Can US-style Housing Crisis, “Jingle Mail” Hit Canada’s Banks?

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Dismantling the old saw that it can’t happen in Canada.

This comes up constantly in discussions on the current house price bubbles in some cities in the US and Canada, and whether a US-style crisis could happen in Canada: The housing bust in the US during the Financial Crisis was marked by banks receiving “jingle mail” from homeowners who saw the value of their homes plunge and their equity turn negative. These folks didn’t feel like paying the mortgage anymore and just turned in the keys to the bank though they had jobs and could have made their mortgage payments.

These “strategic defaults,” it is said, won’t happen in Canada. Therefore, there will not be a US-style housing crisis and financial crisis in Canada. In won’t happen in Canada, they say, because mortgages are “recourse,” and in the US they’re “non-recourse.” We hear this constantly. But it’s wrong.

I’m not a lawyer, and this is not legal advice. For legal advice, pay a lawyer. I’m just trying to shed some light on a tough issue – while dismantling the old saw that a US-style housing bust and financial crisis cannot happen in Canada.

In the US of A:

States vary in how much recourse mortgage lenders have, and it’s not that clear-cut whether they’re “recourse” or “non-recourse.” A working paper by the Richmond Fed in 2010 on defaults in recourse and non-recourse states classified 11 states as “non-recourse.” That’s good enough for our purposes.

In these 11 states, banks’ recourse in collecting on residential “purchase” mortgages after default is limited to the value of the collateral (the home). If the debt is larger than the value of the home, usually determined by proceeds from the foreclosure sale, the lender is generally barred from trying to collect the remainder of the debt from the borrower.

The 11 “non-recourse states”:

  1. Alaska
  2. Arizona
  3. California
  4. Iowa
  5. Minnesota
  6. Montana
  7. North Carolina
  8. North Dakota
  9. Oregon
  10. Washington
  11. Wisconsin

Some of the states on this list are non-recourse only for “purchase mortgages”; lenders may have recourse in collecting on other mortgages, such as a refi.




The 39 “recourse” states in the US:

In the remaining 39 states and the District of Columbia, lenders may obtain a “deficiency judgment” and try to recoup the mortgage debt beyond the value of the collateral. Thus, the vast majority of states are considered recourse states. Of the big four states, only California is non-recourse. New York, Texas, and Florida are recourse states.

Some states require judicial foreclosures (in court), others require non-judicial foreclosures, and in some, both are an option. And there are numerous other laws that impact results.

For example, in Florida, a recourse state, lenders have to use judicial foreclosure. Armed with a deficiency judgment, banks can try to collect the amounts of the defaulted debt not covered by the greater of the fair market value of the property or the foreclose sale price. However, the Richmond Fed points out that Florida has “an extremely generous homestead exemption such that if the property is an investment property rather than a primary residence, the borrower can partially shield his or her assets from collection on the deficiency.”

Then there is also the option of putting a property, particular if it is an investment property, into an LLC, which will limit any recourse to the assets held by the LLC.

In other words, results may vary.

The non-recourse provinces in Canada:

Even in Canada, there are two non-recourse provinces:

  • Alberta
  • Saskatchewan.

In the rest of Canada, mortgages are generally recourse loans. But even in Alberta and Saskatchewan, a mortgage is only non-recourse if it is not insured by the government’s mortgage insurer CMHC. If the mortgage is insured, the CMHC may pursue the borrower for the deficiency.

Recourse v. non-recourse states in the US housing bust

In its working paper, the Richmond Fed tried to determine if there were differences in default rates in recourse states v. non-recourse states – “the first study looking at difference in how borrowers default,” it said. Here are some of the findings:

  • Deficiency judgments are “rare in practice,” in both recourse and non-recourse states. “This may be because it is often costly and time-consuming for a lender to pursue and collect on a deficiency judgment.”
  • Deficiency judgments may be rare for another reason: “The mere threat of a deficiency judgment may deter default, implying few deficiency judgments in practice.”
  • There was “no difference” in the probability of default across recourse and non-recourse states for properties appraised at or below the median price at origination.
  • For properties appraised at $500,000 to $750,000 at origination (2005 dollars), borrowers in non-recourse states were more than twice as likely to default.

So yes, for homes priced at origination substantially above the median price, “strategic defaults” were more likely in non-recourse states than in recourse states.

