Why Canada's Housing Market Didn't Crash

cnbc.com ^ | 6/30/10 | Diana Olick

[Nachum]

They saw a housing boom, they saw a recession, and yet the Canadian housing market is still cooking with gas.

Why?

Fundamental differences in Canadian banking, borrowing and home buying.

I spent the day in Toronto a few weeks ago and was really interested to see how a few miles can span such a huge difference in collective attitude.

[AngelesCrestHighway]

No Bawny Fwank, perhaps????

[EyeGuy]

“Why Canada’s Housing Market Didn’t Crash”

#####

No outrageously unsupported loans based primarily on dermal melanin content?

[VRWCmember]

They probably don’t have a CRA in Canada, and no Fannie Mae or Freddie Mac to use the CRA to pressure banks into extending mortgages to bad credit risks.

[WOBBLY BOB]

Finally, the biggest difference is that if a Canadian borrower goes into foreclosure, the bank can and will come after that borrower's assets until the balance is repaid.

what a crazy concept.

[AngelesCrestHighway]

Because this assclown doesn't live in Canada?....

[outpostinmass2]

From the article:

Nobody stopped a Canadian bank from lending in the subprime market, they chose not to,” says CIBC’s Benjamin Tal. “It was not the government, it was not monetary policy; there were no regulations whatsoever regarding how much you can lend in the subprime market. Canadian bankers decided not to do so, because it was too risky.”

So all this regulation of the banking industry is not needed.

[fish hawk]

No Dodd, no Frank, no Obama, no problem.

[EyeGuy]

“So all this regulation of the banking industry is not needed.”

####

Not if the banking industry is fully exposed to the rigor and consequences of the free market like the majority of other American industries.

[EyeGuy]

“So all this regulation of the banking industry is not needed.”

####

Not if the banking industry is fully exposed to the rigor and consequences of the free market like the majority of other American industries.

[RockinRight]

This is one area where Canada actually does things better than we do.

There are some other areas of their banking system I disagree with, one being that their structure is even more “big-bank” oriented than ours is (I tend to prefer smaller banks).

And they still have overvaluation in some areas but not like here.

[VRWCmember]

"Nobody stopped a Canadian bank from lending in the subprime market, they chose not to," says CIBC's Benjamin Tal. "It was not the government, it was not monetary policy; there were no regulations whatsoever regarding how much you can lend in the subprime market. Canadian bankers decided not to do so, because it was too risky."

But the democrats claim that the problem was Bush eliminating the regulations that protected us (though they never seem to be able to cite a single regulation that he eliminated).

[Pete]

So all this regulation of the banking industry is not needed<

As long as the government gets out of the way and those who make risky bets are allowed to lose.

[A CA Guy]

Frank instructing the banks to make bad loans seems to be the difference indeed.

Regarding loans, it’s simple. You have to qualify for the adjusted rate, not teaser rates. If you qualify for the adjusted rates, then you get the loan. If not, better get two other families and combine to buy your studio apartment.

[WOBBLY BOB]

So all this regulation of the banking industry is not needed.

Professor David Henderson, research fellow at Stanford's Hoover Institution, writes about regulation in "Are We Ailing From Too Much Deregulation?" in Cato Policy Report (November/December 2008). The Federal Register, which lists new regulations, annually averaged 72,844 pages between 1977 and 1980. During the Reagan years, the average fell to 54,335. During the Bush I years, they rose to 59,527, to 71,590 during the Clinton years and rose to a record of 75,526 during the Bush II years. Employees in government regulatory agencies grew from 146,139 in 1980 to 238,351 in 2007, a 63 percent increase.

In the banking and finance industries, regulatory spending between 1980 and 2007 almost tripled, rising from $725 million to $2.07 billion. So here's my question: What are we to make of congressmen, talking heads and news media people who tell us the financial meltdown is a result of deregulation and free markets? Are they ignorant, stupid or venal?

Protesting against greater controls against lax mortgage lending, Sen. Harry Reid said, "While I favor improving oversight by our federal housing regulators to ensure safety and soundness, we cannot pass legislation that could limit Americans from owning homes and potentially harm our economy in the process." One-third of the $15 trillion of mortgages in existence in 2008 are owned, or securitized by Fannie Mae, Freddie Mac, Ginnie Mae, the Federal Housing and the Veterans Administration. Wall Street buyers of repackaged loans didn't mind buying risky paper because they assumed that they would be guaranteed by the federal government: read bailout from the taxpayers. Today's housing mess can be laid directly at the feet of Congress and the White House.

http://townhall.com/columnists/WalterEWilliams/2009/01/14/congress_financial_mess

So yes, you're right.

[equalitybeforethelaw]

Gee, let me guess, Canadians are required to make a down payment of at least 10% of the value of the home and acquire mortgage insurance to purchase a house? Contrast that to CRA roulette of giving any mouth breather $500K with nothing down. Contrast the response to two markets when housing prices decline. Thank you Bill Clinton.

[fightinJAG]

Nobody stopped a Canadian bank from lending in the subprime market, they chose not to," says CIBC's Benjamin Tal. "It was not the government, it was not monetary policy; there were no regulations whatsoever regarding how much you can lend in the subprime market. Canadian bankers decided not to do so, because it was too risky."

American banks also knew it was too risky and they also would have chosen to stay out of such risky markets, except for one little thing. First, the U.S. government was forcing them BY LAW to make risky loans. And, secondly, in various ways, the U.S. was backstopping (implicitly or directly insuring) those risky loans, thus making the risk public and the gain private.

[kingcoal]

This is no surprise as the Canadians are huge proponents of Drill Baby Drill - they are huge in getting oil and diamonds out of the ground.

[BenKenobi]

if only. Too many socialists coming here.

[celtictomcat]

I am a canadian but I follow american current events very closely. I have friends and relatives there who are well off. I get all the american tv and cable news shows. The big mistake made in the U.S was, as people have inferred, huge loans to people who had no ability to pay it back. I watch all the networks up there. Sixty Minutes, Dateline, 20/20, Fox news. I heard last week that ELEVEN MILLION ameican homes are owned by people who OWE more on their house than they can sell it for. That translates into about 50 million people using the family of four figure. Incredible. Story after story shows people who earned between 30k to 50k or less as a family and were then given huge loans for 300k to 400k mortages with nothing down. No way these people could ever pay it back. In fact they’d have a hard time paying just the interest, let alone the prinicipal. I also noticed many of these people the lame banks and loaning institutions took advantage of were african americans being convinced they could have the american dream. American banks, bankers, loaners and lenders failed the public miserably. This stuff does not happen in Canada namely because banks won’t allow it and secondly most people up here tend to live within their means. Excluding new immigrants (namely east eurospeans who come from ex communist regimes) who think credit is an asset rather than a liability. Truth hurts. But it’s all here plain as the sky.