“My brother went to renew his mortgage. The guy asked him, “Do you want open a HELOC to borrow against your equity?” He said, “No.” Dude was seriously surprised. I’m guessing few turn down that offer.
My girlfriend works in a bank. When a customer comes in and she opens his account, a flag often comes up in the system stating he is entitled to a new HELOC, or entitled to expand his existing HELOC. And she is obligated to tell them this and ask them if they’d like to do it. More often than not, they bite. Imagine, you don’t even need to apply for credit anymore. It just falls into your lap.”
- theragingranter at VREAA 15 January 2012 at 5:02 pm
Most Recent Comments:
- lithium technologies on The Froogle Scott Chronicles: Mortgaging Our Souls In Paradise – Part 6: Renovation Nervosa
- J-F on The Stigma Of Renting In Vancouver – “Oh no, we would never rent”
- Real Estate Tsunami on Chat Thread
- Nemesis on Chat Thread
- Real Estate Tsunami on Chat Thread
- rod_jonsson on Chat Thread
- Nemesis on Chat Thread
- rod_jonsson on Chat Thread
- Nemesis on Chat Thread
- rp1 on Chat Thread
- Farmer on Chat Thread
- Nemesis on Chat Thread
Type of Anecdote
- 01. He Said, She Said (247)
- 02. Profiting from the Boom (441)
- 03. Changed my Life (103)
- 04. Changed my Career (38)
- 05. Where do Buyers get the money? (958)
- 06. Held my Nose and Leapt (96)
- 07. Avoiding Vancouver (375)
- 08. Overextended Buyers (1182)
- 09. Delaying Buying (315)
- 10. Demoralized Renters? (362)
- 11. Regrets about Investing in RE (417)
- 12. Effects of Development (274)
- 13. 2010 Olympics Related (74)
- 14. Social Effects of the Boom (1255)
- 15. Misallocation of Resources (958)
- 16. Missed The Boat? (236)
- 17. The Froogle Scott Chronicles (27)
- 18. Spot The Speculator (171)
- 19. BlastRadiusPostCards (17)
- 20. The Limitless Demand Argument For Ongoing Market Strength (70)
- 21. Vancouver RE-Verse [Found Poems] (8)
- 22. RE References In Popular Culture (41)
- 23. Jumping The Shark (1)
- 24. Policies On Housing (10)
- 25. Epigrams For The Bubble (1)
- 26. Premature Calls Of "Bottom" (3)
- 27. Seller Panic (3)
- 28. Erroneous Causation Theories For Falling Prices (7)
- 29. Bubblespeak (1)
- Uncategorized (176)
Blogroll
- 01 Vancouver Condo Info
- 02 AmericaCanada [retired, no archive]
- 03 Housing Analysis
- 04 RealEstateTalks BC
- 05 Vancouver RE and then some
- 06 Whispers from the Village on the Edge of the Rainforest
- 07 Greater Fool
- 08 Canada Bubble
- 09 Rob Chipman's blog
- 10 YatterMatters
- 11 condohype [retired; archives available]
- 12 vancouver (un)real estate
- 13 Agent Will's Stats [retired]
- 14 Landlord Rescue
- 15 The Economic Analyst
- 16 Canadian Housing Price Charts
- 17 Hoodsurf [retired Jun 2011]
- 18 World Housing Bubble
- 19 Vancouver Price Drop
- 20 North American Economics
-
Latest Anecdotes:
- Chat Thread
- Taking A Break
- “My best guess: this property is now an ‘investment hold’ and will be built ‘when prices recover’. Good luck on that!”
- Man Loses $745,000 Vancouver Condo Deposit
- Graphic – Degrees of Housing Overvaluation in Canada
- The Rare Individual With A Negative Ownership Premium
- Advice Regarding Renting In Vancouver, Please – “Unfortunately, the Vancouver rental stock is absolutely atrocious. It just seems like every landlord is looking for someone to pay 100% of their mortgage on a crappy place through rental income.”
- “I just visited Manhattan for a week, and happened to snap some real estate ads on both the Upper West and Upper East sides of the island. Compare to Vancouver. It simply doesn’t compute.”
- Ben Rabidoux In Vancouver Next Week
- “The mortgage company told me they were calling in my 40-year, 0-down mortgage. I have paid nearly sixty thousand dollars towards it, but, nearly five years in, I have yet to touch the principal.”
- ‘Vancouver City Hall: Housing Report Card 2012′; Plus Revised Version
- “My folks find themselves at 65 still owing half the value of their home and recreation property to the bank. After almost 30 years of ownership in the BPOE and a number of boom markets, they have very little to show for it.”
- “Rent for $2,200 a month or buy and have a mortgage of $4,310 per month. Why would anyone buy?”
