen runs the company. The preferred share price was 1/2 of The Royal’s and the dividend was more.

Well, it’s all about risk, isn’t it? I looked at them early this year when I was buying preferreds, and decided to do one better, got the parent company (also publicly listed and with preferred issues), more diversified, pays better.

Both have done well on capital gains basis too, in fact all my incomes are up % from low teens to 30s (a mining trust and a specialty REIT, yum) from 2010Q1, except for the laggards Canada Life and Yellow Pages, which dug itself out of a nice hole recently and are basically flat.

Happy investing, and be careful with that Smith Manouver…

#142 Alex on 10.26.10 at 4:34 pm

The latest short but but highly interesting blurb from Mark Carney on a housing “correction”:

http://www.cbc.ca/money/story/2010/10/26/carney-finance-committee.html

#143 Duke on 10.26.10 at 4:38 pm

Does anyone know if collateral mortages still reported on credit bureaus-impacting credit score?

#144 hmm... on 10.26.10 at 4:40 pm

Well,, maybe it’s a time to overmax your house? Borrow a couple of hundred grand at 2.8% buy bank bonds at 3.8%.
The bank will pay itself off and you’ll keep the money without paying almost any income tax and lifting a finger. Did I get it right this time???

#145 Devore on 10.26.10 at 4:40 pm

#99 The Analytical One

By the way, it’s nothing new, the RBC, for example, had similar offering with its HELOC product for years already and it has been great for investors and like minded business people as a source of leveraged capital.

As did every bank, including TD. The difference here is this is the only type of mortgage TD will give you.

#146 Bottoms_Up on 10.26.10 at 4:50 pm

i encourage everyone to write their federal mp about this issue.

#147 BrianT on 10.26.10 at 5:10 pm

#139David-the reality is that the basis of the economy is a Madoff scheme-inexpensive, affordable, high quality housing for the population is desirable under any logical, realistic or sustainable economic system. The MSM spins the decline in RE values as a problem to be fixed while the US population has no ability to pay even these low prices for housing.

#148 First Time Buyer on 10.26.10 at 5:16 pm

Hey Garth,

I am an avid reader of your blog and want to solict yours (and everyone elses help).

I just turned 25, live in Vancouver and have saved about $40K. I have been looking to buy for quite some time but have been hesitant due to the current real estate climate in Vancouver.

When would you buy if you were in my shoes?

You have enough to afford a portapotty on Burrard. Buy when you have the money. — Garth

#149 jess on 10.26.10 at 5:33 pm

Bubble Prevention? Inflation Targeting versus Price-Path Targeting?
==============
“There have been fraudulent efforts to persuade and deviously control that price,” said Commissioner Bart Chilton at a hearing today in Washington, alleging there have been violations of the Commodity Exchange Act. “Any such violation of the law in this regard should be prosecuted,” he said.
From Bloomberg:
Manipulation Cases

“Under current law, manipulation cases hinge on a four-prong test that begins with proving that prices were “artificial,” or outside the bounds of normal supply and demand. Then the government must prove that the accused had the ability to cause an artificial price, took actions to cause it and intended it.

The agency spent five years investigating an attempt by the Hunt brothers to corner the silver market in 1979 and 1980. That effort drove futures prices up to a high of $50.35 per ounce in New York in 1980 before the commission forced the brothers to sell off their silver holdings and the price collapsed.

The CFTC proposal today adds a prohibition on fraud-based manipulation that would cover intentional and reckless conduct that deceives or defrauds market participants. Penalties include a $1 million fine or triple the monetary gain, whichever is greater, and restitution to customers.

The Dodd-Frank legislation also gives the commission until January to impose limits on the number of contracts a single trader can hold in markets for energy and metals. The commission has received dozens of letters in support of limits from people claiming silver prices have been manipulated. The proposed caps have not yet been announced.

#150 Kaganovich on 10.26.10 at 5:34 pm

Hey Dawgs,

Here is an informative little article about the issues behind the ongoing protests in Frenchland:

http://www.alternet.org/world/148596/%22work_harder_to_earn_less%22%3A_why_the_french_are_raising_hell_in_the_streets/?page=entire

#151 john m on 10.26.10 at 5:38 pm

things are getting serious..it seems to me that the banks and the government combined are out to grab every cent of extra income from every greater fool in Canada..destruction of families and our standard of living matters little as long as the books show profit and for a few moments of grace it looks like the economy is responding for the vote buying polls.

#152 pablo on 10.26.10 at 5:41 pm

this 125% LTV collateral mortgage isnt anything new to canadian banks. I believe Manulife and RBC was doing this same thing years ago to take market share in the HOLC segment. U see that’s what the banks are all about, despite the warm/fuzzy commercials about how much they care about you the customer and despite all the glad handing and warm smiles from your branch lender/manager: it’s all about the bottom line, gaining market share and increasing profits. Your best interests matter not.

