Real Estate

It's time to abolish the CMHC.

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Deal Addict
Jan 27, 2015
1037 posts
465 upvotes
Edmonton, AB
Donnie740 wrote: Factually incorrect, my friend.

Taxpayers do NOT "fund" the CMHC. It's profitable - - that means it's an inflow NOT an outflow of revenue for the government.

Do yourself a favour and get a bit of education on how the power of sale process works. Unless the value of real estate goes to ZERO - - a laughable conjecture if there ever was one - - the CMHC is not going to require a "bailout".
Agree on all your points. However, no one can predict what will happen in the future. It is possible (and getting more and more likely) that CMHC will require a bailout if we go by what happened in the US just 8 short years ago. Or did you forget?
Deal Addict
Jan 27, 2015
1037 posts
465 upvotes
Edmonton, AB
licenced wrote: Now you're diverting to misrepresent your position. I read that IMF report in full when it was published a few years ago, it was not about the CMHC's ability or inability to service a defaulting market but rather that it has overstepped it's original mandate which has caused banks to invest too much capital into mortgages as opposed to diversity. Nowhere does the IMF or OECD ever suggest that defaults could wipe out the CMHC or even have devastating effects on the taxpayers. In fact you should know that that report was intended as marching orders which Canada did follow and which, if at all you're familiar with my posts you'll note I said so when it was first introduced.

The whole point of the IMF is to ensure it is capitalized and to dissuade governments from creating instruments from diverting banking funds away from it. Hence the report.

Yes, of course the insurance is backed by the government because the government is in fact the insurer. That doesn't even come close to any point you or anyone else is trying to make that you're paying for it, you're just not! Homeowners are by way of their premiums where the government has already been the benefactor of many billions returned to the treasury.

Further, it behooves anyone crying wolf about their being on the hook to actually review the CMHC financials and understand that when a homeowner defaults on their loans the CMHC's loss if any is limited to the difference between the outstanding mortgage and the proceeds of sale. That's not difficult to understand.

It's a good idea to actually be versed in the topic before commenting.
You're missing one important point: when real-estate values go down, the mortgage balance or the debt remains. And if the crash is as bad as what has been predicted then there will be tons of upside-down mortgages. Even 1% of $600B is a whopping $6B of extra cost to taxpayers. How is that so difficult to grasp?
Deal Fanatic
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Nov 2, 2013
5697 posts
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Edmonton, AB
FinancialFreedom wrote: Agree on all your points. However, no one can predict what will happen in the future. It is possible (and getting more and more likely) that CMHC will require a bailout if we go by what happened in the US just 8 short years ago. Or did you forget?
What happened in the US around 2008 was different though. Our lending system isn't as lenient as theirs at the time. In places like GVA the higher priced properties are typically bought with very large cash downpayments and CMHC wouldn't offer assistance with them to begin with. i.e. People responsible for the rapid RE price inflations of the expensive homes aren't typically the same buyer market that rely on CMHC.
Last edited by FirstGear on Dec 7th, 2016 6:34 pm, edited 1 time in total.
Accountant (Public Practice)
Penalty Box
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Aug 19, 2008
1925 posts
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Metagame wrote:
Citation required.
Do you have Internet access? If not, there may be a public library nearby that you could access.

Go to www.google.com and then type in "CMHC profits" to see for yourself what I'm talking about.
Licenced Realtor and P.Eng
Penalty Box
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Aug 19, 2008
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FirstGear wrote: What happened in the US around 2008 was different though. Our lending system isn't as lenient as theirs at the time. In places like GVA the higher priced properties are typically bought with very large cash downpayments and CMHC wouldn't offer assistance with them to begin with.

You are correct.

Most on this forum have no idea what they're talking about with regard to Canadian mortgages and real estate - - and they have even less of a clue about the Anerican market.

The US market imploded because of the infamous NINJA mortgages - - No Incone, No Job or Assets - - that lenders were giving out.

And then the mortgages were back end loaded with escalating interest rates. Once the escalating rates kicked in, the poor suckers had no chance at making payments.

That kind of reckless lending never happened in Canada. And that's why the Canadian market didn't crash like the US market did.

