Vancouver Condo Info

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.

There’s an article over at CNBC talking about the National real estate market, it’s warning signs and various slumps.

They revisit Vancouver Real Estate agent Keith Roy’s very public decision to sell his house last year and say prices have dropped 3.9% in Vancouver, 5.6% in West Van.

They also talk about lending practices in Canada and recent efforts to return CMHC amortization terms to their historical norm.

Some of the loopholes people use to avoid the mortgage restrictions are quite extraordinary. For example, although the government requires buyers to purchase private mortgage insurance on mortgages with 100 percent loan-to-value ratios, eHow says this can be avoided just by getting two mortgages, each for 50 percent of the home value.

Canadians are also allowed to borrow against pensions and life insurance policies to fund their down payments. Even credit cards can be used to fund down payments. So it’s very possible that the total housing debt is actually much higher than the official mortgage debt numbers.

If this sort of thing is being openly discussed even after the government has launched its efforts to curb lending excess, just imagine what kind of shenanigans were going on before the crackdown. The quality of the mortgages made in 2011 and 2012 may turn out to be much worse than is commonly suspected.

Read the full article here.

So is the Canadian market falling apart at this point?  Vancouver has certainly fallen over the last year and this is starting to have an effect on developers as well – the Alba has been put on hold due to a ‘challenging real estate market‘.

Interest rates are at historical lows and it doesn’t look like that’s due to change anytime soon.

Of course if you could predict future changes with accuracy you could become incredibly wealthy.

It’s the unknown that’s the challenge and that’s why some people chose to pay a premium to lock in todays low rates for many years.

Unfortunately you can’t get the incredibly low rates that US buyers enjoy on a 25 year term, but 10 year rates have fallen along with 5 year and variable rates.

Ten year products are growing in popularity recently with terms available as low as 3.6% according to this article in the Financial Post.

only about 1% of the market locks in for longer than 10 years, Bank of Montreal recently did away with an 18 year locked in mortgage:

“We had to shelve that. It wasn’t a very accepted product by customers,” said John Turner, director of mortgages at Bank of Montreal. “People have a problem getting their head around that long of a commitment.”

Many Franks pointed out this profile from CBC’s Sunday Edition on a bankrupt homeowner.

This isn’t really a tragedy.

It isn’t even just a story about personal responsibility.

This is actually a simple “here’s what” for all the policy makers who thought “what could be the downside of offering up government backed zero down 40 year loans?”.

Sure, it’s all ‘booming economy this’, ‘free money that’ for a while.

And who doesn’t like free money?

Seven times in the preceding two years I had approached the bank that held the lion’s share of my credit card debt and asked them to reduce the interest from 20 percent to something more manageable, something more like 10. I explained that I had been laid off, that I was now not only a single mom but a full-time student, living on student loans. I explained that I was trying my best to pay it off but I couldn’t even make a dent in it with interest that high. Seven times they turned me down. The last time I met with a bank officer, she told me to make all my payments on time for a year and then come back and she’d consider it. I shuffled off, head bowed.

And then the mortgage company told me they were calling the mortgage – a forty-year-mortgage with no money down, made back in the day when you could still do that. I have paid nearly sixty thousand dollars towards that mortgage. Nearly five years in, I have yet to touch the principal. Get a new lender, they told me or come up with the pay-out amount, the same amount of money I borrowed initially. Impossible. I cried.

The silver lining? Bankruptcy was a relief. The kids will be fine, their mother obviously loves them, and the bank made their money.

I paid that credit card debt four times over. The bank is NOT getting ripped off here. They’ve done just fine by me. And my house? We loved our little house, it has been just lovely for us. And now it will be just lovely for some other family who needs a home. We’ll find another little house, or an apartment, and we will make it fine for us, too.

Read the full story over at the CBC.

story submitted by iconoclast

Here’s a weird scene from the aftermath of the US housing bubble…

You’ve all heard of underwater mortgages, but have you ever heard of a zombie foreclosure?

There are more than 300,000 properties in the US where the owner has abandoned the property but the bank never completed a foreclosure.

What does this mean?

Reuters revealed the plight of people who walked away from their homes not realizing that their names remained on the deed and that they were financially liable for taxes and other bills related to the abandoned property.

In some cases, homeowners vacated after receiving a notice from the bank of a planned foreclosure sale, only to find out later the bank never followed through.

Zombie properties can be easy to spot as they deteriorate into neighborhood eyesores and havens for criminal activity.

Read the full article here.

What is going on in the mortgage world?

Now Flaherty is personally calling up banks and asking them to raise their mortgage rates.

On Tuesday, Manulife Bank dropped its posted interest rate for a five-year fixed-rate mortgage to 2.89 per cent. That’s the lowest posted rate for that time frame the company has ever offered. But in an about-face later in the day, the company pulled the offering and reverted to its former rate above three per cent.

“After consulting with the Department of Finance, Manulife Bank has withdrawn the promotional campaign and reverted to our previous posted rate,” the company said in a statement.

Read the full article over at the CBC.

Are a few pips in mortgage rate really driving people to run out and overpay?

It’s not April 1st yet is it?

Because this article in the Globe and Mail reads like some sort of weird parody.

Canada’s Finance Minister has taken his battle against a housing bubble an extraordinary step further, issuing rare praise for the country’s banks for not matching Bank of Montreal’s cut-rate mortgages

What?

