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(Bloomberg)   In no way can this go wrong. Again. Nope. Unpossible   ( bloomberg.com) divider line
    More: Followup, Mortgage loan, uninsured mortgage market, market gain traction, Insured home loans, residential mortgage volumes, taxpayer-funded bank bailouts, new mortgage rules, percent  
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3690 clicks; posted to Business » on 20 Mar 2018 at 6:11 AM (16 weeks ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2018-03-20 08:04:29 AM  
True.  It worked out really well last time, because all those toxic assets could just be offloaded on suckers, making the people who matter tons of money at no risk to themselves.

Granted, additional regulation was passed on banks and financial advisers after the taxpayer bailout to prevent this from happening again.  But... good news!  That's all been repealed.
 
2018-03-20 08:16:07 AM  
Close thread. Done in one.
 
2018-03-20 08:42:46 AM  
What's happening in Canada is that people are so desperate to get in to (what they see as) a housing market that will keep going forever that they are taking on ridiculous amounts of debt to do it.

As a response, the government keeps trying to introduce half-measures to control it (taxes on foreign buyers, restrictions on length of amortization, restrictions on capitals-gains extensions for primary homes), but instead of making people borrow less, they are being driven to alternate lenders.

One big problem that is acting as a feedback loop is that prices go up, so people lend money to their kids (often by getting second mortgages) to buy a house, which gives young buyers more money to bid on houses, which pushes prices up, which raises the amount that can be extracted in a second mortgage, etc.

That's how you get things like this:

https://www.realtor.ca/Residential/Si​n​gle-Family/18755744/242-GLEN-PARK-AVE-​Toronto-Ontario-M6B2E3-Yorkdale-Glen-P​ark

Couple this with the fact that the average person aged 55-64 in Canada has something like $3000 saved for retirement (and amongst those with no workplace pension, 55-64, the average saved is ~$250!), and the fact that the Canadian economy (at least as measured by the stock market) has been flat for ten years, and the fact that the population is aging dramatically and with it the costs of health care, and you have a situation that can be described as Chinese-proverb-interesting.
 
2018-03-20 08:51:28 AM  
Canadian mortgages

FTFA: In January, OSFI made it more difficult for those with more than a 20 percent down payment to qualify for loans.

If you buy a home and put less than 20% down, you are required to have mortgage insurance.
If you have more than 20% down then you're on your own in the chance of a market correction - The taxpayer isn't picking up the tab because you bought an overpriced house in an overheated market.
 
2018-03-20 09:30:18 AM  
FTFA: Mortgages that don't require homeowner insurance surged 19 percent from a year ago... Insured home loans fell 6.5 percent from a year ago...

What is TFA talking about? "Homeowner Insurance" here in the U.S. is what you buy to replace your roof when a tree falls on it, and has nothing to do with "Title Insurance" which insures that the lender has first lien on the property. And neither of them has anything to do with "Private Mortgage Insurance," which is what you have to buy (to insure that the lender will get paid) when you have less than 20% equity in the property.

Maybe it's because I haven't had enough coffee yet, but TFA seems to be simultaneously referencing all three types of insurance as if they were more or less interchangeable, which is absurd.
 
2018-03-20 10:00:21 AM  

D135: Canadian mortgages

FTFA: In January, OSFI made it more difficult for those with more than a 20 percent down payment to qualify for loans.

If you buy a home and put less than 20% down, you are required to have mortgage insurance.
If you have more than 20% down then you're on your own in the chance of a market correction - The taxpayer isn't picking up the tab because you bought an overpriced house in an overheated market.


That was my takeaway, lack of mortgage insurance means that the asset is worth more than the note.  So even if the asset loses value, just give the note a corresponding haircut.  And lack of PMI means there is a margin that the asset can lose without damaging the note.

Then again this is fark, they told us there would be no math.
 
2018-03-20 10:14:52 AM  

Barricaded Gunman: FTFA: Mortgages that don't require homeowner insurance surged 19 percent from a year ago... Insured home loans fell 6.5 percent from a year ago...

