CMHC considers sharing risk with banks

The CEO of the CMHC is saying that although some Canadian house prices are certainly too high, they aren’t worried about a market collapse at this point.

One option they are considering as a way to help cool an overheated market is sharing mortgage loan risk with the banks that are handing out loans.

The mortgage insurance that CMHC and its two competitors sell repays banks when consumers default on their mortgages. At the moment it makes the banks whole. The OECD has called for changes to the system to ensure that lenders take on more of the risk. In other countries with mortgage insurance, the product tends to only cover 10 to 30 per cent of the losses. In his speech, Mr. Siddall said that CMHC is evaluating “risk-sharing with lenders to further confront moral hazard” and is advising the government about its thoughts.

Read the full article here.

Hat-tip to southseacompany.

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Bo Xilai
Member
Bo Xilai

I can guarantee CBA will mount a ferocious offense to ensure Canada’s bank continue to make large risk-free profits…

That’s what Canadian banks do best, right?

patriotz
Member
@1: If risk-sharing is brought into CMHC insurance, banks will simply adjust rates and down payment requirements so that their risk-adjusted return is the same as before. Banks have not been the loudest protestors against reduction of CMHC coverage in the past – indeed they have spoken in favour of reductions. It’s been the RE industry, because restricted credit means lower prices and lower profits for them. And I would expect the same for this proprosal. At any rate I seem to recall Joe Oliver saying that there will be no changes to CMHC in the near future, which means before the next election. This is another in a series of someone talking about doing something and the government actually doing nothing. I’ll use this opportunity to remind the “rates will stay low” crowd that government borrowing rates and consumer… Read more »
southseacompany
Member
southseacompany

Again today in Financial Post; “Joe Oliver says Canada won’t make major changes to CMHC, housing finance”

http://business.financialpost.com/2014/09/22/joe-oliver-says-canada-wont-make-major-changes-to-cmhc-housing-finance/

“Canadian housing has so far defied predictions of a correction with recent data showing an acceleration in resales, starts and prices. Policy makers have downplayed worries the market is at risk of a collapse, forecasting instead a soft landing. Oliver reiterated he doesn’t see a housing bubble.”

Insanity
Guest
Insanity

@2 It was the Harper government who hand picked the current CMHC CEO and new board who are proposing the changes. These things are run past the government prior to them going public so there must be something to it. If they truly had no plans on changes to CMHC they would have left the previous RE industry insider regime in place. Remember there will be significant RE industry and even voter (home owner) opposition to this change so they may be just trying to keep a lid on the opposition while they set out the new policy with the big banks.

VanRant
Member
VanRant

Remember Chicken Joe at next year’s election.

crabman
Guest
crabman

These three points from that FP article seem to demonstrate that Jow Owe is either clueless or a liar. I’m going with the latter.

1. In a conference call with reporters from Sydney Sunday, Oliver reiterated the government wants to gradually reduce its involvement in the mortgage market.

2. Oliver reiterated he doesn’t see a housing bubble.

3. “We certainly aren’t going to do anything precipitous,” Oliver said. “You don’t want to cause the very thing you are trying to prevent.”

So they want to reduce CMHCs role, and there is no bubble. But if they make any significant changes it will cause the bubble to burst?!

Ford Prefect
Guest
Ford Prefect

#3, southseacompany, #6, Crabman: “…no bubble”

One of my favourite quotes: “it is never officially confirmed until it is officially denied”.

Son of Ponzi
Guest
Son of Ponzi
Many Franks
Member
I missed a follow-up article on the Bates House fire in Strathcona a while back. The relevant bits: At the time of the fire the 1894 home, which was not under heritage protection, was in the process of being sold, but the sale was not completed until about a week after. It is believed one developer now owns both lots, according to some sources. […] Vancouver police now are leading a suspicious-fire investigation, after collaborating with fire department investigators. According to sources familiar with the investigations, it is believed the Aug. 2 fire was an arson, but police and fire department spokespeople told The Province they can’t confirm this or comment on details of the investigation. […] “In cases involving heritage homes, a key aspect of the investigation will be to confirm or discount whether the property would be worth… Read more »
kabloona
Member
kabloona
Low interest rates in Canada…forever! Yeah, even after Flaherty and Carney fixed everything, it looks like Canada *still* can’t survive without permanently low interest rates….due to structural changes. 😉 By “structural changes” I guess they mean the Government’s policy of replacing manufacturing jobs with condo construction jobs. 😀 Bank of Canada sees neutral interest rate one and a half points lower: https://ca.finance.yahoo.com/news/bank-canada-sees-neutral-interest-rate-one-half-165240219–business.html “OTTAWA (Reuters) – Interest rates may have to be about 1-1/2 percentage points lower than they used to be historically to enable the Canadian economy to operate at full capacity, the Bank of Canada said on Monday in a major policy pronouncement. The central bank estimated that the neutral rate of interest, at which the economy can work at full capacity with stable inflation, is 3 to 4 percent, down from 4-1/2 to 5-1/2 percent in the mid-2000s.… Read more »
Many Franks
Member

…and Rob McLister on CMHC risk premiums:

With lenders passing those added costs to consumers, Canadians would immediately pay more for mortgages.

