U.S. could learn from Canada's mortgage market, blogs WSJ

U.S. could learn from Canada's mortgage market, blogs WSJ

The superior practices of Canada's mortgage market should be imitated by the U.S., blogged Wall Street Journal mortgage and real estate reporter James R. Hagerty. At a U.S. housing-policy conference this week, Bank of Canada researcher Virginie Tract received "one of the biggest rounds of applause" by simply describing how the Canadian mortgage market works. She, however, declined to say if Canada does have a better system than the U.S, wrote Hagerty.

On the WSJ's Developments blog, Hagerty heralded the following  points as outlined by Tract:

- Canadian lenders are closely regulated and conservative, with subprime loans never accounting for more than 5 per cent of the market.
- All Canadian mortgage loans give the lender recourse to the borrower's other assets, such as cars or savings, if the loan defaults.
- In Canada, when a mortgage loan is more than 80 per cent of the property value, the borrower must buy mortgage insurance.

Hagerty, after comparing these standards to U.S. practices, pointed out that "as of March, 0.44% of Canadian mortgage borrowers were three months or more past due on their loans. In the U.S., the rate was 9.5%."

8 Comments
  • Layth Matthews 2010-06-11 3:56:37 AM
    My first thought was that we were saved by just being slow to the sub-prime party. But ney, we do give creditors more recourse around here, which results in a less reckless housing market.
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  • Layth Matthews 2010-06-11 3:58:21 AM
    Oops. What I was going to say is that what really needs to be regulated harder is:
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  • Layth Matthews 2010-06-11 4:05:05 AM
    What really needs much more regulatory scrutiny is revolving consumer credit. It is a new form of enslavement. Mortgage brokers are in a unique position to witness this. The banks would never want to undercut it, but I think term loans with regulated ceilings on fees and rates are the better alternative. What we really need is a new culture of savings. The government had the right idea with the new TFSPs. That was huge.
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