What is TFA talking about? "Homeowner Insurance" here in the U.S. is what you buy to replace your roof when a tree falls on it, and has nothing to do with "Title Insurance" which insures that the lender has first lien on the property. And neither of them has anything to do with "Private Mortgage Insurance," which is what you have to buy (to insure that the lender will get paid) when you have less than 20% equity in the property.

Maybe it's because I haven't had enough coffee yet, but TFA seems to be simultaneously referencing all three types of insurance as if they were more or less interchangeable, which is absurd.


I've had my coffee and I had the same takeaway (or lack thereof).

If hazard insurance isn't required... well, that seems foolish, but as long as everyone knows the risks, have at it.

This doesn't seem like Title insurance would come into play.

If Mortgage insurance isn't required - well, that could be a good sign (more people are putting down deposits, so it's not necessary).
Or maybe it's a terrible thing (banks are granting loans with little down, and expect the government to step in if the market tanks).

In any case, I have one thing to say to you, Canada:
I hope you're sorry.
 
2018-03-20 12:38:14 PM  

eKonk: Barricaded Gunman: FTFA: Mortgages that don't require homeowner insurance surged 19 percent from a year ago... Insured home loans fell 6.5 percent from a year ago...

What is TFA talking about? "Homeowner Insurance" here in the U.S. is what you buy to replace your roof when a tree falls on it, and has nothing to do with "Title Insurance" which insures that the lender has first lien on the property. And neither of them has anything to do with "Private Mortgage Insurance," which is what you have to buy (to insure that the lender will get paid) when you have less than 20% equity in the property.

Maybe it's because I haven't had enough coffee yet, but TFA seems to be simultaneously referencing all three types of insurance as if they were more or less interchangeable, which is absurd.

I've had my coffee and I had the same takeaway (or lack thereof).

If hazard insurance isn't required... well, that seems foolish, but as long as everyone knows the risks, have at it.

This doesn't seem like Title insurance would come into play.

If Mortgage insurance isn't required - well, that could be a good sign (more people are putting down deposits, so it's not necessary).
Or maybe it's a terrible thing (banks are granting loans with little down, and expect the government to step in if the market tanks).

In any case, I have one thing to say to you, Canada:
I hope you're sorry.


Any loan with less than 20% down requires mortgage insurance.  By law.

So if the number of loans requiring it is going down, it means people are putting more money down when buying a house.

Any analysis on who would be impacted and by how much, in case of a market bus is very difficult without more info.
 
2018-03-20 12:59:45 PM  

Flab: eKonk: Barricaded Gunman: FTFA: Mortgages that don't require homeowner insurance surged 19 percent from a year ago... Insured home loans fell 6.5 percent from a year ago...

What is TFA talking about? "Homeowner Insurance" here in the U.S. is what you buy to replace your roof when a tree falls on it, and has nothing to do with "Title Insurance" which insures that the lender has first lien on the property. And neither of them has anything to do with "Private Mortgage Insurance," which is what you have to buy (to insure that the lender will get paid) when you have less than 20% equity in the property.

Maybe it's because I haven't had enough coffee yet, but TFA seems to be simultaneously referencing all three types of insurance as if they were more or less interchangeable, which is absurd.

I've had my coffee and I had the same takeaway (or lack thereof).

If hazard insurance isn't required... well, that seems foolish, but as long as everyone knows the risks, have at it.

This doesn't seem like Title insurance would come into play.

If Mortgage insurance isn't required - well, that could be a good sign (more people are putting down deposits, so it's not necessary).
Or maybe it's a terrible thing (banks are granting loans with little down, and expect the government to step in if the market tanks).

In any case, I have one thing to say to you, Canada:
I hope you're sorry.

Any loan with less than 20% down requires mortgage insurance.  By law.

So if the number of loans requiring it is going down, it means people are putting more money down when buying a house.

Any analysis on who would be impacted and by how much, in case of a market bus is very difficult without more info.


