Back in April, we had a good discussion of the mortgage mania that has grasped both consumers and financial institutions alike. It seems as though the MSM has caught on too. Which can only be a good thing for the bears, if you ask me.
Some highlights of the article:
Anyway you look at it, the Canadian mortgage industry is starting to look a bit more like its U.S. counterpart.
Nonetheless, for many less-than-solvent folks, getting a mortgage is not the challenge it once was.When I read how unlike our mortgage market place is compared to the US, it is always the same people quoted: the mortgage industry. I am a big fan of the open marketplace. I am also a big fan of self-regulated markets. Generally I believe they work, especially during hard times. It is always on the upswing that we read about the abuses. Though I am not suggesting that any abuses are taking place right now, I still believe it is important to analyze the source of our information.
big international players like AIG United Guaranty have moved in, the first of many American insurers and lenders anxious to keep billions of dollars flowing into the residential housing market.
To fuel the engine, some lenders structured these loans in ways that would only work if housing prices kept increasing dramatically – which they haven't. Add to that... low or even no down payment deals, and bonuses to offset closing costs, and you've got too many borrowers moving into new houses they really can't afford.
The growth of sub-prime mortgages is only part of the changes though, many of which are being driven by non-traditional players. Mortgage brokers, once considered lenders of last resort, are writing more and more of the business, for instance.
Although trade organizations like CAAMP seem quite serious about upgrading industry skills, provincial regulation of mortgage brokers is still bit of a patchwork – so tread carefully if you're planning to enlist their help
When CAAMP says that sub-prime lending is only 5% of the total mortgage business in Canada, we have no real reason to doubt them. But there were 1.86 Million self-employed people in Canada back in 2001. Arbitrarily categorizing self-employed individuals into the sub-prime category seems suspicious to me; because self-employed people made up 8.6% of the total workforce in 2001. This issue could be explained by suggesting that it's just a case of lazy reporting on either my part or that of the reporters in MSM.
Another related story: The reno bug is putting many in financial straits