BREAKING: Insured and Uninsured Mortgage - Stress Test Changing

[Buster]

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Doesn't this typically result in the bank demanding a lump sum payment prior to renewal to bring the mortgage back into the black?

In this scenario, everybody involved is either a little bit or a lot fucked, including the lender.

[adam c]

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20% Down or bust.

Problem solved.

How so? The stress test also includes those without insurance

[killramos]

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How so? The stress test also includes those without insurance

Thins the herd massively of the kind of people who shouldn’t have debt extended to them in the first place.

20% down massively reduces downside for a lender. Chances of a systemic housing market shift going down enough such that the bank can’t recoup 80% of the asset value are extremely low.

Combine that with the stabilizing effect it will have in housing markets ( ie these latest voltatility swings we are seeing ) it literally is a fix all problem.

Expect for fixing the problem of people whining they can’t afford a 600k house with a single teachers salary or something. Those people need to adjust their expectations, and making it easier to finance a home is NOT the solution.

[Disoblige]

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Expect for fixing the problem of people whining they can’t afford a 600k house with a single teachers salary or something. Those people need to adjust their expectations, and making it easier to finance a home is NOT the solution.

The amount of people I know downplaying proper planning on buying a home are plenty. I am sure if they spent just a few days doing some research on it, they would get a good idea of what they need to do to be in a good position, but that usually doesn't happen.
Also the amount of people who just take the bank rate for their mortgages when they could go with a broker and get literally 0.5% or more off the rate without asking...

There are so many cases I know where a little bit of business acumen could easily make that family buy a house $75-125k more than they have, and it would have cost the same.

[Buster]

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Thins the herd massively of the kind of people who shouldn’t have debt extended to them in the first place.

20% down massively reduces downside for a lender. Chances of a systemic housing market shift going down enough such that the bank can’t recoup 80% of the asset value are extremely low.

Combine that with the stabilizing effect it will have in housing markets ( ie these latest voltatility swings we are seeing ) it literally is a fix all problem.

Expect for fixing the problem of people whining they can’t afford a 600k house with a single teachers salary or something. Those people need to adjust their expectations, and making it easier to finance a home is NOT the solution.

Subsidized mortgage insurance shouldn't be a thing.

[ercchry]

Holy this is moving too fast to keep up haha but:

-Alberta is the only province left with no recourse mortgages: for uninsurable ONLY... I don’t mean non-customers paid insurance, I mean the loans that cannot be insured even in bulk

-insured structure was changing, haven’t followed where that ended up but the lenders and insurers were to share losses, lenders hold partial bags

-all insurable mortgages have recourse, they will recoup from consumers in one way or another

[Cagare]

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Subsidized mortgage insurance shouldn't be a thing.

Dangerous to take away now when Real estate represents somewhere between 20-30% of your nations GDP.

[Buster]

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Dangerous to take away now when Real estate represents somewhere between 20-30% of your nations GDP.

Sure, I didn't say it was feasible, but the concept is a big contributor to this mess.

RE is a comparatively non-productive part of the economy. It's a lot of activity, without much actual wealth creation. It's a very bad thing that the Canadian economy is so heavily attached to what is barely better than a pyramid scheme. That Canadians appear to think that this is a good or neutral thing is even more worrying.

And that is why RE is my favorite asset class.

[suntan]

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prices won't drop much with mortgage adjustments. The event, if there is one, will be a loss of confidence in the RE market. It will be a psychological shift more than a policy one. The BoC and policymakers are desperately holding onto the hope that they can change the psychology a little bit, without it turning into a flood.

We're basically on the same page.

Prices will drop some. RE prices are very sticky. The market itself is very illiquid. RE is not a commodity.

I think market activity could drop a lot, but that doesn't mean prices will drop a lot.

As with other occasions when the RE market's dropped, banks will sit on foreclosure sales for a very, very, very long time.

