Canadian Subprime in the Globe…Again

Canadian-foreclosure A week ago the Globe & Mail ran it’s latest subprime “expose,” entitled “Canada's Dirty Subprime Secret, to which the Vancouver Sun replied Friday: “There is no secret subprime mortgage problem in Canada.”

The Globe's story was largely anecdotal and attributed a big portion of defaults to subprime lenders.  It used seemingly large foreclosure statistics (e.g. “10,000 foreclosure proceedings”), in a way that would make a layman think Canada had a virtual foreclosure epidemic.

Like so many stories before it, it was a completely one-sided, and dare we say irresponsible, article that offered absolutely no context whatsoever.  For example, it gave no mention of how record job losses are contributing to Canadian foreclosures.  "Everyone knows unemployment is up, everyone knows we're in a recession, everyone knows that real estate has dropped – by definition you're going to get higher defaults when any of those things happen," said Xceed Mortgage’s Ivan Wahl to CMP.

The Globe also attributed no blame to the borrowers themselves, many of whom knowingly got in over their heads.  (Interestingly, blaming the consumer for bad decisions is a BIG no-no apparently. Maybe it just doesn’t sell newspapers. Whatever the case, it’s politically incorrect to hold homeowners accountable for their actions and you rarely see it written about in mainstream publications.).

Most importantly, however, the Globe provided no historical backdrop to compare their numbers to.  The Globe’s position seems to be that Canadian foreclosures are largely just a big mess cooked up by greedy lenders.

How big is the actual problem of foreclosures in Canada?  In the U.S., 3 out of every 100 U.S. homes is in foreclosure.  In Canada the rate is 10 times less, up slightly from record lows (on an absolute basis).  Furthermore, Canadian arrears are half of what they were in the 1990s, according to CAAMP President, Jim Murphy.

The globe also labeled many defaulting borrowers as subprime even though they weren’t.  The Vancouver Sun writes:

Non-standard, or non-conforming mortgages, sometimes referred to as Alt.A, are not subprime. They are given to borrowers with good credit histories and have low loan-to-value ratios. However, they do not meet bank guidelines for conventional mortgages.

The Globe didn’t (and couldn’t) delineate which defaults met that criteria, versus those that were actually subprime.

Industry executives called the Globe story a “witch hunt,” “inflammatory,” and “scare tactics.” We won’t get into that aspect, but it’s clear that certain business journalists need to take more time in researching statistics before stewing up controversy.

The unfortunate truth is that many Canadian’s take what the Globe says at face value because they trust Globe reporters. This kind of reporting couldn’t betray that trust more.

  1. There you go – blaming the poor borrowers again. How are they supposed keep up with all the complex concepts that the lenders have devised to confuse them?
    Exotic ideas like interest, principal, payments, “You have to pay it back” – all very confusing. :)
    Seriously – unfortunately you really can’t trust the media that much. Most articles are written to sell more news.

  2. This blog is bang on. All you have to do is draw a chart with the unemployment rate overlaid on the foreclosure rate. (Maybe you guys can do this) You will find a very positive relationship.
    There is no story here. The Globe & Mail was doing nothing more than creating news to fill empty columns. It is good that people are calling them on it.

  3. The Globe has been in decline for quite sometime and their article underlines this. It seems the Canadian Media is going the way of US sensationalism such as CNN – mixing comedy and programs like Anderson Cooper with serious journalism – which is all but non-existent in the US.

  4. This blog is an excellent response to a very poorly researched set of articles. The problem, of course, is that the Globe story was distributed to millions of readers, and the circulation of this blog is relatively small.
    The mortgage foreclosure story is so typical of business news reporting in the general media – poorly researched, badly understood, and over inflated for maximum effect. Yellow journalism at its worst.

  5. So the Globe is trying to sell news papers and the Sun isn’t? Probably the #1 problem with Canwest getting ready to go tits up. Then who are all the shills going to have to spew this ever increasing housing ponzi scheme?
    Must be getting scary for people making a living of the whole charade huh?
    Keep drinking your own kool-aid/urine.

  6. yes it’s garbage journalism but it’s at least finally headed in the direction of fact – instead of the advertorial of real estate industry

  7. Fact? What facts? The G&M wouldn’t know a mortgage fact if it slapped them upside the head. The story was a waste of dead trees. The Globe should be ashamed and these two authors fired.

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