Canada invests in mortgages!

[CargrenInvestments]

Someone in the government must be a REIN member. I hope they took REIN`s course in analysing good cash flow properties!!!

link to article:
http://www.mytelus.com/ncp_news/article.en...ticleID=3012649

 

[GarthChapman]

I too think it will be s great move - as I think this will free up 25 Billion dollars in the Canadian mortgage market. That oughta be good for most of us!

 

[wealthyboomer]

And where is THAT MONEY coming from?
Who is paying for it??
What program, or other beneficial spending will have to be cut as an exchange?


Does the country really need to encourage more `DEBT` for Canadians, in the form of encouraging banks to make loans?

 

[betrina]

QUOTE (wealthyboomer @ Oct 10 2008, 08:10 PM) And where is THAT MONEY coming from?
Who is paying for it??
What program, or other beneficial spending will have to be cut as an exchange?

The $ comes from the billions that CMHC charges in insurance premiums, does it not?
They charge exorbitant fees to cover the minuscule percentage of defaults that they are insuring against. It`s a formula for profit. Which happily they are now going to use for our benefit instead of squirreling it away somewhere useless.

 

[willy]

Unlike in other countries, they`re not buying up bad mortgages to bail out banks, but good ones to free up capital for the banks. Played right, the government could actually make money on this deal, though, I`m sure they`ll screw it up somehow.

w

 

[markl]

This is for CMHC mortgages for those of us putting 20% + down on properties like always we have to pander to the bank and make sure we look like a million dollars to them. I would like to know the % of CMHC defaults and I would also like to know how much they actually have in losses as I know they go after the property owner if they do not receive the full funds on the sale.

They will profit off of this the banks in my opinion were holding them hostage by not lending finds and forcing their hand. With only buying insured mortgages they are allowing more of these to happen and yes get more fees back into a gov`t owned corporation.

Regards,

 

[DonCampbell]

Once again this government NAILED it perfectly. Didn`t knee jerk react (despite what the others in the election are wanting everyone to do - PANIC!). They found a very creative and safe way in which to pour cash into the system.

In fact it looks like we, Canadians, will make money on this deal as the government will borrow the money (at super cheap rates) to feed teh $25Billion and collect the mortgage payments off these mortgages (which are super safe - NOT default loans). This is how the US & UK should have handled it - have the governemnt buy the GOOD paper and let the banks deal with their own poor decisions.

I bet if there were others in charge (who didn`t have a business background) that they would call for a Royal Commission spend millions looking for someone to blame (so they feel good) YET not look to solve the problem from a business perspective.

By the way - remember the report that came out on Thursday Canada`s banks rated THE BEST & MOST STABLE in the world. In fact they scored 6.8 out of 7!

 

[Thomas Beyer]

QUOTE (betrina @ Oct 10 2008, 08:17 PM) The $ comes from the billions that CMHC charges in insurance premiums, does it not?
They charge exorbitant fees to cover the minuscule percentage of defaults that they are insuring against. ....
Expect defaults to rise over the next few years .. substantially .. especially all those 0% down mortgages they insured over the last 12 months or so .. or those 5% down ones .. I hope they go back to a 15% down minimum rule ...

 

[GarthChapman]

Or how about a 5% down for first time buyers only- and get back to the mission of helping young families into home ownership.

 

[JerryCharlton]

Do you really think the 25 billion will end up in new mortgages?

Harper says our banks are in great shape and well capitalized and then slips 25 billion through the back door to them. (do the banks still donate to political parties?)

And who really is getting most of the the money? CIBC maybe to cover their (greedy) bad investments in the US subprime market.

Gimmie a break!!

Remember it`s going to the same (greedy) banks that only passed on 1/2 the initial Bank of Canada rate cut last week. -- That was until they were pressured to pass on the full rate cut.

And even if it did go to new mortgages - how long until the cycle would need to be repeated. 25 billion doesn`t go as far as it used to..

25, 35, 40 year mortgages need to be for borrower and lender both - eliminate or limit the selling of the paper.

 

[SeanFlatt]

Sounds like a very sensible way of approaching the situation. There is so much good news in Cannada right now, despite what the Canadian Press wants you to read (buy):

1) Ontario job growth above the Canadian provincial average.
2) Mortgage rates down.
3) Oil sitting around $80.00 a barrel.
4) A weaker dollar to improve Canadian exports.

In my opinion the real concern is the incredibly fast rate at which things have changed. Where does it go from here? I think economists are struggling for the answers.

I`m looking forward to Wednesday night!

 

[navaz]

CMHC is already on the hook for the low down payment mortgages. Is the Government buying anything that it did not own? The banks had these mortgages as good mortgages. Will the banks loan this money out? That is to be seen. But the move on the part of the Government is a good one. They borrow at 2.5% and earn at 5%. For the skeptics -what is wrong with this picture?

 

[CargrenInvestments]

I started this post because I believe it was quite an innovative approach to the credit crunch. While I don`t believe we Canadaians have felt the effect of this situation yet due to tighter regulations and policies, I believe the government is taking a smart business approach to reducing negative effects rather than panicking, as Don mentioned.

From what I inderstand, the government is not funding new mortgages as some seem to think nor bailing out banks who invested in bad debt. It is buying up $25,000,000,000 worth of existing mortgages, just like a normal investor looking for a return. Sure some may turn bad, but at the same level that mortgages usually do or are doing. It is not buying out bad "paper" that is taking place in the states. So in that sense it is not rewarding idiots for making stupid decisions.

The concept is that the funds from selling these to the Government will free up cash which than be lent out again. Who knows, this may actually be a smart money making move, rather than another wasteful use of taxpayers money.

 

[ToddStokowski]

I believe the intent of the government’s plan was excellent. It will depend on the implementation of the program to determine if the consumer will benefit.

I think a good way to implement the program would be as follows:

Upon the financial institution issuing a new mortgage or LOC, then CMHC would purchase one of the existing mortgages from the institution. The institutions that advance more new mortgages/loans will get more of their existing mortgages purchased by the CMHC. I believe, this will ensure the initiative will meet its intended purpose.

If it’s a blanket purchase, then who knows if new credit facilities advanced by the banks will be as a result of the CMHC purchase program or not.

Todd Stokowski, CA

 

[invst4profit]

It looks like a fool proof plan.

So any guesses as to how the government is going to botch it up, skim the profits off to a few rich party supporters and pass bad debt on to the tax payers.

Do I sound synicle?