Remember too that lenders factor in fraud sales. They understand they can't filter them all out.

[Buster]

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We're basically on the same page.

Prices will drop some. RE prices are very sticky. The market itself is very illiquid. RE is not a commodity.

I think market activity could drop a lot, but that doesn't mean prices will drop a lot.

As with other occasions when the RE market's dropped, banks will sit on foreclosure sales for a very, very, very long time.

RE markets can and will crash, though. If people panic and it starts to gain momentum it can be a vicious circle down. You think the probability of that is low, it appears. I think it is somewhat higher.

[suntan]

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RE markets can and will crash, though. If people panic and it starts to gain momentum it can be a vicious circle down. You think the probability of that is low, it appears. I think it is somewhat higher.

It happened last time in the USA because people couldn't make their payments.

It happened in Alberta because people couldn't make their payments.

It's never by choice.

Even when people walked away in Alberta prices didn't dip too much. My parents bought their house in the late 80s, it was $90K but the interest was at something like 21%.

Homes are like food, water, clothing and energy: You have to have it or else you're literally dead.

Lenders don't want to start it either because they want your sweet sweet interest.

[Cagare]

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Sure, I didn't say it was feasible, but the concept is a big contributor to this mess.

RE is a comparatively non-productive part of the economy. It's a lot of activity, without much actual wealth creation. It's a very bad thing that the Canadian economy is so heavily attached to what is barely better than a pyramid scheme. That Canadians appear to think that this is a good or neutral thing is even more worrying.

And that is why RE is my favorite asset class.

Oh, I didn't elaborate but I agree. This is not a sector of our economy that produces anything, it's about the trading of existing assets. This government has only accelerated the growth of this asset class in our GDP while actively reducing the sectors that actually produce something. It's a terrible thing, but no one really seems to pay attention to it.

[suntan]

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Oh, I didn't elaborate but I agree. This is not a sector of our economy that produces anything, it's about the trading of existing assets. This government has only accelerated the growth of this asset class in our GDP while actively reducing the sectors that actually produce something. It's a terrible thing, but no one really seems to pay attention to it.

Trudeau gov't is smartest, best gov't.

[Cagare]

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Trudeau gov't is smartest, best gov't.

Hey now, let's not forget Harper bringing in the 0% down 40 year mortgage. I was living in the GTA at the time, it made it so incredibly frothy it was crazy. People buying houses that had no business affording them. This isn't just a Trudeau problem, this is a federal government problem being addicted to the revenue and the adulation that comes with giving everyone houses like you are Oprah or something.

The GDP portion of our economy in Real Estate grew under Harper with those changes to make things more affordable for people.

[Buster]

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Hey now, let's not forget Harper bringing in the 0% down 40 year mortgage. I was living in the GTA at the time, it made it so incredibly frothy it was crazy. People buying houses that had no business affording them. This isn't just a Trudeau problem, this is a federal government problem being addicted to the revenue and the adulation that comes with giving everyone houses like you are Oprah or something.

The GDP portion of our economy in Real Estate grew under Harper with those changes to make things more affordable for people.

As with every problem in Canada, everything can be traced back to the electorate. The politicians are just the messenger for our own self delusions.

[you&me]

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Subsidized mortgage insurance shouldn't be a thing.

This is the exact solution I was thinking of as I read through the thread.

Tying into one of your other points earlier, not having mortgage insurance would help insure (no pun) that mortgage terms - rate, downpayment, qualifying, etc - accurately reflect the risk taken on by the lender.

To borrow yet again from Killramos - this doesn't mean that a single income teacher can't get a mortgage; but it might mean they don't qualify for a $600k mortgage with 5% down at 3%... They might need a bigger downpayment, might pay a higher interest rate, might qualify for less or any combination of the three... That should be up to the lender to assess.

If everyone had to actually be qualified for their mortgage without the backstopping of CMHC, things would be very different.

[tcon]

Just let 'er buck