USA vs CAN: Different here?

Chip pointed out this article at the Mises Institute on the CMHC. How bad does the author think it is? Pretty bad:

The Canadian mortgage market is dominated by the Canadian Mortgage and Housing Corporation (CMHC) and this government-owned company operates in much the same way as Fannie Mae and Freddie Mac. The CMHC insures and guarantees mortgages as well as buys mortgages from banks in order to issue mortgage-backed securities that trade in the secondary market. In comparison to Fannie Mae though, the prognosis of the CMHC is notably worse. For instance, at the height of the housing boom in 2007 Fannie Mae had guaranteed over $2.3 trillion in mortgages, nearly a quarter of the market. As of 2009 the CMHC guaranteed over $900 billion in mortgages, about 90% of the market. Fannie Mae had approximately $44 billion in net assets to cover those guarantees, giving them a leverage ratio of about 50:1. The CMHC has about $9 billion in net assets to cover theirs, with the ratio working out to a staggering 100:1. To make matters even worse, 74% of the CMHC’s assets are invested in those very same mortgage-backed securities. If the Canadian housing market ever took a dive the CMHC would be bankrupt in the blink of an eye.

Are the new measures to undo the old measures and scale back CMHC exposure too little too late? Check out the full article here for the analysis.

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Anonymous
Anonymous
9 years ago

@stagnate: "none of the above is applicable"

Governments manage crown corporations. Who knows what really goes on, but even in politics if a crown corporation can't balance its books it's rather embarrassing. Doubtful CMHC is the lapdog of the Conservatives.

Patiently Waiting
Patiently Waiting
9 years ago

@Li Kai Shing: You know its bad when Ken-Doll calls in the Legion of Doom.

Li Kai Shing
Li Kai Shing
9 years ago

@Patiently Waiting:

Illich clan worst land pimps.

Head of the RE cartel…documented that lead other developer mafia to lead local gov'ts and planners by nose on how to divy up turf.

Anotonson head of $8 /hour slave wage cartel

Patiently Waiting
Patiently Waiting
9 years ago

Considering everyone's short attention-span, I thought the negative publicity from the riot would blow over fairly quickly.

Apparently, the Vancouver establishment doesn't think so:

Earlier this week, Robertson appointed Rick Antonson, CEO of Tourism Vancouver, and Olga Ilich, businesswoman and former politician, as co-chairs of the "Vancouver Brand Team." The two held a closed-door strategy meeting Tuesday with a number of business owners, agencies and civic heavyweights.

"I want them to look at some clear steps we can take to mitigate any impact the riot might have caused," Robertson said.

"It's important to have a group of leaders discuss the ongoing healing effort along with the economic development and tourism impacts that may be seen because of the riot."

http://www.vancouversun.com/travel/Vancouver+mayo

Li Kai Shing
Li Kai Shing
9 years ago

Why you basement suite renting troglodytes worry about CMHC…economics….blah blah blah etc?

Get a life…..

That BS is for peepulz that not get date ..even blow up dolls turn you down.

Pull head out of ass not covered by MSP.

stagnate
stagnate
9 years ago

jesse says: They will make some up by increasing premiums, tightening approval criteria, and cutting staff, as well as likely turfing some of their actual housing affordability initiatives. If we also include the principal reductions I think they will probably stay solvent but will be under massive pressure to reconstitute their balance sheet if these losses materialize. Not to mention that they will likely need bridge financing if they can’t liquidate claimed assets quickly.

jesse, you're talking like the cmhc is some sort of private company. the cmhc is a federal entity with direct ties to the bank of canada. none of the above is applicable and only a handful of people are actually privy to it's full accountings and transactions. sure it sounds like something out of the xfiles but it is what it is.

Li Kai Shing
Li Kai Shing
9 years ago

@Extremely rich Van house owner.:

David Ho in deep shite..

http://www.vancouversun.com/news/Billionaire+face

I tink it's time you and I joined forces and evict these basement dwelling insubordinates.

We can turn Whalley Newton into new promised land

paulb
9 years ago

New Listings 293

Price Changes 118

Sold Listings 279

Total Inventory: 16007

Holy crap that's a lot of sales. This market is on crack.

Website: http://www.laurenandpaul.ca

Facebook page http://www.facebook.com/pages/Metro-Vancouver-Real-Estat... please "like"!

Li Kai Shing
Li Kai Shing
9 years ago

Where is Lavishing Lick ?

Mummy IV production is held up.

Lindsay Lohan in it….she want to do love scene…hurry up

jesse
9 years ago

@Troll: Here's some analysis I did a while back so the #s aren't updated: CMHC has about $9BB reserves for $500BB+ total insured assets. Some additional amount of loan repayments will have been established in almost all of these properties. You could go through various stress tests and I'm sure under certain market conditions CMHC will be technically insolvent. As a quick estimate, let's say the national market drops 30% from peak in 10 years. Let's assume the average mortgage is 15% below peak prices. Under the 30% price drop stress, this works out to about 15% average loss on $500BB, or $75BB notional shortfall assuming no principal payback (which there is). This would be the amount CMHC is on the hook for if all loans defaulted. Now assume 20% foreclosure rate on insured loans over the 10 years, so… Read more »

stagnate
stagnate
9 years ago

chris h says: I am the article’s author. The numbers are coming from the 2009 financial statements. I’ve analyzed this company from 1999 to 2009.

well, the author is a metals' guy. near the end of the article he is talking about the government monetizing losses and a potential effect on the dollar. don't think the government is worried about that. look for deflationary pressures to predominate for the rest of this year with an inflationary flare up next year.

looking for a house,
looking for a house,
9 years ago

Of course it is different here.

