What are they smoking?
One reason Canadian cities can never have a housing bubble like they had in the US is that our lenders are much more diligent and properly manage risk. At least that’s what I heard, so you can imagine my surprise when I read this article where two different Canadian banks gave mortgages to a grow op owner with no proof of income:
Alarm bells should have gone off the moment Hai Le walked into the Bank of Montreal and asked to refinance the mortgage on his million-dollar home in Vancouver’s up-and-coming Marpole area.
His alleged inability to provide proof he had the means to make the hefty monthly payments of about $4,000 should have been reason enough to crumple up and toss the application into the nearest trash can.
Le, a “sales manager,” was also asking the bank to mortgage the property for its full value, a strategy that authorities say marijuana growers often use to minimize their losses should and when they get busted.
Yet despite these blatant red flags, the bank approved Le’s application for a $976,000 mortgage on Oct. 22, 2008, some 15 months after he’d bought the house from a Viet Van Truong for $980,000.
Ten months after the purchase, in August 2009, Vancouver police raided Le’s West 63rd Avenue home and uncovered a massive grow-op. Two days later, Le sought and received a $70,000 mortgage from the Royal Bank of Canada.
The Forefeiture Office is now seeking to have the mortgage proceeds seized from the bank. Read the full mind-boggling article in the province. Thanks to Jimmy for the link!
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June 15th, 2010 at 7:59 pm
Job creation comes from private demand. The government reduces that private demand by taxing the transaction and reduces the incentive for business to meet that demand by taxing the income, and redistributes a token portion of those proceeds to programs with mandates such as “job creation”.
June 15th, 2010 at 5:30 am
@patriotz: -40% in 4 years is -12% per year. The government knows that funding a housing bailout is folly. They will manage it with lightly funded “bailout” programs and concentrate on job creation instead.
June 15th, 2010 at 3:37 am
@Limey:
You already have your answer really, from Alberta 2007-2008, Vancouver 2008, and California 2006 on.
That’s the natural course of events and this time nothing is going to avert it because nothing can avert it.
Like many other posters I think you’ll see 40% come off within 3-4 years, and then a slow bear market for decades. Vancouver looks a lot like San Diego in many respects, take a look at the excellent charts and commentary from Piggington:
http://piggington.com/
Because the decline here will be far more rapid than in Ontario – and no government reacted to the recent 20% decline in Alberta – any federal attempt to support house prices would be seen primarily as a bailout of BC. I think a lot of people here don’t really appreciate petulant and juvenile this province appears to the rest of the country. The current HST drama is an excellent example – Ontario is getting it with little fuss and Quebec and the East Coast have had it for years. No federal party is going to advocate efforts that would be seen primarily as a rescue for the spoiled brat on the West Coast – this province will have crashed and burned before the bust really gets noticed in Toronto.
June 15th, 2010 at 12:24 am
The individual doomed home debtor will only get a bit of a reprieve if the system for dealing with them is overwhelmed. That could happen, I guess. I’m curious how some here think that the banks and CHMC would handle such a scenario.
June 15th, 2010 at 12:11 am
I’m interested in hearing peoples theories about the time line of the unraveling.
What are we thinking? A quick kill on prices over 3/4 years or a long drawn out wounded erosion over a decade? And why.
Patriotz?