TD: mortgage rules should be stricter

The CEO of TD bank has said in an interview that he thinks the government should make mortgage rules stricter.

Mr. Clark believes cutting the maximum length on federally insured mortgages to 25 years, from 30 years, would be a good step to slow rising household debt, which hit a new record this week, surpassing that of the United States and Britain.

“If you thought the Canadian economy was strong enough to take another adjustment, then we would say take the 30 [year amortization limit] down to 25 and get this back to where it originally was,” Mr. Clark told The Globe and Mail.

“It’s hard to know whether the economy can take another crank like that,” he said, referring to Ottawa’s last round of changes. “But my own gut would tell me that it may turn out that we do have the absorption capacity.”

Now why would a bank that spends tonnes of money on advertising mortgages and essentially makes risk-free income on insured mortgages want the government to tighten up the rules? Could they be seeing consumer debt levels starting to pose a risk to uninsured loans?

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0x13
Guest
0x13

I think there's something rotted on the Canadian's banks balance sheets. All of them accessed the Feds discount window (TD was close to the top with a $153mil bailout). Just roll over the graph at: http://www.bloomberg.com/news/2011-11-28/secret-f

Also some of them are involved in this re-hypothecation business as per the list at the end of this article: http://newsandinsight.thomsonreuters.com/Securiti

Maybe TD has the most to loose… so they are the most forthcoming.

jesse
Member

He is trying to figure out how to thread a camel through a needle.

There is a real possibility there is no viable way out, and bank CEOs as well as central bankers can figure with the best of them.

cgh
Guest
cgh

@WhatProblem: "Canada has better wages than the States"

Do you have a citation for this? As a Canadian who divides his time between Vancouver and California working for an American company, I find this assertion hard to believe.

Anonymous
Guest
Anonymous

"Could they be seeing consumer debt levels starting to pose a risk to uninsured loans?"

Bingo. When people get in over their head on debt they stop paying credit cards, lines of credit and car loans first. The mortgage is the last thing to default because no one wants to move. Much of the money lent has no security and that is what defaults first. The banks will be screwed long before we see foreclosures on CMHC insured loans.

For the guy to come out publicly and state this you have to think he has made his views well known to the gov a while back. I wouldn't be surprised to see a 25 year amort cap for CMHC mortgages in the near future if things have not started to unravel.

registered
Member
registered

4 Kevin Says: "It could get interesting when the housing bubble implodes as most of these guys will be pointing fingers at one another …"

No chance. They're already pointing fingers at China/India/Europe and you.

WS
Guest
WS
China’s housing bubble is losing air http://www.latimes.com/business/la-fi-china-housi… By David Pierson, Los Angeles Times December 13, 2011 Reporting from Beijing— Falling home values. Debt-strapped borrowers. Real estate woes dogging the economy. It’s old news in the United States, but now the air has started to leak from another great housing bubble — in China. Home prices nationwide declined in November for the third straight month, according to an index of values in 100 major cities compiled by the China Index Academy, an independent real estate firm. Average prices in the Shanghai area are down about 40% from their peak in mid-2009, to about $176,000 for a 1,000-square-foot home. Sales have plummeted. In Beijing, nearly two years’ worth of inventory is clogging the market, and more than 1,000 real estate agencies have closed this year. Developers who once pre-sold housing projects within… Read more »
Troll
Guest
Troll

@fixie guy:

No chance. They’re already pointing fingers at China/India/Europe and you.

You don't think that borrowers bear at least some responsibility for getting in over their heads? Or that the 'home ownership' meme and CMHC policies are partly the result of giving the voting public exactly what they want, access to cheap money to buy those fancy homes they want.

Anonymous
Guest
Anonymous

@Troll: We elect 'leaders'

patriotz
Member

@DEFAULT NAME:

"We elect ‘leaders’"

Real leaders say things like "I have nothing to offer except blood, toil, tears and sweat".

We elect cheerleaders, people who tell us what we want to hear.

"We" meaning Canadians at large of course.

patriotz
Member

@DEFAULT NAME:

"In the States, the worse things got, the more strict lending requirments became."

That's because government wasn't holding the bag (yet).

"I don’t think it will be any different with the CMHC."

Oh I think it will be a plenty different. Unless and until the bond markets start getting nasty with the GoC.

VMD
Guest
VMD

[City of Richmond orders developer (likely Onni) to immediately halt construction at Steveston due to cracks at dyke] Source: Dec 14, 2011 MingPao

– so far this is the only official source.

“Last Friday the developer was apparently ordered by City of Richmond to immediately halt its series of low-rise developments in Steveston area due to cracks found at south dyke measuring “several centimeters”, and cracks at the development’s foundation’s east wall.

Onni has been building 6 sets of low-rise mixed-use developments by Bayview St near Imperial Landings, with completion set at summer 2013.

