Thanks investpro. I don’t think newspaper will print article against their advertisement revenue. But I am happy in my tech world.

Yes. We are different and we donot have ’subprime.’

http://www.greaterfool.ca/

The big difference between the two countries, however, is that in America the selling of mortgages was done privately by corporations. So when enough mortgages failed, so did the securities. Here the mortgages are guaranteed by the federal government, so they cannot fail. Unless, of course, CMHC does.
In fact, the government encourages this. It obviously wants a housing bubble. It’s doubled CMHC’s debt threshold to $600 billion, just slightly higher than the current national debt – an amount of money which goes 100% into high-ratio loans and which is guaranteed by taxpayers. At least those still working.

Simply because CMHC, a federal government agency, backs all high-risk mortgages with taxpayer dough. By removing all risk from the banks, it lets them lend to people without money and little prospect of paying their loans off. It allows them to give the cheapest, lowest rate to those with the highest default risk. In case that sounds familiar, we used to call them ’subprime.’

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http://www.yourhome.ca/homes/realestate/article/714706--be-careful-low-rates-won-t-last-says-top-banker#

Bank of Canada Governor Mark Carney is warning homebuyers against taking on too much debt because today's low interest rates will not last forever.
"People should manage their affairs prudently in anticipation that, at some point, rates will return to a more normal level," Carney said after releasing his quarterly economic review.

Quote:

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Originally posted by investpro

Here is one more article in today's National Post by Diane Francis- kinda echoes what rahul singh says. wonder if she compiled the info from the same sources as rahul.

http://network.nationalpost.com/np/blogs/francis/archive/2009/10/21/cmhc-canada-s-freddie-and-fannie.aspx#

Hey Rahul why not write a column for one of the major newspapers?
Try with one of the regional ones and move up.at least we'll see a desi name as columnist other than Haroon.
Diane even mentions Garth Turner whom you also mention in many posts.
maybe u r the ghost writer on this for Diane??!!

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http://www.theglobeandmail.com/globe-investor/easy-credit-soaring-prices-raise-new-housing-fears/article1346308/

Thanks to Mr. Flaherty's January budget, many first-time buyers can now take as much as $25,000 from their RRSPs to use as a down payment, compared with $20,000 previously. Novice buyers are jumping into surging real estate markets in Vancouver, Calgary and Toronto with little understanding that the value of the asset they covet can disintegrate.

While heftier debt loads obviously make all borrowers more vulnerable to higher interest rates, consumers' increased exposure to real estate also means that they have become more susceptible to changes in the housing market.

Broker Darin Bauer says most of his current customers are making down payments of only 5 or 10 per cent, and “not too many” come forward with the 20 per cent down payment that is the minimum to avoid the federal government's otherwise mandatory mortgage insurance.

“Generally, when they're doing the 5 per cent down, they're close to the maximum of affordability ratios,” Mr. Bauer said. “If rates went up significantly, it could be a problem come renewal time.”

Consumers with fixed-rate mortgages might feel secure. But with many mortgages now having a 35-year amortization, they are bound to feel the pinch of higher interest rates at some point.

“Consumers have to think very carefully about what they're going to do in five years when interest rates are higher,” says Peter Aceto, the CEO of ING Direct Canada. The financial crisis crimped property markets around the world, but Canada's eight-month housing correction is now a distant memory.

"Their paycheques show they’re making decent money. But their bank accounts are empty."

"debts are high, but payments are manageable"

http://ca.finance.yahoo.com/personal-finance/article/moneysense/981/squeezed

So what are Dennis and Sharlene doing wrong? If you listen to many commentators, their problem is a simple lack of self-discipline, a selfish desire to have everything at once

The conventional wisdom adds up to a stinging indictment of today’s spendthrift middle class. It sounds convincing — until you talk to folks like Dennis and Sharlene. They and their two daughters shop at a local discount supermarket and get by on less than $500 a month in groceries. They rarely eat out. While Sharlene says they would like to take the kids to Disney World, all their vacations so far have been visits to family in B.C. “There’s nothing fancy in our household,” Sharlene says. The family’s only indulgence is a single television — a 42-inch floor model they bought for half price. But Dennis refuses to spring for cable access, because he would rather his daughters read books than watch TV.

The simple fact is that Dennis and Sharlene are doing nothing wrong. They make a bit more than average, spend wisely, and just barely make ends meet. Millions of middle-class families across the country are in the same boat. Their paycheques show they’re making decent money. But their bank accounts are empty.

