The Office of the Superintendent of Financial Institutions is examining the bank exposure to household debt [FP 3 Jun 2011] -
“If demand for residential real estate were to dry up in Canada, it would not be good for Canadian banks,” said Peter Nerby, senior vice-president at Moody’s who is responsible for the credit ratings of Canadian financial institutions.
We note this here for the chronology and direct you to a discussion of the subject by jesse at Housing Analysis ['OSFI in da House' 5 Jun 2011].
ahhhh moodys, Im sure theyll do a good job.
[hahahaha.. good point. -ed.]
hehehe get S&P to double check
Moody’s just put Sino-Forest’s debt under review for a possible downgrade… after Muddy Waters published their results on that company. Two white guys sitting in an office in China were able to come up with better analysis than all of Moody’s put together.
i think all you need to to be critical of these companies is just to not be chinese or on the take.
The major risk in my view is falling prices will cause CMHC’s insurance under force (correct term?) to balloon as lower-ratio loans become high-ratio at time of renewal. Basically CMHC becomes the lender of last resort and this is only apparent when prices fall. This is a bigger problem than is evident at first pass because many low-ratio loans have been made with looser qualifications than CMHC’s TDSR/GDSR calculation using 5 year fixed posted rate requirement. In other words banks may simply dump homeowners on the side of the road if their equity deteriorates and these homeowners will not qualify under current CMHC guidelines. That’s one helluva giant matzo ball the government will ultimately have to digest.
These sorts of problems only start becoming apparent in the broader public conscience when falling prices start entering onto the horizon of possibility. I would encourage readers who are interested in the mortgage industry and its propensity for spectacular fail to read the late Doris Dungey’s (AKA Tanta’s) posts on CalculatedRisk from 2006-2008. If you have infinite time, read her comments in her posts’ comments section. Much of her underlying analysis is directly applicable to Canada’s current situation.
Something tells ‘Nem’ the ApocryphalFatLady – Helm&BreastPlates duly affixed – is about to emerge from the GreenRoom for a “Bravura!” YVR performance.
Normally I’d agree with you but given the paltry cultural scene in Vancouver, we may have to settle for a quiet-mannered girl 3-chording an acoustic.
Bingo! Inspiration&Epiphany, VeryMuch in the Spirit ‘O, “WhoCoodaNode!???”… re: how to ‘shape’ ContentRecentlyCreated in the, “Heart ‘O Darkness”…
Here’s your thematic TeaserTrailer for a FeaturePresentation ComingSoon to a BlogNearYou, DearReaders:
http://tinyurl.com/5rgp9h
“We know you’ll enjoy your stay in WestWorld. The UltimateResort!
Where nothing… Nothing! Can possibly go wrong.
GoWrong.
GoWrong.
GoWrong.”
PS – Any resemblance of the WestWorld OpeningSequence to the CYVR arrival of OverSeasInvestors anticipating RE LotusLand/ShangriLaCubed is purely co-incidental… “Our robots are programmed to provide you with an unforgettable vacation.”
Good point. Then it will be “how could we have ever known?” And the answer is “math.”