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Mortgage Broker News | 05 Jan 2016, 08:15 AM Agree 0
A leading broker offers his take on the popular movie about the housing collapse in the United States – and how Canada’s mortgage industry differs from the “Wild West” that led to that collapse
  • Gary | 05 Jan 2016, 12:40 PM Agree 0
    Great analysis Dustan
  • Anthony C. | 05 Jan 2016, 02:30 PM Agree 0
    @ Dustan...

    Nice recap of the sub prime circus ...oops, I mean crisis.

    You have a great writing style and your summary was an easy to digest recap of the events leading up to the crisis. You also precisely explained the ARM reset as being a major contributor to the resulting flood of defaults which began in late 2007-08. I can corroborate with your statement as I was also originating some jumbo mortgages (through a U.S. broker) for some of my high net worth Canadian investor clients who were buying U.S. properties...these clients were sold on the ARM teaser rates. They were devastated when their monthly payments doubled and in some cases tripled, after the two-year reset.

    I must however, correct you on your assumption that Canadian banks did not get bailout money...in fact, the financials of the big CDN 5 reveal in excess of $110 billion of capital injection from federal agencies, such loans underwritten from Canadian and U.S. federal agencies.

    The Canadian press did not (whether by design or ignorance) publish this information, nor did good ol' Harper ever admit to the "lending hand" the feds offered the big 5 between late 2008 to mid 2010...the difference was that America called it what it was...a bailout, the CND corporate hoods deferred to using the term "back-stop".

    “We have, I think, the only banks in the western world where we’re not looking at bailouts or anything like that,” Prime Minister Stephen Harper said on CNBC in February of 2009. “We’ve gone in and done some market transactions with our banks to improve liquidity.”

    The US feds admitted it, the CDN feds kept it a secret...but if you look at the audited financials of CMHC, CIBC, TD, RBC, BNS and BMO for the years ending 2008 to 2010, the numbers reveal the extent of the BOC, U.S. Fed Reserve and CMHC capital injections...and remember, CMHC bought $70 billion in mortgages, in cash during this time frame...think this was not a bailout...?

    These five banks took almost $75 billion in short term collateralized loans from the U.S. feds and BOC, with added help from CMHC, and three of them (CIBC, BMO and BNS) were underwater water for most of the first and beginning of the second quarter of 2009. A bailout was what it exactly was...pure and simple.

    We are not, as we may think, immune to the disasterous results of loose lending practices...we in Canada just continue to extend cheap credit, as we do not want the party to stop. But it will stop eventually.

    The truth is out there...you just have to dig deep to find it.
  • Ron Butler | 05 Jan 2016, 03:08 PM Agree 0
    Anthony C. your comments are typical "grassy knoll" distortions sprinkled with pure whimsy.

    CMHC and the DOF did provide liquidity in the mortgage marketplace for about 12 months and then it was rolled back to zero support. The CMB program CMHC offers continues to this day as a method to bring competition to the Canadian mortgage space but it is just a bond program, it was not a bail-out then and it is not a bail-out now.

    The suggestion that banks were "under water" is sheer foolishness: some capital markets divisions at banks took specific, real losses but at no time were the banks themselves in a loss position.

    It always amazes me how some folks feel the need to trot out: "the Illuminati are at heart of this!!" drivel every time someone presents a factual account of a major event.

    The truth is out there.......... wait I hear the X-Files theme music starting.
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