Housing Bust 2015

Leveraging, renting vs owning, making an investment or buying a home?
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AltaRed
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Re: Housing Bust 2015

Post by AltaRed »

Much ado about nothing. Really won't make a difference.
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Re: Housing Bust 2015

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Mortgage fraud poses key threat to Canada's financial system: OSFI
“It has come to light that institutions have been, I would say inadvertently, making mortgages to people whose income has been falsified,” said Jeremy Rudin, superintendent of financial institutions.
However, Mr. Rudin pointed out that the insurance company is not obliged to pay claims if there has been negligence on the part of the lender – say, by turning a blind eye toward detecting fraud related to the borrower’s income.
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Re: Housing Bust 2015

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I thought this was a succinct summary of the problem:
“That’s a problem for our capital regime as it stands now, because the capital is in the wrong place,” Mr. Rudin said. “The capital requirement is on the insurer, who doesn’t have to pay; and there is low or zero capital requirement on the lender, whose insurance is no longer valid."
It does not bode well for bank balance sheets!
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Re: Housing Bust 2015

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CMHC isn't really insurance anyway. It does nothing to protect the homeowner at all, it does protect the bank's however...

The way it works is, the homeowner pays for "insurance". If the homeowner can't pay, the banks foreclose on the property and resell it. So the homeowner has no protection from that. If the bank sells the property at a "loss" (which includes all associated "costs") CMHC pays the bank the difference, hence the "insurance".

Of course, it doesn't end there. CMHC now has the option of going after the original homeowner to try and recover costs. Instead the of buying "insurance" the homeowner is actually paying for an eventual debt collector to go after them.

Ironically, the same bank who foreclosed on the property will often refinance the exact same property which was such a bad deal in the first place. Why not, they literally have nothing to lose if it's CMHC insured...of course they, the mortgage reps, are taught that foreclosures costs the banks "a ton of money", but the truth is a little different.

P.S. I should point out that the banks also get to claim the "losses" from foreclosures on their taxes, even thou they get the money back...
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adrian2
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Re: Housing Bust 2015

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Just a Guy wrote:CMHC isn't really insurance anyway. It does nothing to protect the homeowner at all, it does protect the bank's however...
Protection of the entity who has the insured interest is the very definition of insurance.
In technical terms, the "named insured" is the bank; the premium payor is the guy who took a large mortgage.
Of course CMHC is insurance.

The rest of your post is correct, but there's nothing nefarious in everything you enumerate.
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Re: Housing Bust 2015

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I wasn't trying to imply something nefarious...more that people don't really understand how CMHC works, who it really protects, etc. Because of the way it's pitched, and also because most insurance has the beneficiary pay the premium.

Most homeowners think CMHC protects them.
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Re: Housing Bust 2015

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Just a Guy wrote:Most homeowners think CMHC protects them.
I don't think that's true at all.

Maybe most people might think that, but you'd have a hard time convincing me that more than a handful of people who've actually obtained a high-ratio mortgage and shelled out for the CMHC premium truly misunderstood what it was.
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Re: Housing Bust 2015

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Just a Guy wrote:I wasn't trying to imply something nefarious...more that people don't really understand how CMHC works, who it really protects, etc. Because of the way it's pitched
Please explain what is wrong with the way it's pitched (with actual quotes, if possible).
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Re: Housing Bust 2015

Post by steves »

An acquaintance had a mortgage and a good job. She suffered a stroke which prevented her from working permanently. Her mortgage was forgiven and she now has clear title to her house. I am assuming that was CHMC's doing.
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Re: Housing Bust 2015

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steves wrote:An acquaintance had a mortgage and a good job. She suffered a stroke which prevented her from working permanently. Her mortgage was forgiven and she now has clear title to her house. I am assuming that was CHMC's doing.
Probably pay out from employer provided accidental death and disability insurance.
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Re: Housing Bust 2015

Post by Just a Guy »

CMHC has nothing to do with the stroke. That could have been the optional disability insurance that banks often offer. Also a questionable product as it insures a declining product without lowering the charges (which is why most people say to get third party insurance for a fixed amount).

P.S. Adrian, I think the above posting proves my point that many people fail to understand their "insurance".
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Re: Housing Bust 2015

Post by squid »

Just a Guy wrote:CMHC has nothing to do with the stroke. That could have been the optional disability insurance that banks often offer.
Probably something like this:

https://www.tdcanadatrust.com/products- ... al-illness
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adrian2
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Re: Housing Bust 2015

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adrian2 wrote:
Just a Guy wrote:I wasn't trying to imply something nefarious...more that people don't really understand how CMHC works, who it really protects, etc. Because of the way it's pitched
Please explain what is wrong with the way it's pitched (with actual quotes, if possible).
Gentle reminder to try to answer the question, instead of P.S-ing with a questionable interpretation of other people's thinking.
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Re: Housing Bust 2015

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Man, I'm starting to get tired of your "your wrong, prove it" or nit picking over minor detail, juvenile retorts which you use more often it seems than providing actual information...