The unquestioned assumption is, of course, that risk premiums would drive house prices *up*, not *down*.

Just Jack
Guest
Just Jack

“If it ain’t broke don’t fix it”

Obviously something is going wrong with CMHC. I would suspect that it is similar to what happened to Fannie Mae. There is more money going out of CMHC that is coming in.

Son of Ponzi
Guest
Son of Ponzi

City of Richmond Tax Sale
About 150 properties for Sale.
6 properties on Scratchley Cres.
Someone must be getting burnt big time here.

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

iphone 6 for sale!

http://vancouver.craigslist.ca/search/sss?query=iphone%206&sort=rel

support your friendly neighborhood flipper!

space889
Member
space889

Risk your life visiting hospitals, especially Surrey ones.

Nightmare bacteria resistent to even anti-biotics of last resort are being brought back to Canada from India. What this article didn’t say is that most of the carriers likely aren’t visiting India for work. Most likely they aer parasites who never paid any taxes in Canada and are now sucking the generous Canadians welfare and health system dry. This is so deplorable and need to stop now!

http://www.calgaryherald.com/Nightmare+puts+patients+risk+says+Calgary+disease+expert/10223362/story.html

space889
Member
space889

Oh wait…woops…I guess that was a tad racists…I mean generalizing and making up stuff based on one line in a news story…

I’m sorry, I should replace India with China, and imply it is the mainland Chinese, maybe add in words like filthy, locust, etc. That will make it all ok! It is not racist if it is about mainland Chinese, even if everything is purely conjecture with no backing of facts or anything…just blind hatred will do!

space889
Member
space889

@13 – Link please!?!

So basically the idea is to buy and then get money back with a nice rate of interest (taxable??) when the property tax is paid after the sale? If that’s the case, should you just offer higher and earn more interest cuz you aren’t expected to actually take possession of the property?

messianic
Guest
messianic
forgive me for making a simple comparison. but, when home prices are rising and those that have homes are enjoying the great expansion in their assets, to the point of re-financing continuously to extract equity to Live the Life… we don’t see any call for SHARING. Y’know, i’ve got mine, and f@ck you, won’t be seeing you in Cabo or Mazatlan renter boy. however, now when prices stall, and reversal of fortune looms on the horizon… well, do we Hear about SHARING of risk amongst the heavily indebted, and a rejigging amongst lending institutions to mitigate their profligate lending ways? of course we do… The ship is going down, and only so many life jackets.. but it won’t stop them from making a deal to cut up the lifejackets and make more, of dubious and poor quality… that’s the way… Read more »
Son of Ponzi
Guest
Son of Ponzi

#17
page 6, Richmond Review, Sep 19, 2014

Son of Ponzi
Guest
Son of Ponzi

CMCH and banks sharing risk?
That’s like two junkies sharing needles.

joe
Guest
joe

Quotes from the irish property bubble…

http://quotesfromthebubble.blogspot.ca

paulb
Member

New Listings 242
Price Changes 107
Sold Listings 162
TI:15980

http://www.paulboenisch.com

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

China’s IPhone 6 Craving Leads to Fistfight in Connecticut

http://www.bloomberg.com/news/2014-09-22/china-s-iphone-6-craving-leads-to-fistfight-in-connecticut.html

HAM has a world wide impact that crosses all purchase categories

VMD
Member

@13 Re: the tax sales in Richmond
Here is the link (pg 6)

Here is what the tax sales on Scratchley Cres looked like on Google Maps in June 2012

Note sign on lawn “For Sale: 8 Luxurious Family Homes”

VMD
Member

Further on the 5 tax sales on Scratchley Cres.
All 5 were advertised on craigslist in July 2014
“5 BRAND NEW LUXURY Single Houses OPEN … – Craigslist
vancouver.craigslist.ca/rch/reb/4554267369.html
Jul 5, 2014 – 3411, 3431, 3451, 3471, 3491 Scratchley Cres in Central Richmond. OPEN HOUSE every Saturday and Sunday afternoon from 2-4pm.”

They were also marketed in various Chinese RE sites on Aug 22, 2014. This is the sales pitch (in Chinese)”This property is Top Choice to either live in yourself or hold for appreciation. This opportunity will not last. If you want to buy better act fast! Better yet, buy all 5 with your relatives and friends to make great neighbors”

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