I'd invite any of the unemployed posters here to walk into a bank to try getting a mortgage - - here's a hint: you'll be laughed out of the building.
Licenced Realtor and P.Eng
Deal Fanatic
Nov 24, 2013
6479 posts
3344 upvotes
Kingston, ON
FinancialFreedom wrote: You're missing one important point: when real-estate values go down, the mortgage balance or the debt remains. And if the crash is as bad as what has been predicted then there will be tons of upside-down mortgages. Even 1% of $600B is a whopping $6B of extra cost to taxpayers. How is that so difficult to grasp?
You should read the CMHC annual reports in detail. Their portfolio is stress-tested against major events like a 30% housing price decline or a major earthquake, among other events, and even in losses from those scenarios, they're still solvent (i.e. no bailout necessary).

CMHC has claims it deals with, even now with house prices rising or at least stable in most of their country. 'Costing the taxpayer money' in reduced profit, I suppose, but that's insurance. Like any Crown Corp, there's a cost against revenue that's earned. Still, LTV of their insured portfolio is lower than you probably think.

The numbers are there and the type of scenario that would result in a US style crisis just isn't there. A 9.0 earthquake or Godzilla attacking Vancouver would have to combine with a nuclear reactor meltdown and housing crash in Ontario to produce a situation even remotely comparable to Fannie/Freddie.
Deal Expert
Feb 29, 2008
21739 posts
21357 upvotes
Tarrana & The Ri…
professor24 wrote: You absolutely dont have to buy a home. The issue is rent is just as expensive. I would venture to guess you are older then 50?
This is the biggest reason why people are trying to buy rather than rent. It's the same bloody price. If the rental market was much lower than mortgage payments we would see a lot more people renting over buying. Most would rather go into debt owning a home than doing so by paying someone less mortgage.
Deal Addict
Jan 27, 2015
1037 posts
465 upvotes
Edmonton, AB
FirstGear wrote: What happened in the US around 2008 was different though. Our lending system isn't as lenient as theirs at the time. In places like GVA the higher priced properties are typically bought with very large cash downpayments and CMHC wouldn't offer assistance with them to begin with. i.e. People responsible for the rapid RE price inflations of the expensive homes aren't typically the same buyer market that rely on CMHC.
That's what they want you to believe, but is it real? Let's look at facts:
- There were 0 down, 40-year mortgages
- Anytime the mortgage is backed by CMHC, the bank pushes through the loan as they (the banks) are fully covered in case of a default
- How many cases have you seen where fraudulent documents were forged in order to ensure that the loan gets approved?
- Lower credit borrowers enjoy the SAME rate as someone with excellent credit
- These loans then are packaged and re-sold as bonds. SAME thing happened in the US 2 years prior to the crash.

Let's not be naive and think it isn't going to happen in Canada. It *could* happen. Will it happen? Perhaps, perhaps not. No one knows. I'm glad our Finance Minister is making it such that there is a soft landing.

Prediction time: I predict that home prices will stabilize over the next 5 years. They will track inflation but they won't yield the same return as an S&P 500 index.
Deal Addict
Jan 27, 2015
1037 posts
465 upvotes
Edmonton, AB
Mike15 wrote: You should read the CMHC annual reports in detail. Their portfolio is stress-tested against major events like a 30% housing price decline or a major earthquake, among other events, and even in losses from those scenarios, they're still solvent (i.e. no bailout necessary).

CMHC has claims it deals with, even now with house prices rising or at least stable in most of their country. 'Costing the taxpayer money' in reduced profit, I suppose, but that's insurance. Like any Crown Corp, there's a cost against revenue that's earned. Still, LTV of their insured portfolio is lower than you probably think.

The numbers are there and the type of scenario that would result in a US style crisis just isn't there. A 9.0 earthquake or Godzilla attacking Vancouver would have to combine with a nuclear reactor meltdown and housing crash in Ontario to produce a situation even remotely comparable to Fannie/Freddie.
Good to know. If what you're saying is really true then all of this discussion is moot.
Deal Fanatic
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Nov 2, 2013
5697 posts
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Edmonton, AB
FinancialFreedom wrote: That's what they want you to believe, but is it real? Let's look at facts:
- There were 0 down, 40-year mortgages
- Anytime the mortgage is backed by CMHC, the bank pushes through the loan as they (the banks) are fully covered in case of a default
- How many cases have you seen where fraudulent documents were forged in order to ensure that the loan gets approved?
- Lower credit borrowers enjoy the SAME rate as someone with excellent credit
- These loans then are packaged and re-sold as bonds. SAME thing happened in the US 2 years prior to the crash.

Let's not be naive and think it isn't going to happen in Canada. It *could* happen. Will it happen? Perhaps, perhaps not. No one knows. I'm glad our Finance Minister is making it such that there is a soft landing.

