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Canada tightens mortgage rules, finmin Flaherty announcing government-insured mortgages will be...

Canada tightens mortgage rules, finmin Flaherty announcing government-insured mortgages will be allowed maximum amortizations of just 25 years. Additionally, maximum LTV ratios are lowered to 80% from 85% and mortgage payments will be capped at 39% of income.
Comments (5)
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    Amazing Canada is supposedly more socialist that the US but they have traditionally been more conservative on lending standards than the US. That is not giving away credit for free or with no equity from the borrower.

     

    At least one could argue that they have been more prudent that is for sure.
    21 Jun 2012, 09:34 AM Reply Like
  • Surfer Steve
    , contributor
    Comments (17) | Send Message
     
    How refreshingly sane and thoughtful. Something tells me that there is no Canadian version of Countrywide, WaMu, NAR, or other bubble blowers funneling massive amounts of cash to legislators in an effort to keep the big dance going (apologies to Chuck Prince). Can you imagine the outrage and lawsuits if this were attempted several years ago during the height of the housing bubble in the United States?
    21 Jun 2012, 09:58 AM Reply Like
  • Tony Petroski
    , contributor
    Comments (6373) | Send Message
     
    Surfer Steve and TomasViewPoint. In what way is this top-down socialist engineering decree from the Canadian Financial Tsar "prudent?" Who are they kidding with that "mortgage payments capped at 39% of income"? For anyone who has done their own taxes and has struggled to determine just how much their income is (in order to avoid jail time for tax evasion) determining one's income is no easy trick--ask Timothy Geithner. Now you have a go-ahead from the government-licensed, stamped and approved loan officer if your 24.5 year mortgage requires payments of 38% of your income but if you get laid off from your part-time job at the bowling alley you're out of luck 'cause you've been pushed to 41% of income?

     

    Only at Harvard or perhaps Yale would anyone welcome this kind of endless bookery and rulemaking.
    21 Jun 2012, 10:08 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    Overall debt is capped at 44% so in combination that is probably fine. Without the overall cap it does not mean anything. This is really taking capital out of the housing market which is fairly opposite of the US approach for many decades which was to pour more capital in.

     

    Losing income or gaining income changes the ratio but that is true anyplace.

     

    This is tops down but so is the US through the GSE's but historically they have tended to look for more ways to lend more and beat ups lenders for not being liberal enough.
    21 Jun 2012, 10:21 AM Reply Like
  • 1mp1r3t4
    , contributor
    Comments (326) | Send Message
     
    Your making a reference to the the Dodd-Frank school of mortgage management! It worked wonders in the US, didn't it? The Canadians are simply avoiding a similar debacle by making sensible loans to individuals who'd be best able to pay back their debt.
    21 Jun 2012, 12:35 PM Reply Like
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