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%."