Mortgage Bytes

Commentary

  • mortgage-growth CIBC’s Benjamin Tal says the credit crunch isn’t hurting mortgage volumes. Outstanding Canadian mortgages grew 13% in 2007, accelerating at year end.  It was the fastest growth since 1990. January and February 2008 show no loss of momentum either. CIBC & Financial Post
  • The Chronical Herald quotes Credit Union Atlantic’s CEO, Jamie Ballie, as saying Canada “need(s) to have a law” to protect citizens from predatory lending.  Ballie reportedly addressed an audience in Halifax last week with stories of how U.S. brokers went “door to door” peddling subprime mortgages.  Hopefully Ballie is wise enough not to lump Canadian brokers in that same boat.
  • MP turned real estate critic, Garth Turner, writes: “How are mortgage lenders [in Canada] more prudent [than American lenders] when they allow appraisals based on postal codes rather than home inspections?”  He also compares Canada’s 40-year amortizations to American subprime mortgages.  (That’s stretching it.)  The types of junk mortgages that imploded the U.S. economy are nothing like prime Canadian mortgages, regardless of amortization.

Mortgage Stats

  • 3/4 of Canadians carry some kind of mortgage debt.  — BMO Survey via Toronto Star
  • Mortgage debt in the U.S. was 119% of disposable income in 2007.  In Canada it was 79%. — RBC study via CTV.ca
  • 55% of Torontonians have a home equity line of credit. — BMO Study via Toronto Star
  • Despite sky-high real estate values, BC has the lowest mortgage arrears in the country at 0.14%.  Atlantic Canada is tops at 0.39%.  The average is 0.26%. Financial Post
  • 45% of Canadians make accelerated weekly or accelerated bi-weekly payments.  That equates to 1 extra payment a year, and a lot of interest savings.  Source:  CMHC
  • 25-year amortizations are fast losing ground as the Canadian standard. “Extended amortization mortgages…now account for no less than 65% of new business,” says CIBC’s Benjamin Tal.  That includes 30, 35, and 40-year amortizations. 

Mortgage Industry News

  • Instead of lowering fixed rates across the board, lenders seem to be using quick close promotions a lot more now.  There are currently at least a half dozen more lenders than usual with these special rates–which apply to people closing in 30-45 days.
  • Tal says banks have overtaken non-bank lenders in mortgage growth. That’s partly due to the increased challenge some non-bank lenders face in financing their lending.  In addition, banks are increasingly sharpening their pencils to preserve customers.  Financial Post
  • National Bank may re-launch it’s new and improved All-in-One mortgage as soon as Monday April 7.
  • MyNext Mortgage now offers conventional uninsured mortgages and business-for-self (BFS) mortgages with no NOA required.  Both offer loan-to-values up to 80%.
  • The Globe reports that GE Money Canada is being shopped around by parent General Electric.  TD is rumored to have some interest.  GE sold it’s U.S. mortgage business in December, and took a loss on it. GE Money is an alternative lender and was the first in Canada to offer a 40-year mortgage. The companies didn’t comment for the Globe’s story.  Globe & Mail

Mortgage Miscellaneous

  • Smith Manoeuvre observers are eagerly awaiting the Supreme Court’s decision on the Lipson interest deduction case.  Million Dollar Journey has a good story on it by Thicken My Wallet.
  • Canadian asset-backed commercial paper holders have no real choice according to Purdy Crawford, who’s heading up the ABCP restructuring.  Either they back the planned restructuring or they face “very little recovery.”  The 1800 individual investors holding ABCP debt, own just 1% of it.  Yet their votes outnumber the institutions and control the outcome of the restructuring.
  • Forbes says:  “Canadian banks’ overall credit quality should remain fairly healthy [in 2008], thanks to their large domestic books of low-risk residential mortgages — half of which are Canada Mortgage and Housing Corp guaranteed.”
  • The average home price in Canada is now $327,477, as of February.  A year ago it was $311,101.
  1. Once again I wonder where they are getting their data from. The national are on the CREA website states that the February average sales price was $313,065 and not $327,477.
    I found a really incredible stats page off of the CAAMP website that shows the 10 year returns on real estate in different cities. It shows the compounded yearly return varies by city from 4.4% all the way up to 11.7%. I very much doubt that salaries are keeping up anywhere near these in the respective cities. If I can find a good source for 2007 and 1997 salary info I may take a closer look in my spare time . . . Yes, I realize I’m a dork.

  2. Hi Traciatim,
    My old stats prof used to say “Stats are fun” at the end of each class (and I agreed with him). So you’re not alone…
    The folks here suggested the home price difference may be due to the possibility of one price survey being based on the top 20 metropolitan areas while the other is based on the whole country.
    Cheers,
    Rob

  3. “The 1800 individual investors holding ABCP debt, own just 1% of it. Yet their votes outnumber the institutions and control the outcome of the restructuring. ”
    I realize some people probably have their life savings tied up in ABCP, but if it were me, I’d vote no, just for spite. Just to hurt the people who got me into this mess as much as I could, realizing that I had a rare opportunity in this sense.
    I’d say I was doing it on principle, but it’s not like we are going back to principles after this is over.

  4. “I’d rather have 80% of my money back than 0% in order to make a point.”
    And this is precisely why these disasters happen over and over and over again, with the little guy getting openly robbed and then thanking his muggers for leaving him with bus fare.
    I hope the retail investors make the big guys *bleed* this time.
    Not to mention that by voting “no”, there is a real chance they can get 100% or nearly 100% of their money back despite what Canaccord’s hired experts tell them is in their interests.
    If I had walked into a bank and said, “Here is $100K for a savings account or GIC” and they said, this ABCP pays 0.05% more interest and is gauranteed!*”, I’d be out for blood.
    Canaccord and the banks who pedaled this gilt-edged garbage should make every one of these retail investors whole and if that means insolvency, then so be it.

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