But here’s the thing: In the US, only 11 states are non-recourse. Yet the housing bust and foreclosure crisis was spread across much of the country and crushed lenders in recourse states just as hard, including in Florida and Nevada. It caused the government and the Fed to bail out the banks and the federal mortgage insurers (Fannie Mae and Freddie Mac).

In that respect, the US and Canada are on the same level: In a smaller part of the country, mortgages are non-recourse; in the vast majority of the country, mortgages are recourse. Government entities insure certain types of mortgages in both countries. Mortgage-backed securities exist in both countries, as do subprime borrowers. Loans for down payments are a thriving industry in Canada that even the provincial government of British Columbia has now entered.

Recourse was no protection in the US against defaults and a financial crisis. This shows that when housing implodes hard enough after an enormous bubble, and if the bust is associated with a broader economic downturn, as housing busts inevitably are, in the end, what happened in the US can happen in Canada.

The question now being asked, years too late: How will this end? Read…  If Mortgage Rates Tick Up Even a Little, What’ll Happen to Canada’s House Price Bubble?




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  75 comments for “Can US-style Housing Crisis, “Jingle Mail” Hit Canada’s Banks?

  1. Gershon
    Apr 25, 2017 at 8:18 pm

    You can’t get blood out of a stone. A lot of F***ed Borrowers (FBs) are going to be insolvent once the housing bubble bursts.

    • alex in san jose
      Apr 26, 2017 at 12:54 am

      Gershon – FB’s! Thanks for reminding me of a term from the 2006-2007 time frame! Ah, the nostalgia…

  2. ANON
    Apr 25, 2017 at 8:38 pm

    This will end very quickly, methinks, jingle mail or not…

    • Sound of the Suburbs
      Apr 26, 2017 at 4:03 am

      The UK has housing busts and there is no jingle mail.

      Housing is not a very liquid asset which slows things down.

      1929 was a bubble in a liquid asset bursting, that happens fast.

    • Gershon
      Apr 26, 2017 at 8:07 am

      From Hemingway’s The Sun Also Rises: “How does one go bankrupt? Gradually, then suddenly.”

  3. yon
    Apr 25, 2017 at 8:40 pm

    lol….great SNL skit!

  4. Your Good Friend
    Apr 25, 2017 at 8:49 pm

    Not a matter of if but when…… And which one implodes first…. The US or Canada.

  5. Justme
    Apr 25, 2017 at 8:53 pm

    Great information, very thorough.

    PS: Minor typo “purse the borrower” if you care.

    • Apr 25, 2017 at 11:03 pm

      Thanks. Yes, I care :-)

      • subunit
        Apr 26, 2017 at 2:15 am

        Another- ” In won’t happen in Canada” Presumably, It won’t.

      • Gretzky
        Apr 26, 2017 at 6:11 pm

        Oh really? ;)

      • Ryan
        Apr 27, 2017 at 11:57 am

        In 2011, Nevada became a non-recourse state for first mortgages on primary residences, seconds only have 6 months to file suit.

      • Randolph Tyrone Hawkins
        May 23, 2017 at 10:28 am

        Thanks for publishing this. I live in south Florida and am often exposed to Canadians as tourists and part time property owners. They have often espoused that they don’t do things “like the US”when it comes to banking and borrowing. For a time that may have been true but there is no way this upward momentum could have been sustained without some creativity. Kudos for doing the research to show what lurks under the surface

  6. RDE
    Apr 25, 2017 at 9:09 pm

    I lived in Eugene Oregon during the Ronald Regan 16% interest rate Depression. Eugene went from being voted the most desirable small city in the USA to a place where every forth house was for sale or simply abandoned. All in the course of little more than one year. Some people went to their banker’s office and slammed the keys down on his desk, but most just loaded the family in their car and drove away looking for greener pastures as their parents had done during the Dust Bowl Depression.

    The typical (non-Chinese) Canadian home purchaser in the last decade is leveraged relative to income like a sub-prime janitor in Miami.

    “Can’t happen here.”
    “This time is different.”
    ” Canadians are too law abiding to default”

    You can squeeze a Loon(ie) as hard as you want, but all you get is feathers and shit that smells like dead fish. Better start building as many prisons as they have in the US if you want your recourse.

  7. Mike
    Apr 25, 2017 at 9:27 pm

    A Canadian housing bust is absolutely going to happen – it’s just not guaranteed to be the same as the American one.

