CMHC, debt, economy, mortgage, opinion, predictions

Will the banks have to bail out the CMHC?

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Banks in Canada get a lot of protection.

One thing that helps drive profit is CMHC mortgage insurance.

Wouldn’t it be great to make an investment where you got the profit and somebody else took over the risk?

The unfortunate side effect of this economic boosting is the the spectre of taxpayer liability for housing bubble fallout.

But what if the banks bailed out the CMHC after being bailed out by the CMHC?

Sounds a bit like a perpetual motion machine but that’s what BMO analyst John Reucassel is suggesting could happen if the CMHC went bust:

“It appears to us that the CMHC is reasonably well capitalized and positioned to meet the challenges from a housing slowdown.  However, investors may be concerned that, in a severe downturn, Canadian banks may either a) need to recapitalize the CMHC; or b) absorb some of the losses.”

Read the full article over at the Financial Post.

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Anonymous
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Here are the CMHC board. Saved for ever on this forum. If we take major losses, they should at least symbolically repay all the director fees they took over the years and The CEO and CFO etc.

Robert P. Kelly (Chair)

Sophie Joncas
St-Hubert, Quebec
Chartered Accountant

Karen Kinsley
Ottawa, Ontario
President and Chief Executive Officer
CMHC

James A. Millar
National Capital Region
Associate
The Sussex Circle

Brian Johnston
Toronto, Ontario
Chief Operating Officer
Mattamy Homes

André G. Plourde
Montréal, Quebec
President, Groupe immobilier de Montréal Inc.

E. Anne MacDonald
Pictou, Nova Scotia
Lawyer

Michael Gendron
Edmonton, Alberta
Chief Financial Officer
Mancap Group

Rennie Pieterman
London, Ontario
Partner, Practical Plumbing Co. Ltd.

Ian Shugart (ex-officio)
Ottawa, Ontario
Deputy Minister of the Minister for CMHC

Michael Horgan (ex-officio)
Ottawa, Ontario
Deputy Minister of Department of Finance

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5 years 4 months ago
jesse
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I wouldn’t be surprised if CMHC finds some way to nullify some policies, it’s what any insurer worth its salt would do. One of the better ways for CMHC to recapitalize in the medium term is to increase insurance premiums across the board, but in the short term they’ll need access to cheap funding and that almost certainly will come from the government either through GoC bond issuance or some other guaranteed security.

Don’t hate the playah.

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5 years 4 months ago
Many Franks
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@Anonymous, be realistic. These directors are underqualified (as recently discussed in the media) and the compensation they get isn’t enough to solve that. They more than likely have directors’ insurance against liability.

Is their “mandate gallop” (great term, by the way) their fault? Yes, of course. But they’re just using the rope they’ve been given by the people who *really* should’ve known better, and that’s Jim Flaherty and co. (Why else do you think he’s been pooping masonry recently? His grave has been dug and he knows it.)

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5 years 4 months ago
Aleksey
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“Wouldn’t it be great to make an investment where you got the profit and somebody else took over the risk?”

I guess, this is the way they are doing bussiness in Canada. Take Northern Gateway pipeline for example. Most of the profits will go to Alberta and most of the risks to BC.

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5 years 4 months ago
Loud Howard
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From yesterday’s thread. @#97 Says “…[@paulb] searches for sales posted today only, not sales posted from 5pm yesterday.”

That sucks. What’s the point if sales aren’t since last sample? If @paulb is doing what you say, his numbers are not accurate to begin with.

If @paulb would only tell us what he does, it would clear this up.

I am reposting here in hopes that @paulb reads this question of him and responds.

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5 years 4 months ago
taylor192
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paulb,

Can you address why your numbers and Troll differ so greatly?

Troll,

If paulb’s numbers are so wrong, why have the monthly numbers VHB tracks based on paulb’s posts been so close to what the real estate associations are publishing?

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5 years 4 months ago
Vote Down The Facts
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“What’s the point if sales aren’t since last sample?”

Because it’s better than no data at all?

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5 years 4 months ago
Best place on meth
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Someone actually paid $610K for this yesterday.

http://www.realtor.ca/propertyDetails.aspx?propertyId=13085655&PidKey=1339459076

Hosed!

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5 years 4 months ago
Troll
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Re: The Numbers

I believe Paul’s numbers are accurate 99% of the time, he has done an amazing job day in and day out. I am periodically checking just for my own interest and I usually come up with the same results. A couple of times there was a discrepancy which I shared due to Paul posting a little early and someone still entering sales and listings at the board later into the evening. The fact that you find my motives not ‘genuine’ is laughable. I’m interested in the most accurate numbers possible. The fact that those posts get voted down so quickly shows me that is not a common viewpoint on this blog.

Going forward, you can easily double check with Rob Chipman’s numbers and the boards numbers at the end of each month.

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5 years 4 months ago
Brian Ripley
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Business bankruptcies are trending down since 2004: http://www.tradingeconomics.com/canada/bankruptcies A 2008 study shows the biggest default is in lines of credit: http://www4.hrsdc.gc.ca/.3ndic.1t.4r@-eng.jsp?iid=24 Mortgage default was lower than tax default. I don’t think that government tax payers should be fixing the cost of money with ZIRP or subsidizing flippers with CMHC insurance, but most likely as the long drawn out contraction in price evolves, defaulting mortgages will be a small percentage of the total mortgage stock. Individuals and families if unable to make their payments will take the loss by selling below their break even because it will allow them to repair their balance sheets sooner rather than later. People are used to taking a loss; we do it in the stock market via bad timing and in the auto markets via depreciation. It’s the cost of experience. The big event metric… Read more »
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5 years 4 months ago
It's the Economy stupid
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Re: the last post from yesterday’s format

Hi Franco,
I think you nailed it, but you’re too easy on the NDP.
Just heard a comment on BNN that the NDB has pretty much run out of ideas in the last 20 years. The “tax the rich” schtick is just too damn boring anymore.