- “They were talking about two couples they knew who had recently bought a lot and planned to each build a house on it and live as neighbours.”
- Greater Vancouver Home Builders’ Association Annual First-Time Buyer Seminar Attendance Plummets
- Mom and Pop Get It Wrong In All Markets, Time And Again
- The average British Columbian homeowner is not going to pay off their mortgage by the time they retire.
- “He’s sold all his properties except his current one, which is now for sale. He explained that the market’s currently in crash mode, worst that he’s ever seen.”
- “One of my old high school buddies finally got her mother to sell the family home in Kitsilano – sold for over $1M, monies realized after debt paid off $185K.”
- “I know someone who just declared bankruptcy because her condo was assessed at $150k and she bought it presale north of $250k in 2005 or 2006.”
- Sturdy, With Views – “Calling Froogle Scott!… Is Dr. Scott ‘In The House’?” [Not In This One, Certainly]
- “She said the market was dead in Victoria and that it would remain so for a very long time. I asked how she knew. Her answer was fascinating and should scare the pants off the real estate crowd.”
- Kits Notes – “I’m pretty sure that this is the first 3+ bedroom property of any type that I’ve seen in the 5 years I’ve lived here that is priced below $700K.”
- “A beautiful Belfast home, in the equivalent of 1st Shaughnessy, bought at their RE peak in 2007 for £3.5 million, has now sold for £800K, almost 80%-off. The market didn’t suffer any significant economic shocks. Rates & unemployment didn’t skyrocket. They didn’t build more land. Sentiment just changed and the prices fell and fell.”
- “Two family members of hers are trapped, underwater, in condos on the East Side.”
- “Interprovincial migration is not saying good things about BC’s economy.”
- Vancouver RE: Not As Expensive Provided You Don’t Think – “It’s clear that our perception of affordability has been coloured by living on a continent where housing is unusually inexpensive.”
- More Undisclosed RE Industry Insiders Publicized As Clients – “In 1995, Allan and Karin Hoegg were mortgage-free. But no more. Today their Vancouver home is a valuable source of income as they plan for full retirement.”
- Rumor that some OV units will be reduced by 20%.
- Downside Weights On The Vancouver RE Market – “One of the older guys (over 60) mention to the guy beside him that he and his wife were thinking about selling their family home, and renting, in order to get some of the money that was locked up in the house.”
- “My buddy was looking to upgrade to a house in the Coquitlam area. With 200k extra for a home, that’s half of lifetime saving between him and his wife.”
- “I was walking in the Fraser neighborhood yesterday, I noticed that the population, on average, seem to be composed of workers. I belong to the top 5 percent in terms of income. Nevertheless, I cannot afford any of the houses for sale in that neighbourhood.”
- “Vancouver is an urban resort whose value mostly resides in its real estate and not much else.”
- “Rogers Communications is expanding into RE; aiming to relaunch website; providing critical data that can help potential buyers assess the value of a property from the comfort of their home computer.”
- I’m only 50 and I can just about retire if I want to, all because of a single simple decision – “When prices rebounded to their former highs, then rocketed another 30% higher to what I considered to be totally unsustainable levels, I decided that only a fool would pass up a second opportunity to harvest such a massive non-taxable capital gain, and in 2011 I sold my place.”
- The Vacant Lot of Versailles, Richmond.
- “I don’t think that most people think things are going to crash, just that there is going to be a slight correction, but it was amazing to me how sentiment has changed, and the fact Vancouver RE is too high was just understood.”
- “The ‘investor’ who purchased our house put it up for sale two months later, in January 1981, but the bubble had burst.”
- For A City To Have That Kind Of Vacancy, It’s Like Cancer – “Downtown, the vacant unit rate is so high that it’s as though there were 35 towers at 20 storeys apiece – all empty.”
- “What’s the worst that can happen? You can’t pay your mortgage, so sell your house! No fear.”
Follow vreaa on twitter
- Chat Thread wp.me/pcq1o-5vD 3 weeks ago
VREAArchives
- April 2013
- March 2013
- February 2013
- January 2013
- December 2012
- November 2012
- October 2012
- September 2012
- August 2012
- July 2012
- June 2012
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010
- November 2010
- October 2010
- September 2010
- August 2010
- July 2010
- June 2010
- May 2010
- April 2010
- March 2010
- February 2010
- January 2010
- December 2009
- November 2009
- October 2009
- September 2009
- August 2009
- June 2009
- May 2009
- April 2009
- March 2009
- February 2009
- January 2009
- October 2008
- September 2008
- July 2008
- June 2008
- May 2008
- April 2008
- March 2008
- February 2008
Tags
Anecdotes Banks Bears blogs British Columbia Bubble Bulls buyers Canada Capitulation China CMHC Construction Debt Economy Employment Fear Foreign buyers Fundamentals Government Housing Interest Rates Landlords Life Media Mortgage brokers Okanagan Olympics Ownership Prediction Real Estate Realtors Relationships Rent Retirement RE_ATM sellers Sentiment Speculators Toronto US Vancouver Victoria Visual Anecdote Whistler
bank is sure of bailout – got all its crony pawns lined up. their risk is slap on the wrist. leadership has no spine.