Prediction time: I predict that home prices will stabilize over the next 5 years. They will track inflation but they won't yield the same return as an S&P 500 index.
You generally need a good credit history to even get a mortgage in Canada, so no outstanding collections accounts or anything along those lines. So how are we sure that fraudulent documents are a major contributor to a potential housing crash? It is like saying stocks shouldn't be sold because financial statements could be forged.
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Aug 19, 2008
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FinancialFreedom wrote:
- Lower credit borrowers enjoy the SAME rate as someone with excellent credit

This is absolutely incorrect. Have you not heard of "B" lenders?

I don't know why so many people on RFD want to spout off with such factually incorrect proclamations - - especially on topics they have ZERO experience or education on.

Are you a mortgage underwriter?
Are you a realtor?

Pretty certain the answer to both questions is a resounding NO.

Please do everyone a favour and refrain from making false statements about topics you have no clue as to what you're speaking of.
Licenced Realtor and P.Eng
Penalty Box
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Aug 19, 2008
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FirstGear wrote:
You generally need a good credit history to even get a mortgage in Canada...

That's correct.

And not just credit history - - lenders look just as closely at debt ratio and income. Getting financing now is much tighter than it was four or five years ago.

Unfortunately, most of the "commentators" here have ZERO experience in the real estate industry and many have never even owned property in their life.
Licenced Realtor and P.Eng
Deal Addict
Jan 27, 2015
1037 posts
465 upvotes
Edmonton, AB
FirstGear wrote: You generally need a good credit history to even get a mortgage in Canada, so no outstanding collections accounts or anything along those lines. So how are we sure that fraudulent documents are a major contributor to a potential housing crash? It is like saying stocks shouldn't be sold because financial statements could be forged.
Just because you're unaware does not mean it doesn't exist. http://www.theglobeandmail.com/real-est ... e27051297/
Deal Addict
Jan 27, 2015
1037 posts
465 upvotes
Edmonton, AB
Donnie740 wrote: This is absolutely incorrect. Have you not heard of "B" lenders?

I don't know why so many people on RFD want to spout off with such factually incorrect proclamations - - especially on topics they have ZERO experience or education on.

Are you a mortgage underwriter?
Are you a realtor?

Pretty certain the answer to both questions is a resounding NO.

Please do everyone a favour and refrain from making false statements about topics you have no clue as to what you're speaking of.
LOL. If you don't even believe my simple statement then no amount of explaining will convince you.
Member
Dec 3, 2013
256 posts
42 upvotes
FinancialFreedom wrote: LOL. If you don't even believe my simple statement then no amount of explaining will convince you.
I don't get your point. Fraud exists everywhere. Are you trying to say that mortgage fraud is a epidemic?
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Feb 19, 2010
6237 posts
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For a thread advocating for the abolition of the CMHC it seems strange that few, if any, of the participants have even bothered to look at their last annual report and, presumably, have never ever heard of Google to find it.

For those in the latter group, here it is.
https://www.cmhc-schl.gc.ca/en/corp/abo ... 5-cmhc.pdf
And for those that can't be bothered to educate themselves by actually reading it, here's a summary of the highlights.
https://www.cmhc-schl.gc.ca/en/corp/ner ... 9-1000.cfm

And for those that think we're likely to experience the same here as the US meltdown, here are a couple of selected points to ponder in comparison to 'murica:
Average equity in CMHC’s insured transactional homeowner and portfolio (%)
46
Average credit score at origination for CMHC’s transactional homeowner loans insured in 2015
747
Average outstanding loan amount ($)
173,415
Average arrears rate (%)
0.34
Sr. Member
Feb 5, 2013
592 posts
109 upvotes
Honestly, I don't know where people get their ideas. Let's just say we get rid of CMHC:

With no government oversight a crash is more likely;

With the majority of voters being home owners, the government will be forced to back the mortgage/home industry from a crash anyway, or be defeated by a party that will;

Then these same people will be damning the government for not collecting insurance fees and planning for the crash.

That is the reality.
Sr. Member
Aug 26, 2008
568 posts
359 upvotes
Toronto, ON
bankonit wrote: Then these same people will be damning the government for not collecting insurance fees and planning for the crash.
Would be no fun to watch how CMHC will force bankruptcy on all this poor people. CMCH is not an insurance, but collector's agency. They pay out using premiums only as a last resort, when homeowners are bankrupt, or deficiency is not worth going after the owner.

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