    A point that John Rubino recently made is a good one – roughly, that the Canadian economy is small, while the amount of hot money in China trying to get into Canada is large. These buyers won’t default on homes in Toronto or Vancouver after a bubble crash because they bought in cash, and are using it as a mechanism to effectively launder hot RMB. They might have to sell en masse if there’s a massive economic crash in China. How big will this effect be? I don’t think anyone knows.

    I don’t know how the Canadian housing bubble will end, but I’m fascinated to find out!

    • ru82
      Apr 25, 2017 at 10:14 pm

      Good point. I am guessing the Chinese buyers who default will default on loans made in China too? So it those defaults may not hurt Canadian Banks?

      • Bobby
        Apr 25, 2017 at 10:37 pm

        That’s my guess, a potential Asian crises that will dry up overseas demand, and roll over the local buyers, combined with a commodity blood bath.. A few years out yet..

        • alex in san jose
          Apr 26, 2017 at 12:58 am

          I remember the mid-80s when the Japanese were going to buy everything, and then suddenly that last thing anyone thought was possible, happened. Their economy crashed.

    • Gary
      Apr 26, 2017 at 6:30 am

      What housing bubble?
      The Liberals have started using helicopter money.
      Here comes Hyperinflation.
      If you think $2,000,000 is a lot for a Toronto home, give it 7 years.

      • Gershon
        Apr 26, 2017 at 7:36 am

        Weimar 2.0, here we come.

        Read the classic “When Money Dies” by Adam Fergusson to get a preview of coming attractions.

        Heckova job, central bankers.

    • Andrea Bloomberg
      Apr 26, 2017 at 10:00 am

      No. It’s different in Canada. You don’t find female teachers, doctors, lawyers earning over $180,000 per year in the States as you do in Canada. And we ave free healthcare, so we save more money.

      Toronto is a growing city, and there is no housing bubble. The low income people need to realize that Toronto is not for the poor, it is a rich person’s paradise.

      • Apr 26, 2017 at 10:30 am

        Did you forget to add the /sarc tag?

        • Enrique P
          Apr 26, 2017 at 1:32 pm

          HA….+1

      • Richard
        Apr 26, 2017 at 6:35 pm

        If you think that Toronto is only for rich people then how do you think the rich people will survive without poor people?. Who will take care of their children? Who will cut the grass?Who will drive them here and there?How the Teachers,lawyers earning over $180,000 find employment en mass if poor people are gone. Rich people made money mainly because of “poor people”. Please be grateful and respectful for them and the most important–Be careful what you wish for– .

      • Kman
        Apr 28, 2017 at 7:33 pm

        What again does female have to do with your argument?

  8. memento mori
    Apr 25, 2017 at 10:04 pm

    Rumours of canadian housing bubble bursting are overexagerated.
    This bubble has still years to go before it bursts. Low interest rates and unprecendented large money printing by central bankers have pushed the suspicious citizens to the only hard asset they understand anf have access, real estate. This is only the begining.
    L.V.Mises : “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved”

    When this bubble burst, will CAD go to 20 cents as a result of money printing by BoC to make banks whole or strengthen as a result of the deflationary collapse, that is the question ???

  9. CrazyCooter
    Apr 25, 2017 at 10:46 pm

    Having sent a home to foreclosure in TX (long story) – after a very long series of having leeches basically sucking blood, I managed to get a good legal guy who was just fair and honest. I mailed checks, he gave advice. The only positive experience with any of the professionals in the industry over a number of years it took to play out.

    It deeply colors my opinion of the entire industry as being greedy, fee-sucking delta-bags.

    In Texas, there is a “homestead” thing, against which recourse loans can’t be issued (i.e. your primary residence is YOURS and if someone lends against it they don’t have recourse – doesn’t apply to any property OTHER than your “homestead” which is your primary residence – state constitution – look it up). This is despite the fact I got an equity loan through USAA (which I am still paying on mind you – due to technicals of the divorce that created said problem and the fact I let the property go to foreclosure and creating a liability for my ex is a problem I legally and responsible for).

    Not to piss on the OP, but in Alaska, back when oil tanked in the early 80s, there was A LOT of jingle mail and banks got screwed. Hard. I am pretty damn sure that has been buttoned up and you are not walking away from a mortgage in AK. But, I haven’t been through that and it is just the informed impression I had living here.

    Wolf had it right – get a lawyer (hopefully an honest one – I will PS my favorite lawyer joke) – and cover your own butt.

