Is CMHC a ‘crooked crown corporation’ ?

According Ben Rabidoux’s article appeared on Globe and Mail, CMHC does sound like a ‘crooked crown corporation’ … Instead of helping Canadians to own homes, it seems CMHC is “helping to enrich the filthily rich and their buddies – Mafia developers” ?

What do I think ?

Am I surprised ?

No comment.

The only thing I can say is I live long enough to just say “live with it” to a lot of bullsh*ts we see on every now and then … “Crookedness” is one of those bullsh*ts..

Four changes CMHC needs to make to rein in its mortgage market influence

My nomination for the understatement of the year goes to Finance Minister Jim Flaherty, who in early December observed that “regrettably, CMHC became something rather more grand I think than it was intended to be.”

Indeed. The Crown corporation, which originally had a humble mandate of helping first-time buyers obtain favourable financing, now insures $560-billion of some of Canada’s riskiest mortgages, more than double what it insured in 2005.

To their credit, the current government has implemented several measures since 2010 aimed at reducing taxpayer exposure to the Canadian mortgage market, but some structural issues remain. Below are four changes that the government should consider making in 2014.

1) Increase income documentation requirements on insured mortgages

Canadians are rightfully proud of the stricter mortgage underwriting that spared us from some of the particularly egregious lending practices seen stateside before their real estate bust.

However, most Canadians would be surprised to learn that “prime” Canadian mortgages, particularly high-ratio mortgages insured by Canada Mortgage and Housing Corp., involve far less documentation than comparably-labelled “prime” loans in the U.S. … and this was true even during the subprime years.

Today, a borrower can obtain a prime, CMHC-insured mortgage with as little as a pay stub and a job letter, which would make it a low-documentation Alt-A mortgage by U.S. standards. RBC recently tweeted about this, noting that securing a mortgage in the U.S. requires more documentation than in Canada.

Interestingly, CMHC places the integrity of the underwriting primarily with the lenders themselves who profit from the mortgages, as the insurer seldom sees the physical documentation and very rarely spot checks mortgage applications at origination.

This relatively low standard for mortgage documentation coupled with a very obvious moral hazard leaves the door open for what the mortgage industry calls “soft fraud” or “fraud for shelter,” which typically involves the applicant (often with the knowledge of the lender) misrepresenting their financial circumstances, usually related to their income or job status.

There’s really nothing “soft” about this form of fraud, particularly when it’s a CMHC-insured mortgage where taxpayers are holding the bag. And while it’s impossible to know the true extent of the problem, one highly respected Canadian mortgage website suggested that it is “one of the most widespread and under-reported problems in mortgage lending” and that it is “surprisingly common these days.”

Regardless of the scope of the problem, the solution is relatively simple: CMHC should demand Canada Revenue Agency notice of assessments (NOAs) for all mortgage applications. This is common practice for prime mortgages in the U.S. and is a simple way to ensure that income or employment has not been significantly misrepresented given that NOAs are very difficult to alter or forge.

Interestingly enough, many lenders insist on seeing NOAs for conventional mortgages that aren’t being insured. This suggests, not surprisingly, that their underwriting is more stringent when they are forced to bear the risk for the mortgage they originate rather than insuring the mortgage through CMHC and passing the risk on to taxpayers.

2) Reinstate the regional mortgage cap

Prior to 2003, CMHC had a regional mortgage cap that set a maximum dollar amount on the size of mortgage they would insure. This made a lot of sense given that CMHC’s original mandate was geared toward helping first-time buyers get into entry-level housing. The logic here is simple: If a buyer can afford a home that is priced significantly above the local average, they shouldn’t need what effectively amounts to a taxpayer-backed subsidy to do so.

In what can only be described as a massive policy blunder, this cap was eliminated in 2003. For nearly a decade, CMHC would insure mortgages of any size, from simple starter homes to opulent mansions, a truly epic case of “mandate creep.” In 2012, a nationwide limit was re-established; CMHC will no longer insure mortgages on homes that are purchased for more than $1,000,000.

This is a step in the right direction, but it ignores the fact that a million-dollar home is well above a starter home in nearly all parts of Canada. This should change. One possible solution would be to set the maximum mortgage cap to the average resale price in each census metropolitan area and have that cap change annually to reflect changing house prices.

3) Eliminate the second home program

CMHC currently has a program that allows buyers to purchase a second home with as little as 5 per cent down. This program is most commonly used for purchasing recreational properties such as cottages, but can also be used to purchase a “pied-à-terre” for those who have to often travel to another city for work, or to purchase a home for children while they are attending college or university.

