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shorting Canadian Banks

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  • Sep 22nd, 2017 10:09 am
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Member
Apr 9, 2012
417 posts
112 upvotes
Markham
zakarydoks wrote:
Apr 27th, 2017 2:53 pm
Compliance for loans in the millions is strictly enforced. The notion of geting millions of dollars deposited​ into your bank account from falsified documents is overblown. People geting those loans have substantial equity, high quality collateral or guarantees, and almost flawless credit history.

Do you really believe a $1.5 million house is so excessive that people would need to lie and cheat? The world economy grew exponentially and pulled millions out of poverty in the past 4 decades. It's a miracle really. Only socialists would deny this and only Canadians could be so oblivious to its consequences. Humor me and imagine a world where most potential buyers have substantial capital available to them then the real estate market doesn't seem so excessive.

Fraud exists in banking but it's impact on real estate is overblown because Canadians cannot fathom people can accumulate massive amounts​ of capital ethically. If you are rich, you stole it, give me some handouts now, is how Canadians think. It's simple but not easy, work hard, save, and invest diligently, sometimes over multiple generations. Time for Canadians to stop scapegoating banks and foreigners and work for what they truly desire and lack, dignity.
http://www.statcan.gc.ca/tables-tableau ... 7a-eng.htm

Median house hold income. it's a bit dated but I can't imagine that figure to be $200k now.

Generally how much do banks give as a loan, 3x 4x 5x of income.
Deal Addict
Sep 20, 2014
1147 posts
364 upvotes
Calgary, AB
dlhunter wrote:
Apr 27th, 2017 9:58 am
if somebody naive enough to think big 5 brokers are angles and had not falsified income for their clients, think again.
I know at least two (Scotia, RBC) high volume brokers in Vaughan who my friend used to get 3.5M LOC on 50K income. LOL

the path is simple - start at the branch, offer good deals to RE agents, they will refer clients, close your eyes on some irregularities in documentation or use creative approach to produce them. As soon as volume of loans exceeds certain threshold, you get nice bonus and promotion. What happens next is non of your business.
Ever notice how your favorite branch mortgage broker gets promoted within 1-2 years? All good while prices rising...
Harder to do with the back-office. Obviously going to happen with the kind of commission involved but it's hard to keep covering your tracks. Not going to argue that the system is fool proof but it is hard to cheat. You're also insinuating that because some falsifying happens, it must be a widespread problem and relying completely on your personal experiences to back it up.

Source: family members employed with banks as mortgage lenders
Deal Addict
Dec 6, 2006
3633 posts
640 upvotes
Toronto
atang810 wrote:
Apr 27th, 2017 3:29 pm
http://www.statcan.gc.ca/tables-tableau ... 7a-eng.htm

Median house hold income. it's a bit dated but I can't imagine that figure to be $200k now.

Generally how much do banks give as a loan, 3x 4x 5x of income.

Unless you are telling me majority of Canadians put down $1 million downpayment for a home.
I don't know why some can't seem to comprehend these.

Regardless if you think the current market is healthy or not, clearly currently it's not the "majority", "average" or "median" Canadian first-time buyer families buying the detached SFH that were $1+ millions in GTA/GVA. It's the top 5%, 10%, or 20% or whatever that are buying. And there are cheaper alternatives aside from detached. And you're always assuming everyone is buying a a detached from nothing... people who already own a previous property and now moving up can certainly and reasonably has a $1million "downpayment" for the bigger place even without a seemingly huge income.
Sr. Member
Jan 14, 2009
801 posts
288 upvotes
Vancouver, BC
atang810 wrote:
Apr 27th, 2017 3:29 pm
http://www.statcan.gc.ca/tables-tableau ... 7a-eng.htm

Median house hold income. it's a bit dated but I can't imagine that figure to be $200k now.

Generally how much do banks give as a loan, 3x 4x 5x of income.
You can obtain loans with 0 income if you have enough equity and or quality collateral. When business loans get large enough, many banks require financial review of financial statements and tax filings because the loans come attached with covenents. The review is performed by accounting firms.

A university student with 0 income can use his student loans and grants to open a margin account and rack up 6 figure debt in a hurry. Brokers are comfortable because they know the value and quality of the assets with a comfortable degree of certainty.

Credit funds many aspects of the Canadian economy and the government and the BoC is careful not to choke it off. Furthering the problem is that globally credit is very loose and if you deny Canadians this tool it makes us less competitive.