    Regards,

    Cooter

    PS: My favorite lawyer joke.

    Q: Why do lawyers where neck ties?

    A: To hold down their foreskin.

    Hopefully we can all be adults and enjoy the shared experience and joke.

    • kam
      Apr 26, 2017 at 6:34 pm

      Cooter:

      “a good legal guy who was just fair and honest.” I’ve hired lawyers over the years and there was only one who would qualify for that statement.

      He had been a helicopter pilot in Viet Nam and nothing rattled him. He had a saying printed on his wall, ” a town that hasn’t got enough work for one lawyer will always find a lot of work for 2 lawyers.”

  10. Tony
    Apr 25, 2017 at 11:23 pm

    Interesting article. Here in Australia, we are the proud owners of possibly the worlds largest housing bubble. We are also the second most indebted (debt to disposable income), only being edged out by Sweden.

    Our real estate industry believes that there won’t be an implosion, because we don’t have jingle mail, like the USA. Apparently, “we’re different”, so I’m told.

    We’re all different, until we’re not.

    • MC
      Apr 26, 2017 at 3:30 am

      Between 2005 and 2016 Australia was at the receiving end of a veritable bonanza of Chinese “investments”. While official data do not exist (of course), investment banks put the total at around US $93 billion. Only the US managed to beat that and not by much. When the sizes of the two economies are considered, however, Australia came out as the clear winner.

      In both countries Chinese investments have poured chiefly into the category labelled as “real estate and hospitality”. In short that money has been used to buy real estate but while in the US it’s estimated “only” 36% of the total went into real estate, in Australia the estimate is north of 50%: it means over US$45 billion have poured from China alone into a housing market that is a minute fraction of the American one.
      That’s more than enough to cause prices to shoot into the stratosphere, especially given Asian buyers are well known to favor certain markets.

      I’ve read Victoria has a further problem in that population in and around Melbourne is ballooning due to massive immigration… while I do not dispute the data, I have been unable to find out more about it. For example is this immigration a byproduct of Western Australia’s mining burst or are these foreigners? What jobs do they fill or hope to fill? The only sure thing is local administrations have proven to be both unable and unwilling to cope with this situation, just like their colleagues in Spain.

      • Tony
        Apr 26, 2017 at 5:20 am

        Hi MC,

        It’s all foreign immigration. We’ve been running a high immigration program since about 2000. All are heading into Sydney and Melbourne. Both cities are now choking to death. Population growth is running at 1.7%, incredibly high when compared to other western countries. Nothing is being done about infrastructure to cope.

        Western Australia is in deep trouble, but the population movement is only minor, when compared to foreign immigration.

        • MC
          Apr 26, 2017 at 7:04 am

          Thanks for the reply.
          Sounds like what’s happening in most of the Western world: take in as many people as you can at the worst possible time.

        • Lee
          Apr 26, 2017 at 5:38 pm

          Actually Melbourne is growing at over 2% a year……

          You can see the results on the roads to the city every morning and in the afternoon during peak hour.

          Yesterday it was taking over 75 minutes to get into the city on the Monash Freeway (carpark) from where I live.

          Try to find parking at the local shopping mall after 11 in the morning or for that matter at the local grocery store. Parking lots are full.

          By the way the ‘panel beaters’ – those companies that repair cars after crashes are doing a lot of business recently – one of the few growth industries here…………ever wonder why?

        • R2D2
          Apr 27, 2017 at 12:17 am

          I repost this since it is necessary to see the facts:

          We keep hearing that number of immigrants to Australia is huge; well, here it is:

          “The Australian Bureau of Statistics released its latest statistic report on migration, which revealed that the number of migrants has increased by 28% in the past decade, with 508,662 people moving to Australia and 264,291 leaving.

          British people continue to make up the largest portion of Australia’s overseas-born population, followed by New Zealanders, Chinese, Indians and Vietnamese.

          However, the number of British immigrants is decreasing overall and the countries with the fastest growing number of immigrants to Australia, apart from Nepal which had a very small number to begin with, are India at 12% more per year-on-year average, Pakistan (11.4%), Bangladesh (10.9%) and Sudan (9.2%).”

          Tell me how many immigrants from Nepal, Pakistan, Sudan, and Bangladesh can not afford 2 million dollar houses; no tell me how many can afford $250,000 houses. This immigrants are coming and gobbling up real estate is a made up story.