In the context of CMHC’s original mandate, this program is simply indefensible. If someone is fortunate enough to have the income and assets to purchase a second home, for recreational purposes or otherwise, they should not require taxpayers to bear the risk, particularly considering that the majority of Canadians are not fortunate enough to own multiple properties themselves. This program needs to go.

As an aside, contacts in the mortgage industry suggest that some investors are also currently abusing this program. In 2010, the government wisely changed the rules so that investors must put down 20 per cent on investment properties. However, the door has been left open to purchase investment properties with 5 per cent down through the Second Home Program, with taxpayers bearing the risk. Of course, the applicant can’t state up front that the home will be rented out, but they are free to quietly rent out their second home after the deal closes.

4) Increase transparency and oversight

The ironic part about Mr. Flaherty’s comments that CMHC has become something more “grand” than it was intended to be is that Canadians still have no idea just how “grand” CMHC has actually become since we still don’t know exactly what is included in that $560-billion in insurance in force.

This was driven home to me last year when a developer told me that CMHC recently had a program (and perhaps still does) that allowed developers to get insurance on loans for their condo developments. This is unbelievably bad policy. This effectively lowers the interest rate the developer would pay, but you can be assured that those cost savings would not be passed on to consumers at the other end. In essence, taxpayers were assuming risk on these development loans to pad developer pockets.

Dr. Ian Lee from Carleton University’s Sprott School of Business has in the past been an outspoken critic of CMHC’s lack of transparency. He recently told me via e-mail that “CMHC is the least transparent of all Canadian Crown corporations concerning its numerous activities and detailed breakdown of its insurance guarantees.”

What can I say ?

Read more @ ww.theglobeandmail.com

Listings for Fri Jan 3

Open Map

C2726138 – M2M – 198 NEWTON DR Toronto, Ontario – $ 949,988

Price Change. Jan 3: $ 949,988 Sep 24: $ 958,000
Prime Location.Beautiful Bungalow Located In A Most Demand Area,Bayview & Steeles – Surrounded By Multi Million $ $ $ Homes.Living Room With Skylight & …

C2726138 GoogleMap

C2804058 – M2N – 28 SOMMERSET WAY Toronto, Ontario – $ 579,900

Live In A Beautiful Tridel Townhome In A Prime North York Location. Exceptionally Clean & Well-Kept. Accessible And Conveniently Located. Granite …

C2804058 GoogleMap

C2804161 – M2N – 135B FINCH AVE E Toronto, Ontario – $ 769,900

Brand New Luxury 3 Storey Freehold Townhouse, Loaded $ $ $ Upgrades, Two Car Tandem Garage, Upgrade Stain Hardwood With Stain Solid Wood …

C2804161 GoogleMap

C2804188 – M4P – 363A ROEHAMPTON AVE Toronto, Ontario – $ 934,900

Elegant Uptown Living! Best That North Toronto Can Offer. Welcome To Roehampton Lane! Modern Townhouse With 3 Functional Bedrooms Perfect For A Family! …

C2804188 GoogleMap

C2804418 – – $ 1,425,000

Tridel s 101 Erskine, A Smartly Tailored Condominium Residence Ideally Tucked Away, Mere Minutes From The Energy Of Yonge & Eglinton, The Subway, …

C2804418

C2804485 – M2N – 257 WILLOWDALE AVE Toronto, Ontario – $ 980,000

Interior Pictures Coming. Lot Next Door Also For Sale Exclusive (41.54 X 152) Total 83 Ft. Frontage On Willowdale. Small Lots South And North Of This …

C2804485 GoogleMap

E2762953 – M4J – 86 ROOSEVELT RD Toronto, Ontario – $ 568,000

Price Change. Jan 3: $ 568,000 Dec 4: $ 579,000 Oct 16: $ 599,900
Prime East York Location, Walk To Library, Schools, Hospital & Subway, Perfect For Adults Wanting To Have …

E2762953 GoogleMap

E2804087 – M1B – 19 ROSEBANK DR Toronto, Ontario – $ 392,000

Beautiful 4 Bedrooms Townhome In A Quiet And Well Managed With 24 Hr Security. North-South Exposure With Back Yard. Very Comfortable, Bright …

E2804087 GoogleMap

E2804118 – M1G – 44 STONEHENGE CRES Toronto, Ontario – $ 399,900

Don t Miss This Opportunity! Updated Detached Home-Move In Ready! Full Bthrm Reno, Updated Kit W/Oak Cabinets,New Tile Flr,Countertops & Backsplash.Refin. …

