Finance Minister Jim Flaherty announced in July that the federal government was cancelling its policy of guaranteeing 40-year mortgages as of Oct. 15 in order to shield Canada from the kind of housing crash that has devastated the U.S. economy. However, according to sources, bank executives had been warning Mr. Flaherty and central bank officials since the beginning of 2008 about a dramatic and unexpected increase in demand from consumers for 40-year mortgages with small down payments.Harper, October 7, 2008:
Lenders, insurers and government officials interviewed by The Globe characterized the first half of 2008 as a period of apparent paralysis by federal decision makers. These sources said bank and insurance executives and finance officials disagreed over how to pull the plug on popular and risky mortgage products. One of the few things they did agree about, according to sources, was that there was insufficient monitoring of CMHC, which accounts for about 70 per cent of the total value of mortgage insurance underwritten in Canada. (emphasis added)
In the U.S., they are still responding to the fallout of the sub-prime mortgage mess. In Canada, we acted early over the past year.Doesn't sound like they acted as early as they're telling us.
We acted earlier to further strengthen our banking disclosures, transparency and regulation.
We acted earlier to trim excesses in the mortgage market, by reducing the 40-year mortgage to 35 years and requiring a minimum down payment of five per cent for new government-backed mortgages.
CMHC is not disclosing how much of the mortgages it insures are of the 40-year/zero down type. The report describes CMHC as having had no choice but to get into these risky products due to the opening up of the market to U.S. competitors and concerns they would be privatized, both courtesy of the Harper Conservatives. Minister Finley, responsible for CMHC, shockingly not answering questions.
Looking like a huge sleeper issue in the next election.