        • Jack
          Apr 27, 2017 at 4:23 pm

          R2D2,

          I don’t know about down under but here, in the Greater Toronto Area (the GTA) RE agents will go door-to-door, insert printouts of the highest-priced recent house sale in your ‘hood claiming that “your house is worth that much, too, so let me list it, blah, blah.”

          And then they’ll get buyers started on bidding wars (everything around here sells above asking price), sell that house to one cash buyer usually, and then take that sale to the next guy to entice him/her to sell, etc.

          These buyers that paid these inflated prices recently are going to be very sorry if global interest rates go up.

      • Cyrus
        Apr 27, 2017 at 1:19 am

        MC, Tony, and Lee, can you provide a source of your information? Seems like a lot of immigrants are leaving Australia.

        • Apr 27, 2017 at 7:19 am

          “Seems like…” Where did you get that impression?

          Check the comment by R2D2 with data on this, including the source, namely the Australian Bureau of Statistics.

        • Cyrus
          Apr 27, 2017 at 8:53 am

          R2D2’s post says “with 508,662 people moving to Australia and 264,291 leaving”.

          264,291 leaving is actually a great number of people leaving for a country that is supposed to be a great destination for immigrants.

        • Apr 27, 2017 at 9:44 am

          Many Australians are leaving… Same with Kiwis. They have a lot of wanderlust, being from down under. There are a bunch of them in my swim club here in SF. Great people. And easy to pick out by their beautiful accents.

        • Tony
          Apr 30, 2017 at 9:40 pm

          http://www.macrobusiness.com.au/2017/03/melbourne-grinds-to-a-halt-on-insane-population-growth/

          The information in the link is derived from the ABS. The vast majority of arrivals are settling in Melbourne and Sydney. Whether they can afford to buy a house is irrelevant. The fact that they need a roof over their heads adds to housing pressure. If they can’t buy, they still need to rent. Enter the property speculator, the guy that’s pushing up house prices.

  11. p. coyle
    Apr 26, 2017 at 1:06 am

    slightly off-topic, but slightly relevant. i am in the phoenix az area, and for the last couple weeks have been laughing to myself over this “advertisement” i see on my way to work. it says, “learn how to invest in real estate” and provides a phone number to call. it is one amongst many, i admit, but this one has charm: it is a hand-scrawled, in marker on a piece of posterboard, and tied to a street sign i commonly get stuck by waiting for the light to turn green. i’ve pointed it out to friends several times and we had a good laugh. today, on my way to work, i was sitting there looking at the sign, waiting for the left turn arrow an on the radio there was a commercial for a house flipping seminar, where you could learn how to, and i quote: “invest in real estate risk-free!” now i know, they don’t ring a bell at the top, but…

    • Tony
      Apr 26, 2017 at 5:55 am

      Nothing unusual. We have the same thing here in Sydney. All over the place, and yes, they are written on cardboard. It fascinates me, that no matter what part of the world we come from, we all still behave same.

  12. Gretzky
    Apr 26, 2017 at 1:08 am

    I’ll believe an implosion in the Canadian housing market when I see it. I have been an observer, in the middle of Vancouver’s housing rise, for 15 years. I don’t think a bubble-burst will happen.

    Three Canadian cities are beginning a pilot project re: basic income. That will be the saving grace for many Canadians WHEN the federal government institutes this program nation-wide. Rates will eventually rise, and basic income will be the home owners’ saviour.

    I thought I was smart deciding NOT to buy an over-priced home, but the joke is on me. I am a fool for not taking the plunge years ago. I thought that NOT being a slave to a home was intelligent. I chose the red pill and lost.

    • MC
      Apr 26, 2017 at 7:35 am

      A quick question: where is the money to pay for basic income coming from?
      Since 2012 France, Germany and Italy have all been chipping at infrastructural, educational and healthcare spending to the tune of 0.5-1% per year to finance an increase in welfare spending.
      Italy recently mused about introducing basic income but quickly clashed with reality: giving €500/month to one million people would cost €6 billion/year, and that’s before considering the bureaucratic apparatus to distribute the money. The original plan called for the same sum to be given to 3 million people… now you understand why Italy has a worse credit rating than Colombia and Mexico.