#153 BrianT on 10.26.10 at 5:47 pm

#151John-Yes-even the MSM is tiring of lying for these guys http://money.cnn.com/2010/10/25/news/economy/foreclosures_big_banks.fortune/index.htm

#154 TheBestPlaceOnEarth on 10.26.10 at 6:02 pm

One day the rest of the rest of the World will catch up.
We’re the top dog folks, more condos coming, guaranteed to sell out. God How i love this place
http://www.cbc.ca/canada/british-columbia/story/2010/10/26/bc-developers-vancouver-high-rise.html

#155 JB on 10.26.10 at 6:03 pm

Three points:

– This is only for NEW mortgages
– Not sure if this includes renewals (probably does)
– I will buy TD stocks

Anyone care to comment???

Of course it is for new originations. — Garth

#156 BrianT on 10.26.10 at 6:18 pm

#149Jess-I wonder what the almighty Commissioner thinks about this: the average length of time a US equity purchase is held until sale is currently ELEVEN SECONDS http://georgewashington2.blogspot.com/2010/10/70-of-all-stock-market-trades-are-held.html

#157 R U SERIOUS on 10.26.10 at 6:50 pm

You’re a credit to your race. Thanks for the illumination.

#158 Devore on 10.26.10 at 6:50 pm

Tomorrow’s news today: Goldman rolls out a 50 year bond. At 6.125% sure to be a hit (a 1.3BB issuance, with a 250MM trial balloon) with retail investors chasing yields, regardless of risk, as Goldman would have to pay 6.75% to raise this money from institutional markets.

#159 miketheengineer on 10.26.10 at 7:34 pm

Garth et al:

Hey Nostradamus le mad dude:

I saw this and thought I would bounce it off you. Indonesia is getting “hammered” with earth quakes right now. Interesting since we just had a “solar storm” a day or so ago.

What was interesting was the rapid succession of ~ 5plus magnitude intensity quakes….quite a few in a short number of time. Don’t know if this is a normal pattern or not. Combined with the “Volcano” blowing it’s stack, makes for an interesting combo.

So here is the pattern…sun spot solar storm activity, then 1 or 2 days later, earth quakes and volcanos going nuts.

Here is the link:

http://earthquake.usgs.gov/earthquakes/recenteqsww/Quakes/quakes_all.php

http://www.n3kl.org/sun/noaa.html

Reminds me of the words from that song by Jerry Lee Lewis song, “Whole lotta shaken going on”

#160 dd on 10.26.10 at 7:37 pm

#158 Devore

…Goldman rolls out a 50 year bond…

What ever Goldman is doing it is too late. If this isn’t a bear signal for bonds I don’t know what is.

#161 Nostradamus Le Mad Vlad on 10.26.10 at 7:44 pm


#130 Bill Gable — “. . . what Banks are seeing, that they are scared of, hmmmm…?”

The following gives a realistic hint: The second smaller headline clearly shows that Iran’s nuke objectives are to provide electricity; thus, the enrichment would be no more than 20%, as compared to the greater than 90% needed for nuke WMD, which the US and Israel both have, Iraq and Iran don’t. “If Israel or the US bombs the plant now, it will unleash a Chernobyl like disaster on the entire region!” wrh.com. Plus — Invasion At roughly the same time . . . all things are co-ordinated.

This is where the west is headed, with a few bumps in the road along the way.

AIG Seems the Glazers are in slightly more trouble than first thought.

8:39 clip Ponzi Scheme + Inside Job = US Fed.

4Closures Speeding Up “Count on the Snidelys at the banks to move quickly to block this. Short sales will force real-estate prices down, causing more defaults as peoples’ homes sink “underwater”. Worse, every sale, short or otherwise, runs the risks of having the investors holding those extra copies of mortgages showing up and making a public stink. Already Bernanke is saying another $4 trillion of your money needs to be spent to buy up “Toxic Assets”, meaning to buy back the bad paper the mortgage bundlers sold to keep the fraudsters out of jail.” wrh.com.

Toxic Dollar sludge.

Wiki-what? “More reasons to conclude that Wikileaks is a very clever propaganda operation. Well.. maybe not all that clever.” wrh.com.

The Elite “Here is the key point I wish to emphasize: we will not “get” inflation or deflation by chance or mechanistic functions, but by a series of policy choices which will be made to benefit the Financial Power Elites and their functionaries in the Central State.”

Bill S-510 and Monsanto. One way or another, the elite will have their depopulation unless some ETs in UFOs pass by and take them to hell, leaving them there. Further — Food Shortages.

7:31 clip Dollar dive? Timmy The Mighty Gee briefly speaks and dumbfounds himself.

Banks are out of control.

1:26 clip Ten foot high tsunami.