City of Richmond’s Robert Gonzalez said the city is following the situation closely. The developer likely has ‘a lot of work ahead’ to repair the dyke. Prior to resuming construction, the developer (Onni) will need to have it’s plan approved by the city again.”

http://translate.google.com/translate?sl=zh-CN&tl=en&js=n&prev=_t&hl=en&ie=UTF-8&layout=2&eotf=1&u=http%3A%2F%2Fwww.mingpaovan.com%2Fhtm%2FNews%2F20111214%2Fvasb.htm&act=url

Anonymous
Guest
Anonymous

How do mortgage insurance claims work?

Does the bank have to first foreclose on the owner, sell the home, and claim the difference between the home sale and the loan?

Or does the bank foreclose on the owner and transfer the home to the CMHC who pays out the claim immediately?

If the claim system works like the former, then I would expect banks to start to worry about a major crash as the foreclosure and sale process will become costly and they are likely not setup for it. That may be also be a reason for the banks to start pushing for stricter amortization rules. Risk mitigation.

Devore
Member
Devore
bubbly
Member
bubbly

today’s regular buyer should, as a class, have done long term economic, historical and asset risk analysis before the simple act of buying a home in spite of government assurances.

Of course. Borrowers are adults after all. They should be responsible for their actions.

bubbly
Member
bubbly

I should add that not as a class (classes are BS anyway) but as individuals.

DaMann
Member
DaMann
@fixie guy: Sorry I don't buy this bull about poor little ol' naive consumer. NO ONE put a gun to their head to buy places at way over inflated prices at next to free borrowing costs. We expect people to be somewhat intelligent. Sure it was tempting, but so are many things in life and we expect people to have some sort of restraint. People are spending like drunken sailors AND bragging about it! Yes some blame can be laid at the feet of the Government and banks and industry but nothing even close to what you are suggesting. Especially in Canada!!! Bubbles have formed and popped all over the world all around us, even as close as the US. We in Canada have had a front row seat of what NOT TO DO, and yet these people sit in… Read more »
jesse
Member

@DEFAULT NAME: Start here

CMHC provides a "streamlined" process for processing defaults, and includes provisions for ameliorating distressed situations through various refinancing/extension schemes.

@Devore, when you show "exposure" to NHA-backed MBSs, do you think TD is the one exposed? I wonder if have an adequately staffed arrears department 😉

registered
Member
registered

22 bubbly Says: "Of course. Borrowers are adults after all."

Those two sentences are unrelated. People are doing what they've always done, our friendly feds bank on it. Your parents were idiots for not studying Case, Shiller and Schiff before buying your childhood home?

space889
Member
space889

@patriotz: How is that a real leader when he's not even leading anybody? If you can't get pepole to buy your vision and follow you then you aren't leading or a leader.

space889
Member
space889

@fixie guy: I was going to write rebuttal to bubbly but you did a much better job than I ever could.

DaMann
Member
DaMann

@fixie guy:

You have a case for places like the US, but certainly not Canada. The US were at the tip of the collapse, Canada has had a front row seat. We have seen it all unfold and can see the lessons first hand as it's happening. The US never had that luxury, we do, and we are still being idiots about it.

Meh
Guest
Meh

Those Port Moody locations must be condos. Can you imagine a meth lab on the other side of your bedroom wall?

"Search warrants were executed at two businesses and three private residences in the 2600-block Lillooet St. and 1100-block Pacific St. in Vancouver, in the 200-block Newport Drive and 400-block Capilano Road in Port Moody and in the 9400-block 189 St. in Surrey."

Read more: http://www.vancouversun.com/news/Police+target+Me

bubbly
Member
bubbly

@fixie guy: The point is that adults are responsible for their decisions no matter what bullshit they have to face. There will always be marketing, PR, information noise and conflicting interests everywhere around us. If someone doesn't know how to deal with it, perhaps he should not call himself an adult.

Saying that they are not responsible is equivalent to saying that they are geniuses if they win and victims if they lose.

patriotz
Member

@fixie guy:

"Your parents were idiots for not studying Case, Shiller and Schiff before buying your childhood home?"

My parents bought my childhood home because it was cheaper than renting, not because they expected to sell it at a profit.

Troll
Guest
Troll
@fixie guy: You’re implying today’s regular buyer should, as a class, have done long term economic, historical and asset risk analysis before the simple act of buying a home in spite of government assurances. Nope, nice straw man though. But anybody who wants to call themselves adult should at least do a little due diligence before shelling out $500K for likely the biggest purchase of their lives. After 2008, they would only have to do simple things like listen to Flaherty or Carney repeatedly warning of excessive debt and higher rates down the road. They probably should do some simple 'stress tests' at higher rates to see if they'd be OK. Or even something as basic as turning on the TV and see what's happened to our friends down south. I can't believe that anyone who believes in accountability and… Read more »
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