      I am sure the ingenious Canadian bureaucrats will guarantee their country is different, but the problem is always the same: where is the money going to come from? My guess is infrastructures will start to crumble first (if they haven’t already: politicians and bureaucrats love ribbon cutting but hate maintenance and improvements with a passion), then schools will start experiencing funding difficulties and finally hospitals will become more crowded and dirtier. It’s a flick I’ve seen before and it never ends well.

      • kam
        Apr 26, 2017 at 6:47 pm

        Once the commodity cycle is finished ( a function of the birth of the Chinese monster) Canadian and Australian real estate will be priced closer to cost. And that will be less than 50% of today’s number.

        None of this real estate got jacked up in price due to local demand. It is all the panic of getting in before it is too late. Corrupt politicians everywhere.

    • TJ Martin
      Apr 26, 2017 at 8:51 am

      The minute yo say it can’t … is the very moment it probably will .

      Suffice it to say ” It Can’t Happen Here ” … or worse ” It Can’t Happen to Me ” regardless of the ‘ It ‘ .. or the ‘ Here/Me ‘ .. is a pleasant little head in the sand fantasy verging on self delusion that will inevitably bite you on the posterior the minute your back is turned . The simple fact is ‘ It ‘.. can happen anywhere.. and to anyone .

      As far as you’re having made a mistake and being a fool ? I wouldn’t be so sure about that assuming you’ve been saving/investing in lieu of making house payments

  13. Nicko2
    Apr 26, 2017 at 4:23 am

    We have a condo just outside Calgary. It’s value has almost reached what it was two years ago…which considering what else is going on, not bad. At least it has a reliable tenant.

  14. Kent
    Apr 26, 2017 at 5:59 am

    My brother was way upside down after 2008 in his house in Florida. He just walked away and began renting from a friend who had also stopped paying his mortgage. The bank stopped sending him threatening letters after 9 months or so. So he let my niece move into the house to keep it from molding over. She lived there for 5 years before the bank finally took it back.

    Recourse doesn’t work when everyone walks away at the same time. The bank is already insolvent and not about to hire an army of lawyers to destroy its customers in a court system that is also whacked financially by the loss of tax dollars.

  15. SimplyPut7
    Apr 26, 2017 at 5:59 am

    Jingle mail is not likely, it’s a term that was used frequently in our last big housing bubble in Canada in the late 1980s early 1990s when people could send their house keys back to the bank. But back then 99% of people paid the minimum down payment of 25% and qualified for a non-recourse loan.

    Today the down payment required to not need a CMHC loan and qualify for a non-recourse loan (if your province allows non-recourse loans) is 20% or greater, however most people pay the minimum of 5% sometimes 10%. Majority of loans especially with first time home buyers is less than 20%.

    I doubt Alberta and Saskatchewan would have many non-recourse borrowers because most people pay smaller down payments so their homes are recourse loans. If they do have more than 20% down it would likely be from a homeowner who has moved up the property ladder and used the equity in their current home to make the down payment in their new home. Most of these people would have smaller mortgages that could be paid off in 10 to 20 years as Alberta and Saskatchewan have many homes of great quality under the $500,000.

  16. Meme Imfurst
    Apr 26, 2017 at 6:52 am

    As always, a well written and well thought out article by Mr. Wolf.

    No matter what country you live in, the Central and institutional bankers have designed a system, along with real estate ‘professions’ and politicians to make sure you clearly see that if you don’t play the game, you will be left behind.

    Big industry, when construction stops, people go on welfare. The game is no longer finding a home, it is now finding an ‘investment”. We, as humans, have bought into the ‘make money’ meme and left the ‘dream of home ownership’ in the dust. The ‘family home’ is not in our conversation anymore.

    This ‘keep the parade’ going is so important in the USA, that an
    executive order’ deleted the Congressional mandated section of HUD guidelines ( FHA/VA/Fanny) that no bank/lender involved in fraud (convicted or not) could make any more home loans. Of course, pressure from Bells Frago had nothing to do with that action. Now, Fanny is going to re-do the rules so student debt is not counted in applying for a home loan. What is next to keep the bubble afloat, a bucket of tears from homeless children as a down payment?

    Just like the stock and bond markets, and frankly all markets now, there is no price discovery when you have 200 billion printed every month, shoved down the throat of the economy, and no one understands the value of ‘a buck in your hand’ anymore. We did joke, it is just paper, but now simply 1s and 0’s on he phancyphone.