Anyways, I actually would prefer mortgage rules to be a bit tighter and compliance to be enforced more diligently to reduce overall risk in the economy.
Member
Apr 9, 2012
417 posts
112 upvotes
Markham
boyohboy wrote:
Apr 27th, 2017 4:39 pm
I don't know why some can't seem to comprehend these.

Regardless if you think the current market is healthy or not, clearly currently it's not the "majority", "average" or "median" Canadian first-time buyer families buying the detached SFH that were $1+ millions in GTA/GVA. It's the top 5%, 10%, or 20% or whatever that are buying. And there are cheaper alternatives aside from detached. And you're always assuming everyone is buying a a detached from nothing... people who already own a previous property and now moving up can certainly and reasonably has a $1million "downpayment" for the bigger place even without a seemingly huge income.
I also don't know why some can't seem to comprehend very simple concepts.

Just do any google search with Canadians, Toronto, Debt etc. and you will quickly realize even the people who can afford a home are very leveraged and Canada probably sits at the top compared to other developed nations on people who are too leverage due to housing.

Your myopic view of families/people moving up the housing tier just isn't true for majority of the people.

Here's a date article which I found in less than 2 secs. http://www.cbc.ca/news/business/bank-of ... -1.3897875
Sr. Member
Jan 14, 2009
801 posts
288 upvotes
Vancouver, BC
atang810 wrote:
Apr 27th, 2017 5:23 pm
I also don't know why some can't seem to comprehend very simple concepts.

Just do any google search with Canadians, Toronto, Debt etc. and you will quickly realize even the people who can afford a home are very leveraged and Canada probably sits at the top compared to other developed nations on people who are too leverage due to housing.

Your myopic view of families/people moving up the housing tier just isn't true for majority of the people.

Here's a date article which I found in less than 2 secs. http://www.cbc.ca/news/business/bank-of ... -1.3897875
Right but the government is implementing new measures to slow mortgage borrowing. They are being careful because they do not want to crash real estate just slow down the gains in two cities.
Deal Addict
Nov 24, 2013
4053 posts
1102 upvotes
Kingston, ON
atang810 wrote:
Apr 27th, 2017 5:23 pm
I also don't know why some can't seem to comprehend very simple concepts.

Just do any google search with Canadians, Toronto, Debt etc. and you will quickly realize even the people who can afford a home are very leveraged and Canada probably sits at the top compared to other developed nations on people who are too leverage due to housing.

Your myopic view of families/people moving up the housing tier just isn't true for majority of the people.

Here's a date article which I found in less than 2 secs. http://www.cbc.ca/news/business/bank-of ... -1.3897875
Your article shows that of new high-ratio borrowers in GTA (i.e. those using CMHC), roughly half are tapping out their GDS (wouldn't pass the new stress test).

You're dancing all over the place with anecdotes. New high-ratio borrowers in GTA aren't all GTA borrowers. Notably, it's excluding all purchases >$1MM, which by definition are not high ratio. Further, by being only a debt:income statistic, it can't capture how many people chose to take a higher mortgage and leave cash in the bank, rather than increasing down, due to low cost of borrowing. Then, while you keep talking about the situation for "the majority of Canadians," only about 20% of Canadians live in the Lower Mainland & GTA crazy markets (and a good chunk of the ones that do, rent). The very article you linked shows the national stats for high ratio (CMHC) borrowers were 31% 'wouldn't pass the stress test' and average price was $489K.

It's okay to have concern about people over-leveraging, but it's a good idea to read past the attention-grabbing headlines and bolded 'shocking' statistics and understand what's actually being observed.
Member
Apr 9, 2012
417 posts
112 upvotes
Markham
Mike15 wrote:
Apr 28th, 2017 6:37 am
Your article shows that of new high-ratio borrowers in GTA (i.e. those using CMHC), roughly half are tapping out their GDS (wouldn't pass the new stress test).

You're dancing all over the place with anecdotes. New high-ratio borrowers in GTA aren't all GTA borrowers. Notably, it's excluding all purchases >$1MM, which by definition are not high ratio. Further, by being only a debt:income statistic, it can't capture how many people chose to take a higher mortgage and leave cash in the bank, rather than increasing down, due to low cost of borrowing. Then, while you keep talking about the situation for "the majority of Canadians," only about 20% of Canadians live in the Lower Mainland & GTA crazy markets (and a good chunk of the ones that do, rent). The very article you linked shows the national stats for high ratio (CMHC) borrowers were 31% 'wouldn't pass the stress test' and average price was $489K.