Some listings have been up for over a month and lazy useless REALTORS don't even have a decency to put any pictures on MLS.

WTF for are they getting paid again?

Could someone please explain???

Or perhaps it's just the local thing – as in: chinese will buy everything using remote control, no need for no stinkin' pictures.

Laibach
Laibach
9 years ago

Wouldn't be surprised to hear some folks call Auditor-General John Doyle a racist…

http://www.theprovince.com/news/auditor+general+s

onenangryslav2
onenangryslav2
9 years ago

@Troll:

So you’ve spent 10 years studying this organization and you haven’t even taken the time to estimate the amount CMHC would be on the hook for in the event of a housing correction?

He didn't spend 10 years of his life analyzing the CMHC. He analyzed 10 years of CMHC data–1999-2009.

Mike
Mike
9 years ago

Canada may be heading for a housing crash (probably not as bad as the US) but I'd take anything written on that site (or by Austrian economists generally) with a bucket full of salt. They've been predicting the end of the world for a long time.

chip
chip
9 years ago

@Troll:

"Assume 2.5% Default Rate (same as US)"

That would be the default rate per month. This is what the FT says for a time when most defaults and foreclosures are supposed to be behind us:

"Nearly 20 per cent of non-government-guaranteed mortgages held by the banks are at least 30 days late or in some stage of foreclosure, compared with 7 per cent for loans held by Fannie Mae and Freddie Mac, now controlled by the federal government, according to the data."

More than a quarter of US homeowners have negative equity.

fixie guy
fixie guy
9 years ago

@52 Troll: If the picture is that safe and rosy, it's amazing private entities are tearing each other apart for dominance in the mortgage insurance industry. Wonder why?

Extremely rich Van h
9 years ago

@rp1:

Ha ha ha crash when when……………?

China will surge ahead and become number one despite such retard uttering.

patriotz
9 years ago

@Troll:

That’s not a correct analogy since the person who damaged your house probably didn’t pay a ‘home damage’ insurance premium before they began damaging houses.

I am a renter and I know that part of my rent goes toward the property insurance of my rental, and that if I damage the property the insurance company will compensate the owner. But I know that the insurance company has the right to come after me for the damages.

There is your analogy. The person damaging the mortgage is not a stranger, but the person who is renting it from the lender.

Troll
Troll
9 years ago

@patriotz:

The correct analogy is that someone damages your car, ICBC pays out the damages to you, and then goes after the person who caused the damage. Or someone damages your house, the insurance company pays out the damages to you, and then goes after the person who caused the damage.

That's not a correct analogy since the person who damaged your house probably didn't pay a 'home damage' insurance premium before they began damaging houses. If they did, they would likely expect some kind of protection, just as someone who pays for 'mortgage insurance'.

patriotz
9 years ago

@space889: Like I said, it’s like you bought auto insurance from ICBC but after you get involved in an accident and ICBC has to pay out the damages to the other party, ICBC comes after you for the money it has to pay out. You expressly pay ICBC to insure you against damage to 3rd parties. That's liability insurance, which is separate from the property insurance for damage to your own car. CMHC insurance is not liability insurance for the borrower, only property insurance against loss to the mortgage. The correct analogy is that someone damages your car, ICBC pays out the damages to you, and then goes after the person who caused the damage. Or someone damages your house, the insurance company pays out the damages to you, and then goes after the person who caused the damage. Just… Read more »

space889
space889
9 years ago

@Troll: Uhm is that 2.5% default rate the total default rate or yearly default rate? That makes a huge difference. Also the loss given default various as well since high ratio, high amount mortgages will far more losses than low ratio, low amount mortgages. Without an actual break down of the mortgages CHMC holds by amount, age, equity %, default rates, etc we can't do an actually detailed analysis. You are assuming every mortgage in CHMC has the same outstanding amount which is definitely not true. It could be 70% mortgage that has a LTV value of 80%+ only has an average outstanding amount of $400K while the low ratio mortgage have an average outstanding amount of $700K. That will really skew the loss distribution. Without more detailed data from CHMC on the assets it hold, it is impossible to… Read more »

rp1
rp1
9 years ago
Li Kai Shing
Li Kai Shing
9 years ago

@VanRant:

Thanks Honky…you may bro' round eyes!

Troll
Troll
9 years ago

@ChrisH:

I am the article’s author. The numbers are coming from the 2009 financial statements. I’ve analyzed this company from 1999 to 2009.

So you've spent 10 years studying this organization and you haven't even taken the time to estimate the amount CMHC would be on the hook for in the event of a housing correction? Or maybe you have and just didn't include it in your report…