    I firmly believe, especially after reading some comments here, that ‘everyone’ believes the sky will not be allowed to fall, and if it does it will be a buying opportunity with gobs of cheap money available for the ‘properly’ connected. After all the last 8 years would seem to validate that proposition.

    good luck everyone…..the sky is not the limit!

    • Kent
      Apr 26, 2017 at 8:11 am

      It will stop when wages can no longer support mortgages. The market will start moving sideways. At first a slow trickle will start quietly selling. Then that will be a flood. Prices will collapse, people will walk away, banks will start collapsing and the stock market with it.

      What I see different right now is that the bubble seems to be isolated to certain urban markets: Cali, Vancouver, Melbourne, Amsterdam. Down here in the Central Florida ‘burbs you can still pick up a newish and nice 2500 sq. ft. house on a 1/2 acre for $300k. That house would have been $550k in 2008. So we have a ways to go.

      • Gershon
        Apr 26, 2017 at 8:30 am

        It will stop when wages can no longer support mortgages. The market will start moving sideways. At first a slow trickle will start quietly selling. Then that will be a flood.

        Anytime the median home price exceeds by median income by a factor of 3X or more, it always corrects to the norm. The only thing that has enabled the current outlandish bubbles is, once again, the massive distortions and speculative orgy unleashed by the Fed’s provision of trillions in financial crack cocaine to its favored Wall Street grifters. This cannot end well for the 99%. The only silver lining is that maybe this time around, the looted and impoverished middle and working classes will finally rise up and demand an end to the criminal private banking cartel known as the Federal Reserve.

        • Kent
          Apr 26, 2017 at 10:58 am

          Nah. The system is too complex for the average Joe to understand. Joe will look for a savior and the bankers will provide him with one.

        • Frederick
          Apr 26, 2017 at 12:39 pm

          Gershwin Agree the parasitic FED must be dismantled and eliminated

        • Your Good Friend
          Apr 26, 2017 at 1:13 pm

          I think the historic long term metric you’re referring to is 2x income. I never was a fan of that one considering price to income doesn’t reflect actual production cost of housing.

          Figure $50/sq ft (lot, labor, materials and profit) less depreciation for a used house.

      • Simplyput7
        Apr 26, 2017 at 9:56 am

        You can’t walk away, our laws are different in Canada. The majority of the surveillance techniques Snowden was complaining about, we already have legally.

        The banks will start an investigation to find you, there are only 6 major banks in Canada, if you are hiding money in one and debt in another and stopped paying the debt; they would talk to each other and share that information if a formal investigation has started. Then they will “shut the client down” and close all of your accounts – chequing and savings accounts, credit cards and line of credits and foreclose on any property owned by the client.

        Banking is a privilege not a right in Canada. No one has to offer you a bank account, credit cards, line of credits or mortgages, banks have a right to say ‘No’ if they believe you are too risky and won’t be able to pay back your loans or can’t verify where the original money you deposited came from.

        Any money in the accounts will be used to pay any outstanding debt – they take it all, if there’s $50,000 and you were warned to pay your debt (usually formal letter sent to your address) and you ignored the bank or if taxes owed by the Canada Revenue Agency (CRA – Canadian equivalent to IRS) they will clear the account, they don’t care if there’s no money or credit cards left to buy food for your family or pay utility bills.

        Any debt left, if you have not declared bankruptcy will be brought to court where the bank will garnish your salary wages to pay for the debt you owe. The only thing they usually don’t touch is your pension accounts: e.g. RRSP [our version of 401(k)] and government pension plans.

        • Apr 26, 2017 at 10:28 am

          Banks can do all that in most US states as well. But you can’t squeeze blood out of a turnip.

          That’s why they didn’t even try. It’s costly, and it accomplishes nothing when you have a huge wave of defaults.

        • Thor's Hammer
          Apr 26, 2017 at 2:45 pm

          Must be a reason why in Puerto Vallarta the majority of the condo owners are Canadian. (not Chinese Canadian LOL). I suspect most of them would be completely happy to sit in the sun instead of going back to shovel snow and play footsie with the Mounties.

    • Gershon
      Apr 26, 2017 at 8:12 am

      Well said, Sir.

      Remember, in a time of universal fraud, possession is 9/10s of the law.

    • SaveUs
      Apr 26, 2017 at 5:39 pm

      Meme Imfurst: You nailed it.

