As the article below illustrates, interesting times in Canada’s mortgage and housing industries.
Bank are biased in maintaining the status quo as it protects their interest and, of course, their multi billion dollar profits.
I honestly don’t buy into their argument that if they were to be responsible for deductibles consumers should suffer.
Yet the reality is that the banks have traditionally always been more than happy to push down regulatory costs down to their customers.
Personally, I think charging banks a deductible on mortgages that go into default is an excellent idea.
This could only improve their already decent underwriting due diligence and prevent people who really should not be getting a mortgage that they cannot afford in the first place from getting one. This is especially true in today’s red hot real estate markets in Toronto and Vancover where the term “house poor” should likely be updated to “house destitute” for some.
The problem is that banks like to overshoot on their policies and thereby needlessly affect and deny mortgages to those who can easily carry and really should qualify.
One can only wonder whether the last financial crisis and Great Recession could have been avoided if these policies were in place before the last US real estate crash.
It has now been over 8 years and the world economies are still attempting to dig themselves out of their holes!
The question we as Canadians should ask is whether we as taxpayers or the banks, as the corporations who actually lend money should be held liable should the proverbial crap hit the fan in the next crash.
Regardless, a deductible would only be a drop in the bucket.
More importantly, historically the Canadian rate for mortgage default, that is the percentage of mortgages that go into default, has hovered around 0.4%. This compares to over 4-5% in the US, where Americans are viewed as 10 X more likely to default on their mortgages vs their Northern neighbours in Canada.
We benefit from such low default rates in part due to our banks more robust underwriting standards, both legislated and self imposed.
Honestly, I don’t know why the CBA is making such a fuss over something, that as prudent lenders they should have no issues with. Especially since we as the tax payers would remain on the hook to cover the lions share of any mortgage defaults even if these new proposed changes were to be implemented.
As the article below illustrates, interesting times in Canada’s mortgage and housing industries.
Bank are biased in maintaining the status quo as it protects their interest and, of course, their multi billion dollar profits.
I honestly don’t buy into their argument that if they were to be responsible for deductibles consumers should suffer.
Yet the reality is that the banks have traditionally always been more than happy to push down regulatory costs down to their customers.
Personally, I think charging banks a deductible on mortgages that go into default is an excellent idea.
This could only improve their already decent underwriting due diligence and prevent people who really should not be getting a mortgage that they cannot afford in the first place from getting one. This is especially true in today’s red hot real estate markets in Toronto and Vancover where the term “house poor” should likely be updated to “house destitute” for some.
The problem is that banks like to overshoot on their policies and thereby needlessly affect and deny mortgages to those who can easily carry and really should qualify.
One can only wonder whether the last financial crisis and Great Recession could have been avoided if these policies were in place before the last US real estate crash.
It has now been over 8 years and the world economies are still attempting to dig themselves out of their holes!
The question we as Canadians should ask is whether we as taxpayers or the banks, as the corporations who actually lend money should be held liable should the proverbial crap hit the fan in the next crash.
Regardless, a deductible would only be a drop in the bucket.
More importantly, historically the Canadian rate for mortgage default, that is the percentage of mortgages that go into default, has hovered around 0.4%. This compares to over 4-5% in the US, where Americans are viewed as 10 X more likely to default on their mortgages vs their Northern neighbours in Canada.
We benefit from such low default rates in part due to our banks more robust underwriting standards, both legislated and self imposed.
Honestly, I don’t know why the CBA is making such a fuss over something, that as prudent lenders they should have no issues with. Especially since we as the tax payers would remain on the hook to cover the lions share of any mortgage defaults even if these new proposed changes were to be implemented.
http://thechronicleherald.ca/business/1324998-canadian-bankers-warned-tories-about-mortgage-risk-sharing-plan