Even with both parents working full-time, the middle class is drowning in a sea of rising costs. The result is a paralyzing sense of economic vulnerability. With a recession looming ahead of us, the middle class is facing potential disaster. Yet no one appears to be paying attention.

Between 1999 and 2004, average household spending on tuition and school supplies rose by nearly half to $1,078 a year, according to People Patterns Consulting of Summerstown, Ont.

Looming larger than all those costs is the monster in the room — mortgage costs. The average price of a home in Canada’s major markets has soared since 2000, shooting from just over $160,000 to $315,000. Last year the ability of the average Canadian to own a home was at its lowest point since the last housing bubble in 1990. The cost of owning a two-storey home, including mortgage, taxes, upkeep and utilities, took up 48 per cent of the typical pre-tax household income. It was more in big cities like Vancouver and Toronto.


If a recession hits and house prices fall, watch out. People who’ve relied on overtime earnings to maintain their lifestyle will have to make do with less. Same goes for homeowners who’ve dipped into the equity in their homes. Many middle-class Canadians may find themselves unable to keep up.

Doug Hoyes, a bankruptcy trustee with Hoyes Michalos & Associates in Toronto, says he sees a stream of people through his office who never dreamed they would be declaring bankruptcy. His typical clients make decent wages — $2,071 a month after tax, to be precise. Their debts are high, but payments are manageable — until a divorce, a layoff or a serious illness strikes. At that point, they’re sunk, because they’re operating with no margin of error. “I’m of the opinion that the average person does not realize how close to financial disaster they are,” says Hoyes.

In the 1980s, Ottawa was awash in debt, but average citizens were not — in fact, in 1982 the average savings rate in Canada hit 20 per cent, its highest point ever. Two and a half decades later, the government is in the black, but Canadians are saving next to nothing. The turnaround is not a coincidence. Governments have downloaded extra costs on us in the form of higher taxes and fees. We may never again be able to save 22 per cent of our incomes, but even a modest decrease in our taxes would help us boost our anaemic savings from their current level of around 3 per cent of earnings.

CMHC backed mortgage is not same as sub prime mortgage in usa....

Sub prime mortgage in usa had not insurance..

CMHC is just a insurance.. like all insurances it charges a premium.. upto 2.75% for 95% loan..

for a house costing 200K it works to 5500, lets say the house goes on Power of sale.. and sells for 170K , the bank has to first go after the individual ..

If the individual does not pay or has filed for bankrupcy then the CMHC kicks in and that too for the difference of 30K ...

CMHC is a good thing.. and i think today it is funded by premiums much like EI and other social benefits..

Quote:

---

Originally posted by rahul_singh23

Thanks investpro. I don’t think newspaper will print article against their advertisement revenue. But I am happy in my tech world.

Yes. We are different and we donot have ’subprime.’

http://www.greaterfool.ca/

The big difference between the two countries, however, is that in America the selling of mortgages was done privately by corporations. So when enough mortgages failed, so did the securities. Here the mortgages are guaranteed by the federal government, so they cannot fail. Unless, of course, CMHC does.
In fact, the government encourages this. It obviously wants a housing bubble. It’s doubled CMHC’s debt threshold to $600 billion, just slightly higher than the current national debt – an amount of money which goes 100% into high-ratio loans and which is guaranteed by taxpayers. At least those still working.

Simply because CMHC, a federal government agency, backs all high-risk mortgages with taxpayer dough. By removing all risk from the banks, it lets them lend to people without money and little prospect of paying their loans off. It allows them to give the cheapest, lowest rate to those with the highest default risk. In case that sounds familiar, we used to call them ’subprime.’

--------------------------------------------------------

http://www.yourhome.ca/homes/realestate/article/714706--be-careful-low-rates-won-t-last-says-top-banker#

Bank of Canada Governor Mark Carney is warning homebuyers against taking on too much debt because today's low interest rates will not last forever.
"People should manage their affairs prudently in anticipation that, at some point, rates will return to a more normal level," Carney said after releasing his quarterly economic review.

Quote:

---

Originally posted by investpro

Here is one more article in today's National Post by Diane Francis- kinda echoes what rahul singh says. wonder if she compiled the info from the same sources as rahul.

http://network.nationalpost.com/np/blogs/francis/archive/2009/10/21/cmhc-canada-s-freddie-and-fannie.aspx#

Hey Rahul why not write a column for one of the major newspapers?
Try with one of the regional ones and move up.at least we'll see a desi name as columnist other than Haroon.
Diane even mentions Garth Turner whom you also mention in many posts.
maybe u r the ghost writer on this for Diane??!!

---

---

What happens if govt changes the rules of the game.. Stops giving CMHC backed mortgages...