It's okay to have concern about people over-leveraging, but it's a good idea to read past the attention-grabbing headlines and bolded 'shocking' statistics and understand what's actually being observed.
Sure, exactly why even the BoC addressed the high debt levels that Canadians are facing. But don't worry, the BoC didn't "capture how many people chose to take a higher mortgage and leave cash in the bank, rather than increasing down, due to low cost of borrowing." Too many headlines about many Canadians can't even pay mortgage payments if the interest rate went up; but these are only headline news so don't read too much into it.
Member
Apr 9, 2012
417 posts
112 upvotes
Markham
zakarydoks wrote:
Apr 27th, 2017 6:18 pm
Right but the government is implementing new measures to slow mortgage borrowing. They are being careful because they do not want to crash real estate just slow down the gains in two cities.
Ya I agree and they have done it through forcing banks to tighten up, limiting 30 years mortgages, minimum down payments etc. Those are all needed given most people will end up spending more than what they can afford. And majority of Canadians doesn't even understand the impact if rates went up to 5-6%.
Deal Addict
May 22, 2003
2187 posts
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Vancouver
Any reason why RY is down when the other banks are slightly up?
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User avatar
Oct 9, 2008
3943 posts
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Thornhill
Jermyzy wrote:
Apr 28th, 2017 12:47 pm
Any reason why RY is down when the other banks are slightly up?
The multibillionaire sultan OP must have started another naked short position today. Face With Tears Of Joy
Sr. Member
Oct 21, 2014
627 posts
407 upvotes
Burlington, ON
Mike15 wrote:
Apr 28th, 2017 6:37 am
Further, by being only a debt:income statistic, it can't capture how many people chose to take a higher mortgage and leave cash in the bank, rather than increasing down, due to low cost of borrowing.
You are on point. It makes a lot of sense to borrow money at 2.xx% and invest, especially when it is possible to be cash flow positive from dividends alone from day one. I've done some of that with my existing mortgage, cashing out a bit of equity in order to invest and know others who have done the same.

On another topic, notice that this thread seems to get bumped every time there is a headline or volatility in the banks? No one ever made money by panicking, and this thread is no exception.
Sr. Member
Jun 15, 2012
761 posts
53 upvotes
MB
Canada’s banking system will soon be put to the test.
But don’t take my word for it.

Take it from Prem Watsa, who runs the Canadian investment firm Fairfax Financial Holdings:

Most banks can’t survive a 50 percent drop in real estate values…

It’s going to come down, and a lot of people are going to get hurt.
If you have any money in Canada’s stock market, here’s what you should do.

Lighten up on Canadian housing stocks. If Toronto’s housing market tanks, Canadian homebuilders could severely struggle. Get out of these stocks while you still can.

Sell Canadian bank stocks. This is another no-brainer. If housing prices in Toronto tank, a wave of foreclosures could rip across Canada. Banks and other lenders would take huge losses if this happens.
https://www.caseyresearch.com/articles/ ... oss-canada
"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful."
- Warren Buffett
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User avatar
Feb 19, 2010
4456 posts
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ukrainiandude wrote:
May 6th, 2017 3:58 pm
Canada’s banking system will soon be put to the test.
But don’t take my word for it.

Take it from Prem Watsa, who runs the Canadian investment firm Fairfax Financial Holdings:

Most banks can’t survive a 50 percent drop in real estate values…

It’s going to come down, and a lot of people are going to get hurt.
If you have any money in Canada’s stock market, here’s what you should do.

Lighten up on Canadian housing stocks. If Toronto’s housing market tanks, Canadian homebuilders could severely struggle. Get out of these stocks while you still can.

Sell Canadian bank stocks. This is another no-brainer. If housing prices in Toronto tank, a wave of foreclosures could rip across Canada. Banks and other lenders would take huge losses if this happens.
https://www.caseyresearch.com/articles/ ... oss-canada
If only I had a dollar for every prediction of a 50% housing crash...:rolleyes:

How many consecutive years has this been going on? Six? Seven? Eight? More? I know there was that big "Vancouver Road to a Housing Crash", or some such title subsequently changed, by crashadamtheman, that has been ringing the alarm bells for somewhere in that range.

Even in Alberta, almost taken to its knees by world oil prices and the NDP government, house prices are stabilizing and with nowhere near the kind of precipitous crash that some predicted.

IOW, I think I'll stick with Canadian banks for the time being. The capital appreciation over the years alone dictates sticking around.

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