E2804118 GoogleMap

E2804119 – M4L – 39 CONNAUGHT AVE Toronto, Ontario – $ 689,900

Stunning Leslieville Reno! Like A Brand New Home With Quality Finishes & Attention To Detail. Designer Influences Throughout. Featuring Crown Moulding In …

E2804119 GoogleMap

E2804179 – M1K – 142 NORTH BONNINTON AVE Toronto, Ontario – $ 629,700

Truly Rare Opportunity! Renovated All Brick 2-Bedrm Bungalow & 2 Storey 3-Bedrm Built 2004, Large Bsmt Apartment. Potential To Make 3 Units. Ideal Set Up …

E2804179 GoogleMap

E2804406 – M1N – 96 HOLLIS AVE Toronto, Ontario – $ 429,900

Birchcliffe ! Why Pay Rent? When You Can Own This Renovated 2 Bedroom Bungalow. Features Include: Rich Refinished Hardwood Floors, Open Concept …

E2804406 GoogleMap

W2800277 – M3A – 10 HARDING AVE Toronto, Ontario – $ 615,000

Price Change. Jan 3: $ 615,000 Dec 14: $ 649,000
Big Lot 50 X 148Ft , Parking For Over 10 Cars. 3 Bedroom + 2 Bedroom + Bachelor. Right Now It Is …

W2800277 GoogleMap

W2804041 – M9B – 26 PRENNAN AVE Toronto, Ontario – $ 1,280,000

Stunning Executive Home Professionally Landscaped In High Demand Neighbourhood. Spacious Rooms With Only The Finest Materials Used. Skylight, Wet/Dry …

W2804041 GoogleMap

W2804075 – M9B – 68 LLOYD MANOR RD Toronto, Ontario – $ 748,900

Immaculate 3Brw/Open Concept Bungalow .Completely Updated 3+ 2Bedroom Casements Windows And Updated Doors. Premium Hardwood Floors New Gourmet Kitchens …

W2804075 GoogleMap

W2804153 – M8V – 22 TWENTY-SIXTH ST Toronto, Ontario – $ 589,900

Classic 2 Storey Updated Family Home In Long Branch, Walk To Schools, Parks, Pool, Humber College And Lake, Steps To …

W2804153 GoogleMap

W2804154 – M6E – 279 HARVIE AVE Toronto, Ontario – $ 369,900

Opportunity 4 First Time Buyers*Renovators Prime Location*Minutes To St Clair …

W2804154 GoogleMap

W2804218 – M1X – 55 PETERSON DR Toronto, Ontario – $ 428,000

Beautiful Family Home In High Demand Area, Featuring Reno d Kitchen, Beautiful Hardwood Flrs & So Much More! Great Location & Nhbmd With Close Proximity …

W2804218 GoogleMap

W2804232 – M8Y – 172 MELROSE ST Toronto, Ontario – $ 399,000

Opportunity Knocks In The Heart Of Mimico! Charming, Exceptionally Well-Maintained Bungalow Just Waiting For You To Move In Huge Lot 25 X 125 …

W2804232 GoogleMap

W2804313 – M3L – 36 LONEY AVE Toronto, Ontario – $ 689,000

Full Renovation – Top To Bottom, 3 Bedrooms Plus 2 Full Bathrooms On Main Floor. Gorgeous 2nd Master Retreat In Loft Area With W/O To Juliet Balcony …

W2804313 GoogleMap

W2804446 – M9W – 710 HUMBERWOOD BLVD Toronto, Ontario – $ 237,900

Absolute Stunning Tridel Luxury 2 Br Corner Unit With Panoramic South East View Overlooking Green Belt & Ravine W/River, Huge Balcony, Living Dining With …

W2804446 GoogleMap

W2804499 – – $ 445,000

Hardwood Floors Main Clean Home Close To Ttc Ect **** EXTRAS **** Fridge …

W2804499

Read More » Source

323 Richmond Suite 412 – Toronto Real Estate For Sale.

323 Richmond Suite 412 - Toronto Real Estate For Sale.

Floor Plans & info@ www.LovelyTorontoHomes.com 2 bedroom 2 full baths, sleek reno 2010. Presented by The Julie Kinnear Team Sales Representatives Royal LePag…

Video Rating: 0 / 5

Leave a Reply

Your email address will not be published. Required fields are marked *