Garth Turner, the Housing Crash, “Liar Loans” & More
Predictions of a Canadian housing crash have been unsubstantiated and have emanated largely from one man: Garth Turner.
So says Jay Bryan in this story from the Montreal Gazette.
In not so many words, Bryan suggests that Turner is more of a book promoter, and less of a real estate expert or economist.
We’ve spoken with Turner before. He’s a truly gifted writer and is always congenial with us by phone. But he is a polarizing figure to many.
Ignoring his unrealized housing crash predictions, Turner has made a fair share of other mortgage-related statements that industry experts question.
One example is Turner’s opinion on stated income mortgages. In speaking with Garth a few weeks ago, he unapologetically vilified stated income mortgages, referring to them as “liar loans.” (Stated income programs allow self-employed individuals with complex business incomes to qualify for mortgages).
He warned that stated income borrowers face a high risk of scrutiny from Revenue Canada. He says it’s because applicants are declaring more income to lenders than they are declaring to the government.
“CRA is going to audit every one of these CMHC self-declared mortgages,” he told us. “You just count on it.”
That statement surprised us, so we asked CMHC about it. CMHC stated that they cannot share application information with CRA. CMHC spokesperson, Charles Sauriol, wrote, “CMHC is subject to the Privacy Act and must not disclose borrower information obtained from Approved Lenders to third parties.”
Another example of a Turner claim that we haven’t been able to substantiate relates to down payments. In this article, Turner says “nine out of ten new mortgages are high-ratio.”
That seemed counter-intuitive given our recollection of the numbers, so we decided to confirm with Will Dunning.
Will is one of Canada’s foremost authorities on mortgage statistics. He told us that CAAMP’s “fall 2010 survey data provides an estimate of current loan to value ratios. Among new mortgages initiated in the past year 53% have 20% or more equity and 47% have less than 20%.”
The difference between 90% and 47% isn’t exactly a rounding error, so we asked Garth where he got his figures. He said he “doesn’t have a source.” He apparently derived that number from some industry executives he spoke to a while back.
This isn’t meant to say that Turner is not right about a lot of things. But, everyone’s got their own agenda and being quoted in the media doesn’t make a person infallible. Nor does it ensure that all of one’s published facts are correct.
Rob McLister, CMT
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