Housing market crash..

Ripple affect..

Job market collapse..


Canadian unemployment could hit 20% if this is done.. which meant the tax payers fund for the additional 12-15% unemployed people for health care and other social services..

If there was no government then we would live in the wild west.. , no law , no infrastructure, no jobs..

some sort of regulation is always required.. how much is always up for debate..

China will all control works.. rest of the world with moderate control also works..


So Rahul it aint happening, CMHC is here to stay..

dudewheresmycar.. nice post. Thanks

How long Govt. can run CHMC and low interest rates?

Capitalism, competitiveness and market forces always try to balance over (bubble) and under (recession). Corporatism, lobbying and govt. are problems and try to change the course of economic cycle. Their simple policy is let keep problem under carpet. When economy will get better all these problems will be fixed automatically.

Bank can do mortgage insurance (take own risk) on their behalf. Why do they need CHMC? It's simple if everything is good we will enjoy interest if things go bad CHMC needs to pay. If mass foreclosure will start like USA, CHMC does not have sufficient fund to pay the banks just by insurance. So what Govt. action will be… .. bailout CHMC that is taxpayers money. Govt. is still throwing a lot of money to CHMC when mass foreclosure has not started.

“The bank has to first go after the individual .. "..... Most of these individual barely had 5%-10% down payment and 35 yrs mortgage. Most of them are living pay check to paycheck with such a low mortgage rates.

Govt./BoC can find lot of ways to address household debt/mortgage issue:

- raise down payment requirements
- raise CMHC insurance rates
- require banks to take some risk
- create a maximum insurable amount
- reduce maximum amortization
- require a minimum credit rating

We shall see some good spike in RE sale in next couple of months that is called fear mongering sale at low interest rate by our RE industry.

Their mantra "RE price and interest rate will go high. Right time buy otherwise homeless."

Quote:

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Originally posted by dudewheresmycar



What happens if govt changes the rules of the game.. Stops giving CMHC backed mortgages...

Housing market crash..

Ripple affect..

Job market collapse..


So Rahul it aint happening, CMHC is here to stay..

---

The people who cannot pay back have to file for bankruptcy protection or their wages get garnished.. once u file for bankruptcy u are pretty much screwed for 7 years..

It aint that easy.. people who are on total destruction path will only take this route..

Low interest has help pull the economy back.. it was done not for RE industry but for business lending.. the main benefactor ended up being the RE industry..


Essentially the capitalist system came into being on entrepreneurship.. which need free flow of cash.. what CHMC did was aid in that free flow of capital for housing..

If there is no chmc banks will just stop giving mortgage loans to first time home buyers.. which will mean a crash in housing market..

Untimely raising of interest rate will also have similar affect..

All ur ideas will cause economic and job market collapse.. and then the few tax payers will started funding all the laid off workers for medical..

the only people it benefits is fence sitter like you who are waiting for a housing meltdown..

Mark my words it aint happening.. the worst is over .. now the movement is sideways.. so will the RE industry...

You are a doomsday Nostradamus thats all.. u have no idea what drives the economic cycle and the real estate industry..

If anyone is buying after listening to a Sales agents pitch then that guy is a fool..

Quote:

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Originally posted by rahul_singh23

dudewheresmycar.. nice post. Thanks

How long Govt. can run CHMC and low interest rates?

Capitalism, competitiveness and market forces always try to balance over (bubble) and under (recession). Corporatism, lobbying and govt. are problems and try to change the course of economic cycle. Their simple policy is let keep problem under carpet. When economy will get better all these problems will be fixed automatically.

Bank can do mortgage insurance (take own risk) on their behalf. Why do they need CHMC? It's simple if everything is good we will enjoy interest if things go bad CHMC needs to pay. If mass foreclosure will start like USA, CHMC does not have sufficient fund to pay the banks just by insurance. So what Govt. action will be… .. bailout CHMC that is taxpayers money. Govt. is still throwing a lot of money to CHMC when mass foreclosure has not started.

“The bank has to first go after the individual .. "..... Most of these individual barely had 5%-10% down payment and 35 yrs mortgage. Most of them are living pay check to paycheck with such a low mortgage rates.

Govt./BoC can find lot of ways to address household debt/mortgage issue:

- raise down payment requirements
- raise CMHC insurance rates
- require banks to take some risk
- create a maximum insurable amount
- reduce maximum amortization
- require a minimum credit rating

We shall see some good spike in RE sale in next couple of months that is called fear mongering sale at low interest rate by our RE industry.

Their mantra "RE price and interest rate will go high. Right time buy otherwise homeless."

---