#162 dd on 10.26.10 at 8:11 pm

#128 dd
#8 Brad Ormsby

“Maybe some day you will understand the difference between income and an unrealized capital gain. — Garth

That is what my job is for. With the real rate of inflation currently running in excess 6% these preferred shares are only advisable for short term considerations. In the long run decreased purchasing power is guaranteed.

A wholly unfounded comment from a bullion pumper. — Garth

#163 Mike B formerly just Mike on 10.26.10 at 8:12 pm

OK so TD is being brutal… so what happens when people walk across the street and get a conventional mortgage from bank A, B , C or D. Won’t this backfire on TD.

#164 Patz on 10.26.10 at 8:19 pm

There’s a lady in town pimping Arizona property. She’s a Canadian but seems to have her licence there. Says she’s sold a truckload of props to Canadian vulch… er, clients. Apparently only 3 of her clients got mortgages from US banks, some paid cash but most took out HELOCs to pay for the US houses. How interesting is that?

I wonder how that’s going to work when the home here that the LOC was taken out on drops in value. Seems like it would be compounding the liquidity problem. Just saying…

#165 ccen on 10.26.10 at 8:40 pm

T.O . BUBBLE BOY

Now that Rob Ford has been elected mayor of Toronto, you can officially write off any hope we had of being “different”.

Watch how many people want to move to a place that is cutting every public service possible.

Jim Flaherty’s best bud is going to turn Toronto into Buffalo or Detroit or Cleveland… cities of the past with no hope for the future.

What’s the over/under on voter regret? 2 weeks?
——————————————————–
I hope he will privatize all the municipal services so they cost less and we don’t have to pay more taxes in the future to make sure the public crackheads have a nice fat pensions

#166 Utopia on 10.26.10 at 8:40 pm

Well I have been looking at this collateral mortgage issue today. All I can say is something stinks in Dodge. the appearance that the balance of power in the relationship is being shifted more in favour of the lender and to the detriment of the borrower.

The bait, for those fool enough to bit, is the extra 25,000 of borrowing capacity and some cheap one-time legal fees.

This is change at TD really is significant and after a century or so of abiding by traditional mortgage practices it does seem strange to introduce this now.

Strange because customers were not demanding this kind of change. Most people will not likley even know the difference in the two lending practices and I will bet that almost nobody will see through to understanding how the consequences might negatively affect them in future.

My advice. For the time being, borrow elsewhere and avoid TD like the bloody plague. This is NOT in the customers interest at all.

#167 dd on 10.26.10 at 8:42 pm

.#162 dd on 10.26.10 at 8:11 pm

“A wholly unfounded comment from a bullion pumper. — Garth”

Sure. Commodity prices are up all across the board. I do expect business to pass along the costs. I don’t need to read it on the front page of the G&M to confirm.

#168 Utopia on 10.26.10 at 9:02 pm

Sorry everyone.

Seems I posted before doing any editing and it shows.

Anyway, I do think that this issue is a big one. Probably needs a second blog article to bring everyone up to speed on the legal ramifications implied by collateral versus conventional mortgages.

Is there a lawyer out there in “Greater Fool” blog dawg land who can offer a short concise commentary on the specific differences between these mortgage loans and how it might impact our legal rights?

#169 Taxpayer like everyone else on 10.26.10 at 9:12 pm

164 Patz

“Apparently only 3 of her clients got mortgages from US
banks, some paid cash but most took out HELOCs to pay
for the US houses. How interesting is that?”

Doesn’t surprise me at all. That would be an option I
would consider. Money so cheap right now why not borrow and save cash for whenever. Typical Cdn home $400k. A buddy scored townhouse outside Phoenix for
about $120k. Easy with lotsa downside room to spare.

#170 Future Expatriate on 10.27.10 at 1:19 am

#129 Nostra, my friend… familiar with Clif High at Half Past Human? See the latest report? Highly recommended. And timely, we’ll know within a few weeks if his methodology is correct.

As for everyone else, never mind. Cliff (two f’s) is thataway. ->

#171 State of Mind on 10.27.10 at 5:26 am

#160 dd “…Goldman rolls out a 50 year bond…

What ever Goldman is doing it is too late. If this isn’t a bear signal for bonds I don’t know what is.”

@dd – The bond market has been right 100% of the time for inflation vs deflation, and it’s showing deflation has won. (not winning, but won). Gold (“hyper-inflation metal”) doesn’t do so well in a deflation environment.

#172 pjwlk on 10.27.10 at 9:58 am

#40 Real Estate Realist:

I for one really appreciate the clarification. Thank you!

Any chance you can post information on the new product when you get wind of it?

#173 TD Collateral Mortgage: Green Fuzzy Handcuffs on 10.27.10 at 2:47 pm

[…] thoughts about real estate, money and the road ahead. For this post I will implore his post Pricks which very accurately explains why TD’s move is bad for borrowers: Starting last Monday the […]