Ottawa is growing concerned the banks could end up causing the housing market to overheat, especially after Mr. Flaherty has gone to great lengths to cool the market over the past year.

Could overheat? What brand of rear-view mirror are they using? Maybe if you didn’t use taxpayer money to ensure that they make money from mortgage business but take not risk of loss thanks to the CMHC that would help cool the market a smidge?

Mr. Flaherty and Bank of Canada Governor Mark Carney have waged an all-out war against the massive build-up in consumer debt to record levels. Along with Mr. Flaherty’s restrictions – which reduced the maximum amortization on mortgages last year to 25 years, down from 30 – the central bank went so far as to warn it could raise interest rates to tame the borrowing binge.

All out war?!? This gets better and better! They reduced amorts to 25 years but who jacked them up to 30 in the first place? And warning that rates could go up? Boy, that’s tough!

Battling a housing bubble by undoing the things you did to fuel it is a bit like thinking that getting rid of your slingshot should be enough to un-break all those windows you shot out.

“I encourage responsible lending,” Mr. Flaherty said Friday. “I think that the financial institutions of course are major players in the residential mortgage market and it forms a major part of their asset portfolios and the Government of Canada has a lot to say about it, not only because we’re concerned about the economic fiscal health of the country, but also we have CMHC [the federal mortgage insurer] and many of those mortgages held by the private sector financial institutions are insured with Canada Mortgage and Housing Corp.”

Maybe via the CMHC you’re encouraging too much lending, responsible and not.

And here’s the punchline:

Mr. Flaherty’s praise of BMO’s rivals may be somewhat off target, though, since most of the lending sector is quietly offering the same rates as BMO, mortgage professionals say

Phew. Is that enough stupid for your monday morning?

Looks like statistics from last month are starting to show up now.

Over at the Vancouver Sun they’re leading with the headline stat that YOY sales are down almost 30%.

The REBGV Home Price Index (HPI) is now down 5.6%, which Aleksey points out means that people who bought last May with the minimum down payment are now ‘underwater’ on their mortgages.

It’s been quite a while since we’ve seen this happen, but we’re now at a point where a small number of recent Vancouver home buyers owe more for their property than their property is worth on the market.

How long till we see the term ‘underwater’ or ‘upside down’ when it comes to Vancouver mortgage holders in the news?

With sales and prices down, REBGV president Eugene Klein did find one market indicator that is up: Realtor anecdotes of visitors to open houses.

Sales in February followed recent trends and were below seasonal averages, though our members tell us they saw more traffic at open houses last month compared to the previous six to eight months.

Somebody should tell the Vancouver Observer so they can correct this article again: What does it mean when nobody shows up to an open house in Vancouver?

“Well, this is a bit odd.” The Realtor checks his phone again, but it’s not saying anything new.

It’s been an hour, and nobody has shown up to the open house. We’re standing on the ground floor of a townhouse.

The Downtown East Side, but it’s silent except for CBC Radio 3: classical music plays quietly from tiny, beautiful speakers that can probably only play classical music. Top-40 would cause them to implode.

The Realtor walks out the door, across the long, wide patio, to the front gate of the courtyard. He’s making sure his phone number is correct on the open-house announcement. It is.

A bright, sunny Saturday in Vancouver. Just after lunch, and there’s nobody here but us.

The CMHC tends to have some pretty rosy forecasts for the future of Canadas housing market.

But if all is well, why are they now trying to get real estate agents to hide foreclosure status from potential buyers?

After recent stories about deceptive marketing practices, it’s heartening to hear that a group of Realtors in Quebec have raised issues of an ethical breech after the CMHC asked them to conceal foreclosure status on properties for sale.

The Quebec Federation of Real Estate Boards, which oversees the 12 real estate boards in the province, says it challenged CMHC about the change requiring them not to report on a detail sheet that properties for sale were part of a foreclosure, despite the fact that information is considered mandatory when loaded by brokers onto the selling system of local boards.

“Because the repossession field is currently a mandatory field in the brokerage system you have no choice by to indicate ‘no’, which goes against ethical rules stipulating that real estate brokers are obliged to publish information that is truthful and verified,” the group said in a statement to members.

The two sides resolved the issue by making it no longer mandatory to reflect the foreclosure status of a home, based on the seller’s instructions.

So why does the CMHC not want you to know about foreclosure status? Because then you might be tempted to bid on cold logic rather than emotion.

“Look at what is going on right now in financial institutions and everybody is ratcheting up their loan-loss provisions,” said Ben Rabidoux, a Canadian analyst for California-based Hanson Advisors, a market research firm whose clients are institutional investors. “Everybody expects loan losses to rise. I can’t imagine CMHC is in the dark on that. My suspicion is they want to limit any loss on that hits their books.”

By limiting the information on whether a property is part of foreclosure, the Crown corporation would potentially avoid a situation in which a buyer knows it has to sell. In the United States, foreclosed properties have sold at huge discounts.

Read the full article here.

Finally!

A bit of humour that calls out the absurdity of the ‘tough new mortgage rules’.

This is brilliant, thanks Rick Mercer.

On a side note is the ‘crantini’ joke a common one in housing markets? The only place I’ve seen it is here on dear old VCI when ‘samantha’ refers to drinking crantinis on the patio.

(at least I assume that’s a joke, sorry Sam if it’s not.)