You also need 20% down on any home over $1,000,000, and in Canada (in Toronto at least) more and more places are above a million, so more loans are uninsured as a result.

I think people hit up some sort of shady second lender to get most of the 20%, not sure though.
 
2018-03-20 01:08:16 PM  

Flab: Any loan with less than 20% down requires mortgage insurance.  By law.


In Canada?

In the US there's no requirement for PMI, but 20% is a common cutoff point that lenders use. There are laws that limit the amount of PMI that can be imposed (for example, once you've paid off 20% of the principle of your loan you're entitled to cancel any PMI you are currently paying).

It's possible, for example, for lenders to just roll their own form of PMI into their loan offers. Rather than giving you a 4% loan with PMI, I might give you a 4.1% loan without PMI.
 
2018-03-20 01:08:41 PM  
Canada wasn't part of the housing crash of 2008. The Canadian Govt was quite proud of their "boring" banking industry. Am surprised they have gone this route.
 
2018-03-20 01:27:59 PM  

jpo2269: Canada wasn't part of the housing crash of 2008. The Canadian Govt was quite proud of their "boring" banking industry. Am surprised they have gone this route.


Wait for it.....
img.fark.netView Full Size


And that only goes as far as 2013.  The real craziness had yet to start then.  Toronto was y-o-y up 30% from March 2016 to March 2017!
 
2018-03-20 01:30:54 PM  
civilizedfront.comView Full Size


There's the rest of the story.....

Terrifying stuff.
 
2018-03-20 01:34:07 PM  

facepalm.jpg: Flab: Any loan with less than 20% down requires mortgage insurance.  By law.

In Canada?


In Canada you get mortgage insurance (usually) through CHMC.  It's a one-time payment proportional to the price of the house, proportional to the length of amortization, and inversely proportional to the downpayment.

For a 25 year mortgage with 5% down, CHMC insurance is something like 3.1 to 3.2% of the purchase price (so put 50,000 down on a 500,000 house, and on day 1 you have a ~481,000 mortgage)
 
2018-03-20 01:35:41 PM  

TheAlgebraist: For a 25 year mortgage with 5% down, CHMC insurance is something like 3.1 to 3.2% of the purchase price (so put 50,000 down on a 500,000 house, and on day 1 you have a ~481,000 mortgage)


Nope, looks like it's gone up again:

https://www.cmhc-schl.gc.ca/en/co/molo​in/moloin_005.cfm

For 90-95% loan to value (i.e. less than 10% down) it's 4% of the purchase price.  Buy for 500k, put down 50k, have a 490k mortgage.
 
2018-03-20 02:22:00 PM  

facepalm.jpg: Flab: Any loan with less than 20% down requires mortgage insurance.  By law.

In Canada?

In the US there's no requirement for PMI, but 20% is a common cutoff point that lenders use. There are laws that limit the amount of PMI that can be imposed (for example, once you've paid off 20% of the principle of your loan you're entitled to cancel any PMI you are currently paying).

It's possible, for example, for lenders to just roll their own form of PMI into their loan offers. Rather than giving you a 4% loan with PMI, I might give you a 4.1% loan without PMI.


Yes, in Canada.

TFA is about Canada.  I'm in Canada.
 
2018-03-20 02:57:01 PM  

Barricaded Gunman: FTFA: Mortgages that don't require homeowner insurance surged 19 percent from a year ago... Insured home loans fell 6.5 percent from a year ago...

What is TFA talking about? "Homeowner Insurance" here in the U.S. is what you buy to replace your roof when a tree falls on it, and has nothing to do with "Title Insurance" which insures that the lender has first lien on the property. And neither of them has anything to do with "Private Mortgage Insurance," which is what you have to buy (to insure that the lender will get paid) when you have less than 20% equity in the property.

Maybe it's because I haven't had enough coffee yet, but TFA seems to be simultaneously referencing all three types of insurance as if they were more or less interchangeable, which is absurd.