  17. Gershon
    Apr 26, 2017 at 8:24 am
    • Simplyput7
      Apr 26, 2017 at 11:40 am

      It’s our car sales that will show the tides are turning, many people have new cars (less than 5 years old) we offer up to 84 months in financing for vehicles or you can just put it on the home equity line of credit, the bank does not care what goes on the line of credit as long as the interest of 2.5% – 3% is paid.

      Many middle class people drive higher end cars in Toronto – Audi, BMW, Lexus, Infinity and not the lower end models either. Gone are the days when you would see any cars on the road greater than 10 years old.

  18. Maximus Minimus
    Apr 26, 2017 at 11:03 am

    The unstated policy of the bank of Canada is to thrash the Canadian dollar as much as possible, the unstated government policy is to open the floodgates for shady money from around the globe, and migrants from everywhere.
    So yes, there are policies in place to deal with the housing bubble.

  19. Justme
    Apr 26, 2017 at 11:28 am

    Three words: Home Caoital Group.

    The stock is down 58% so far today. Canadian mortgage lender.

  20. Anon
    Apr 26, 2017 at 11:56 am

    Get a few more of these frauds, and there will be a foreign investors’ crash perhaps sooner than later:
    https://canadianfraudnews.com/1b-investors-money-lost-syndicated-mortgages-toronto-lawyer/

    • Simplyput7
      Apr 26, 2017 at 12:34 pm

      No, it’s different here.

    • Frederick
      Apr 26, 2017 at 12:41 pm

      Rates I saw that on Zerohedge too Sure is looking ugly for them and their shareholders right about now

  21. mynamett
    Apr 26, 2017 at 12:21 pm

    Home Capital the owner of home trust a mortgage lender in Toronto area is having financial difficulties. Canadian dollars is still going down causing inflation because Canada imports a lots for USA. Inflation will eat up into disposable income and more and more people will default on their mortgage.

    http://www.hometrust.ca/

    http://business.financialpost.com/news/fp-street/home-capital-shares-plunge-after-mortgage-lender-seeks-2-billion-credit-line-as-deposits-decline

  22. JB
    Apr 26, 2017 at 6:31 pm

    what will crash the housing markets not only in canada but around the world will be the exodus of investors as they liquidate their holdings . It won’t be a subprime mortgage catalyst like 2007. Their really isn’t a housing supply side shortage . Many millions of units are sitting vacant and are not primary residents. this article reads an oversupply of housing of around 8 million.
    we can only surmise the tipping point .

    https://mhanson.com/3-17-hanson-house-supply-shortage-red-herring-next-foreclosure-type-cycle/

  23. Gershon
    Apr 26, 2017 at 7:07 pm

    Canada’s mortgage lenders plummeted today. Oh dear – that’s going to leave a mark.

    http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/04/21/20170426_EOD1.jpg

  24. Gershon
    Apr 26, 2017 at 9:01 pm

    But…but…Canadians confidence in their housing market just hit an all-time high! Surely God and the fates would not dare to disappoint such incurable optimists.

    http://www.huffingtonpost.ca/2017/04/24/confidence-canada-housing-market_n_16209488.html

  25. Jeremy
    Apr 27, 2017 at 7:09 am

    It has happened in Canada – in 1990-1992.

    I was in high school, and a number of my friends’ parents lost their homes this way.

    One of my buddies and I sold door-to-door during summer vacations during that period, and we always looked with interest at for-sale signs (they used to post the asking price). Houses lost around 50% of their value in our neighbourhood, which is a good area. Wish I’d been able to afford a down-payment back then – would have made 500%+ in the 25 years since.

    I don’t know what, if anything, has changed in terms of how mortgages work since then. I do know that a lot of people have forgotten (or blocked their memories) of that time though.

  26. CK
    May 14, 2017 at 4:36 pm

    The big 6 banks from Canada all verify income. I know this from experience. No NINJA loans like the US. Where strippers had 5 homes with adjustable rate loans. Also what triggered the US sub prime crisis was adjustable rate loans. Which the big banks in Canada don’t do either. The bubble will pop no doubt and prices will come down but those thinking it will be a full blown financial crisis like the US will be sadly disappointed. Big banks in Canada use very few MBS and CDO’s and synthetic CDO’s. Comparing CA to USA is apples and oranges. It’s a bubble no doubt but will unfold differently from the US bubble.

  27. FranSix
    May 16, 2017 at 6:37 am

    In Canada, banks have power-of-sale should the mortgage default. Essentially thus is a would-be short sale.

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