Once again though, I'll humour you...

These quotes are taken right off of cmhc's website (do I need to provide you with the links as well?)...

"Drawing on more than 65 years of experience, we offer you peace of mind, working with you to demystify all aspects of homebuying to help you enjoy an informed and assured homebuying and homeownership experience."

Under the section of "what's in it for you"

"A wide range of CMHC products are available through your lender. For example, if your house needs renovations, refinancing or if you are moving to another home, please check with your lender or mortgage broker on qualifying criteria for these flexible mortgage insurance options. Ask your lender about getting pre-approved for CMHC Mortgage Loan Insurance — this way you can find out beforehand how much of a loan you can qualify for."

How about this portion...

"Who Needs Mortgage Loan Insurance?

Typically, lenders require mortgage loan insurance for loans made to anyone that wishes to purchase a home with less than 20% of the purchase price. The Canadian Bank Act prohibits most federally regulated lending institutions from providing mortgages without mortgage loan insurance for amounts that exceed 80% of the value of the home or purchases with less than 20% down payment.

Through your lender, CMHC Mortgage Loan Insurance enables you to finance up to 95% of the purchase price of a home.

Use our mortgage calculator to help calculate the maximum house price you can likely afford, the maximum mortgage amount you can likely borrow, and your likely monthly mortgage payments (principal + interest). To learn more about the process of buying a home, see Home buying Step by Step. It can take the confusion out of the home buying process by helping you understand the various aspects to buying the home you really want."


Heck, even where they state the definition...they do state it's to the benefit of the lender, but aren't exactly spelling it out...

"What is CMHC Mortgage Loan Insurance?

Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protect lenders against mortgage default, and enables consumers to purchase homes with a minimum down payment of 5% — with interest rates comparable to those with a 20% down payment.

To obtain mortgage loan insurance, lenders pay an insurance premium. Typically, your lender will pass this cost on to you. The premium payable is based on a percentage of the home’s purchase price that is financed by a mortgage. The premium can be paid in a single lump sum or it can be added to your mortgage and included in your monthly payments.

Mortgage loan insurance is not to be confused with mortgage life insurance which guarantees that your remaining mortgage at the time of your death will not be a burden to your estate."

Then there is the explanation you get at the actual bank (do I need to video a pitch from a mortgage guy to prove it to you, or have you never sat through a mortgage negotiation?). They rarely tell you it's for the bank's protection...instead saying things like "it's mandatory insurance sign here", and other helpful, detailed, explanations...

Now, granted, if you look hard enough, or ask the right questions, they aren't lying or avoiding the truth (even though I have a really hard time finding the part where they can sue me to try to recover costs after I paid for insurance), but they certainly aren't going out of their way to tell people either.

Ask your friends and family who have mortgages what CMHC insurance does for them, take a tape recorder so you can play it back to yourself as proof if you require it, and see what they say. Unlike you, I spend a lot of time listening to people to see what they say for reasons other than just to disagree out of spite (and yes, I can go back and pull up quotes of your postings for proof if you want).
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adrian2
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Re: Housing Bust 2015

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Just a Guy wrote:Then there is the explanation you get at the actual bank (do I need to video a pitch from a mortgage guy to prove it to you, or have you never sat through a mortgage negotiation?). They rarely tell you it's for the bank's protection...instead saying things like "it's mandatory insurance sign here", and other helpful, detailed, explanations...

Now, granted, if you look hard enough, or ask the right questions, they aren't lying or avoiding the truth (even though I have a really hard time finding the part where they can sue me to try to recover costs after I paid for insurance), but they certainly aren't going out of their way to tell people either.

Ask your friends and family who have mortgages what CMHC insurance does for them, take a tape recorder so you can play it back to yourself as proof if you require it, and see what they say. Unlike you, I spend a lot of time listening to people to see what they say for reasons other than just to disagree out of spite (and yes, I can go back and pull up quotes of your postings for proof if you want).
Sorry to disappoint you, but neither myself, nor any of my friends (as far as I know), have ever needed CMHC insurance, so I never had the opportunity to hear the bank's explanation on how it works and whom it protects.

My point is simply that the printed literature (or website content) is not misleading, but relatively clear about what CMHC does. I'd be more concerned about people buying at the bank a complex product like an equity market-linked GIC without understanding that the odds are not in their favour (heads the bank wins, tails the bank does not lose).
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