CMHC: Canada's Freddie and Fannie?

[Glen]

http://network.nationalpost.com/np/...9/10/21/cmhc-canada-s-freddie-and-fannie.aspx

Ottawa has been creating a housing bubble in Canada with taxpayer money which is why residential real estate prices rise in defiance of high unemployment and recession.
Ottawa's low interest rate policy and crown agency Canada Mortgage and Housing Corporation's dramatic increase in mortgage backstopping, for people who put only 5% down, have pushed upward activity and prices.
Some, such as Post reader and accountant, Derek Bruce, worry that the Tories are allowing CMHC to become like Freddie and Fannie south of the border, a rogue financial institution the size of one of our big five commercial banks.
In March, CMHC was allowed to insure up to C$600 billion in mortgages, up from C$450 billion the year before, said a CMHC spokesman today.
“Last year alone, CHMC did 919,780 deals worth a staggering C$148 billion, or about twice what it had planned. To accommodate that, the feds have raised its allowable insured mortgage limit to C$600 billion, or about double what it was two years ago,†wrote author, former MP Garth Turner.

continues....

 

[Torontotony]

Generally a well written article. There are a couple points which need to be clarified however.

CMHC's deal flow and overall $$$ value of mortgages funded has indeed increased over the last year, but a large part of this increase is directly related to the fact that most lenders plain and simply have refused to use other insurers like GENWORTH and AIG, because of the 90/10 rule.

In addition, the $148B funded last year is the gross $$$ amount funded. The net new $$$ is significantly lower than that, as a fair number of those deals counted towards the $148B were either refinances or transfers of existing CMHC mortgages from property to property.

 

[safeashouses]

I believe you are way off base Tony. The chart shows an enormous surge in CMHC lending. As a mortgage professional I'm a little surprised by your misleading/erroneous information.

 

[Torontotony]

There is no denying the overall volume of deal flow and representative $$$ is way up year over over; however, like I stated previously, the numbers only reflect the end results, not some of the reasons why they are what they are.

Fact is, aside from 1 big 5 bank, every other lender on the street directed deals that would have been split 3 ways in 2006-7, to CMHC almost exclusively. This would account for at least part of the surge. This is not misguided or misleading. It's just the way it is.

 

[safeashouses]

It's a backdoor bailout via you and me and the cmhc Tony. You claim to want your posts to be treated fairly but all you give us is typical mortgage industry BS.

The fact is that cmhc rescue our supposedly 'world class' banks who all would have become wards of the state had they not. None of them could have sustained the

losses associated with the mortgage debt and securities

that they were holding before the government bailed them out.

Yet, no one in the media (except Diane here) bothers to report the truth.

Perhaps the finance minister had legitimate justification for this move but it should have been subject to more public scrutiny than a press release.

And now that the program has been extended and actually widened, we as Canadians are now exposed to even

greater risks of financial disaster for pure political reasons.

 

[dpylyp]

Yet, no one in the media (except Diane here) bothers to report the truth.

we as Canadians are now exposed to even greater risks of financial disaster for pure political reasons.

Ok So lets go to a DIFFERENT SYSTEM OF BUYING HOUSES
Go and save 50% and then get financed.

Hold Properties in trust through a lawyer ( mexico)

What a bunch of Tripe.

Lenders cannot by law advance more than 80% on a single advance. (some are reducing this to be 65 - 75% based on appraisal and not sale contract.)

Truth? what is the truth. People buy houses NOT cmhc.
People are deciding to buy houses without manipulation or treachery.

David Pylyp

 

[Torontotony]

Interesting admonishment from Safeashouses....don't you just love it when people try sucking and blowing at the same time?

Here is some additional information, as presented by Will Dunning, Chief Economist for CAAMP, which Ms. Francis (whom I have nothing but utmost respect for and hold in the highest regard) did not report, and the chart presented by Safeashouses does not adequately explain.

1. Canadian mortgage arrears remain at or below .40%, despite the global economic meltdown;
2. in 2008, 18% of Canadians refinanced, withdrawing approximately
$41Billion in new $$$, from their homes. Dunning thinks these figures will be the same in 2009.
3. 41% was used for (get this!!!) paying down debt. 29% used for renovations and 15% used for investment;
4. only 1/3 of mortgage activity was new mortgages, with 2/3 being renewals and refinances.

I have attached a link to Dunning's report for review.

http://http://www.caamp.org/meloncms/media/Survey1.pdf

 

[cdr108]

Here is some additional information, as presented by Will Dunning, Chief Economist for CAAMP, which Ms. Francis (whom I have nothing but utmost respect for and hold in the highest regard) did not report, and the chart presented by Safeashouses does not adequately explain.

1. Canadian mortgage arrears remain at or below .40%, despite the global economic meltdown;
2. in 2008, 18% of Canadians refinanced, withdrawing approximately
$41Billion in new $$$, from their homes. Dunning thinks these figures will be the same in 2009.
3. 41% was used for (get this!!!) paying down debt. 29% used for renovations and 15% used for investment;
4. only 1/3 of mortgage activity was new mortgages, with 2/3 being renewals and refinances.

http://www.dbrs.com/research/211674


1. According to the Canadian Bankers Association (CBA), the default rate on mortgages had a historical high of 0.65% in January 1997 ... that was 6/7 years after the latest recession, and almost 2 years into a housing recovery.

The default rate from December 2004 to December 2006 was around 0.20 - 0.27%; so why has the default rate increased 50 to 100% ???

Typically, there is an inverse relationship between housing price appreciation rates and
mortgage default rates as an increasing property value allows home owners in financial difficulty
to sell their property or obtain an equity takeout, thereby cashing in on their increased equity and
avoiding a mortgage default.

Defaults will rise, when come renewal, the outstanding mortgage is greater than the value of the property.

Keep in mind, during that period high-ratio mortgages (ie. >75% loan value) were not as prevalent either.


2 and 3. That tells me people are using their homes as ATMs ... hmmm, sound familiar ??? Essentially, they swapped equity for debt, or debt for more debt ... oh so wise.

If they refinanced and cut up their credit cards, then that would be smart. but chances are, any amount paid down was quickly racked up again.

Where did the other 15% = $6 BILLION go ???