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5 years 4 months ago
gokou3
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You can count on the banks chipping in for CMHC, one way or the other. Similar things are happening for the US counterparts of CMHC, namely Fannie and Freddic. One of many examples:

http://money.cnn.com/2013/01/07/news/companies/fannie-bank-of-america/index.html

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5 years 4 months ago
VMD
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Fraser Valley Stats:
May 1-14
2013: Lists: 1447. Sales:573 (-19%)
2012: Lists: 1591. Sales:705

Source

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5 years 4 months ago
kabloona
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What really jarred my preserves last night was Krusty prattling on in her Victory Speech about about her deep and abiding love for “Democracy” (shades of Dubya the Dimwit) when she’s basically been avoiding the Legislature and campaigning full-time against the Opposition for the last two years….using public funds for TV ads that say nothing of any consequence except how great the BC Government (i.e. her Party) has been for the Province. And it worked! By the way, I did not vote NDP…. 😉 Back on topic: Krusty’s an idiot and she’ll be wearing the inevitable housing slowdown and it’s messy aftermath….. http://www2.macleans.ca/2013/01/13/the-absentee-b-c-legislature/ Maclean’s – The absentee B.C. legislature Why we should be worried about a government that sits for only 19 days in a full calendar year by Mark D. Jarvis on Sunday, January 13, 2013 12:12pm “Mike de… Read more »
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5 years 4 months ago
kabloona
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oops… I used “it’s” when I meant “its”….

Need to be able to edit these….

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5 years 4 months ago
rp1
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Will banks bail out the CMHC? Of course they will. It will be a political necessity if a housing bust occurs. And they’ll turn around and hike fees and spreads to pay for it, just like in the early 1990s. Because whatever they say, the household sector always bails out the banking sector. That’s just how it works.

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5 years 4 months ago
pricedoutfornow
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Heard on CBC radio this morning that housing has “stabilized” and there would be no crash. Couldn’t help thinking that this was what I heard right before the collapse in the US. You know, where people borrowed at low (teaser) interest rates, which went up, and people found they could no longer afford their payments. Does this sound familiar? No, not at all.

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5 years 4 months ago
/dev/null
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Paulb has an infant at home. I think we could all cut him some slack if he misses some late sales entries. And Troll’s numbers have been demonstrated correct before I believe, so no real reason to think s/he’s… ah, trolling.

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5 years 4 months ago
Loud Howard
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pricedoutfornow Says: ‘on CBC radio this morning that housing has “stabilized” and there would be no crash’

Phew! Yup. Now people who don’t need them can get back to buying houses for triple what they’re worth on the dream of paying rent into their own home. Thanks CBC and mainstream media for egging on the idiots.

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5 years 4 months ago
chilled
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kabloona Says:
May 15th, 2013 at 1:22 pm 13

What really jarred my preserves last night was Krusty prattling on in her Victory Speech about about her deep and abiding love for “Democracy” (shades of Dubya the Dimwit) when she’s basically been avoiding the Legislature and campaigning full-time against the Opposition for the last two years….using public funds for TV ads that say nothing of any consequence except how great the BC Government (i.e. her Party) has been for the Province.

And it worked! By the way, I did not vote NDP….

+++++++++++++++

So you voted Green, split the vote and handed the Lieberals a majority. Pure genius.

We need to get back to THREE parties ONLY or proportional representation otherwise we are in for majority governments elected on the minorities vote, both Provincially and Federally.

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5 years 4 months ago
Many Franks
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In the Globe today:
Hike rates now, economist urges Bank of Canada

The chances of that happening soon are slim given that Carney’s successor seems to be cut from the same cloth, but anyway:

“The cumulative effect of artificially low interest rates on the economy increasingly will show up in pervasive distortions of economic decisions, and risk fuelling an underlying inflationary process,” Dr. Masson, a PhD economist who has worked at the Bank of Canada and the International Monetary Fund, writes in a paper published Wednesday by the C.D. Howe Institute.

“Therefore, the Bank of Canada should start now to reverse some of the monetary stimulus and begin raising interest rates.”

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5 years 4 months ago
Vote Down The Facts
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“We need to get back to THREE parties ONLY”

So what if you want to form your own political party? That doesn’t sound like much of a democracy to me…

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5 years 4 months ago
Anonymous
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“We need to get back to THREE parties ONLY or proportional representation otherwise we are in for majority governments elected on the minorities vote…”

What a dumb thing to suggest. There has only been one election in my lifetime that a party has gotten more than 50% of the popular vote (BCLib – 2001), and that includes when there were only two parties.

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5 years 4 months ago
mac
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Um no. Only in Iceland can things like that happen.

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5 years 4 months ago
mac
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Actually, the Greens didn’t split the vote. The Cons went up 3%. The NDP down 3%. That’s what I heard before the election results put me to sleep. I am very disappointed my vote for the Dix Detonator didn’t work out. I can see the Chinese returning to bidding money they absconded with from a Marxist regime now that we’re safe and sound from the socialists. Irony anyone?

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5 years 4 months ago