Homeowner insurance is the fire/flood/tree/meteor insurance, title insurance is generally included in each real estate transaction (buried in the closing costs).   TFA is about the mortgage insurance on what you actually owe 'the bank' as it were.

TFA make sense (or should (hah!)) to Canuckleheads like myself.

It's kind of like trying to figure out wtf a 401k vs IRA vs Roth IRA etc.
 
2018-03-20 03:51:50 PM  

TheAlgebraist: [civilizedfront.com image 300x191]

There's the rest of the story.....

Terrifying stuff.


Add in the USD - CAD fix rate over that time...
 
2018-03-20 04:02:26 PM  
Good.  I looking to buy in a year or two and was hoping for a housing market collapse.
 
2018-03-20 04:18:29 PM  

TheAlgebraist: TheAlgebraist: For a 25 year mortgage with 5% down, CHMC insurance is something like 3.1 to 3.2% of the purchase price (so put 50,000 down on a 500,000 house, and on day 1 you have a ~481,000 mortgage)

Nope, looks like it's gone up again:

https://www.cmhc-schl.gc.ca/en/co/molo​in/moloin_005.cfm

For 90-95% loan to value (i.e. less than 10% down) it's 4% of the purchase price.  Buy for 500k, put down 50k, have a 490k mortgage.


Slight math error.

$500,000 house with 10% down = $450,000 mortgage

4% of $500,000 = $20,000

So $470,000 mortgage.
 
2018-03-20 05:03:36 PM  

Flab: TheAlgebraist: TheAlgebraist: For a 25 year mortgage with 5% down, CHMC insurance is something like 3.1 to 3.2% of the purchase price (so put 50,000 down on a 500,000 house, and on day 1 you have a ~481,000 mortgage)

Nope, looks like it's gone up again:

https://www.cmhc-schl.gc.ca/en/co/molo​in/moloin_005.cfm

For 90-95% loan to value (i.e. less than 10% down) it's 4% of the purchase price.  Buy for 500k, put down 50k, have a 490k mortgage.

Slight math error.

$500,000 house with 10% down = $450,000 mortgage

4% of $500,000 = $20,000

So $470,000 mortgage.


Yeah, I am all over the frigging map there.  I meant to have a 5 percent dp not a 10 percent one.  What a shiatshow that post was.  Thanks.
 
2018-03-20 05:08:51 PM  

HempHead: TheAlgebraist: [civilizedfront.com image 300x191]

There's the rest of the story.....

Terrifying stuff.

Add in the USD - CAD fix rate over that time...


USD and CAD have fluctuated, sure, but that doesn't change the fact that Canadian and US house prices have tracked one another pretty closely for a long time.  Here it is back to the early 70s

3.bp.blogspot.comView Full Size


It is certainly not the case that the current price gap between US and Canada is due to exchange rates.  If it was, you wouldn't expect the behaviour from 2009 ish until 2013 ish when we were going towards or were at parity to match the behaviour since then (where the loonie has dropped 30% or so)
 
2018-03-20 05:10:09 PM  

TheAlgebraist: HempHead: TheAlgebraist: [civilizedfront.com image 300x191]

There's the rest of the story.....

Terrifying stuff.

Add in the USD - CAD fix rate over that time...

USD and CAD have fluctuated, sure, but that doesn't change the fact that Canadian and US house prices have tracked one another pretty closely for a long time.  Here it is back to the early 70s

[3.bp.blogspot.com image 579x441]

It is certainly not the case that the current price gap between US and Canada is due to exchange rates.  If it was, you wouldn't expect the behaviour from 2009 ish until 2013 ish when we were going towards or were at parity to match the behaviour since then (where the loonie has dropped 30% or so)


I just realized an earlier graph I posted also shows back that far, this one is just a bit bigger.
 
2018-03-20 05:11:54 PM  
Also, in the 1990s we had an exchange rate as bad or worse than the current one.  I'm not sure our house prices are correlated to the exchange rate.
 
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