Maybe a bailout would help alleviate the pain somewhat, but banks are being foolish here. If a house goes underwater on the first mortgage, the value of a HELOC on that house basically goes to zero for the lender.
So even if the government is backing/guaranteeing first mortgages, banks are going to get killed on these HELOC’s. The losses on them will be huge.
I don’t believe a HELOC qualifies for CMHC insurance, though could be wrong.
apparently bank used to be able to buy insurance from CMHC on pools of HELOC. However that was stopped late last year?
not just cmhc. if the chartered banks get themselves into trouble, carney will bail them out. tarp, ltro, qe all examples of this. bailout would just transfer the pain from the cronies to the public. there is no alleviating it.
The business model for banks is to lend money productively. For loan to be productive it has to create more value than the interest charged, which for the most part means that loans to growing business are good, so are loans on assets that produce income. A home loan to a family occupying the house is not creating more value in society than the interest charged, its a consumption loan not an investment loan.
My intuition is that there are not very many businesses wanting enough loans so investment loans are out and consumption loans are in. Is there any way to find out what percentage of loans are investments loans and what are consumption loans in Canada?
Banks’ business model is to lend money PROFITABLY. It’s up to the borrower to decide whether to use it for investment, or just to pre-consume future earnings. Case in point: I got an offer for a credit card from a big-5 Canadian bank, interest of 0.99% for the first 9 months, including cash advances. I took the offer, maxed it out* and invested the money. Carney’s going to see this and have a conniption — how does HE know what I used the money for?
If you get a HELOC, the bank doesn’t know whether you invested it in solid dividend stocks (making the interest tax deductible), or materials for a great kitchen reno you did yourself, or gave it to a contractor for a poor quality kitchen reno with unfashionable finishes (not tax deductible, but house capital gains are untaxed), or spent it on a hookers-and-blow weekend in Whistler (fully taxed). The BoC doesn’t know either.
I always smile when I see realtors’ rankings of home renovations by value. Most don’t pay for themselves, so they’ve redefined the terms. “Bathroom renos average a 95% return on investment” means a -5% ROI.
* Yes, I’m fully aware what this does to my credit rating
the model is to balance risk of default against payment stream and collateral. enter more into more good contracts than bad. but now the risk of default on formerly risky, nay, suicidal ventures is increasingly backstopped by central bank and cmhc – i.e. the public backstop to select private enterprise. why should they get that priviledge? it is the definition of cronyism. imagine you are daytrading and losses are absolved by govt – leads to higher risk trades. concerned persons are imploring c and f to vada bordo, cazzo. but they’re likely to have as much success as de falco. it’s going to take a sinking to get some changes around here.
Now why does this sound familiar?
That comment stemmed from conversations the family had around the table over the holidays. My mom told us how they had to almost beg for a $10,000 mortgage to build the little bungalow in which they eventually raised four kids. That was in 1972. Not exactly yesterday, but not the Great Depression either. Now, when us kids go to the bank, credit is offered to us like candy from a dish. How can any thinking person believe this is sustainable long term?
Its all about the pump and dump. Mass collusion from the feds, banks, msm and re industry all out to milk the avg joe. The sad thing is these orgs are all puppets in a greater global game.
I don’t think they are puppets so much as blind, greedy participants. I never assume conspiracy when basic short-sightedness, incompetence and human nature offer a more plausible explanation.
[Amen. - ed.]
tgif RFLOL!
http://tinyurl.com/6o2sl6y
Now it’s getting serious. Vancouver will be a town of zombie owners within months. Living dead that cannot sell and cannot leave.
Actually why can’t you leave? Is there a law that says you can’t leave to other parts of Canada or countries if you have an underwater mortgage? Frankly, a lot of immigrants or those that holds Canadian citizenship as passports of conveniences are the most likely to leave when their mortgage goes underwater and they don’t see much hope/improvements in their lives. Actually the more unscrupulous ones will likely max out all credit cards, HELOCs, etc before they leave the country. Last time I checked, you can’t exactly extradite someone for not paying their debt or declaring bankruptcy.
There’s more of that going on than you think. A popular scam is to borrow $25,000, buy a car, ship it out of the country for maybe $8000 in total cash after expenses, then skip out on the $25,000 loan with $8000 in your pocket. Use fake ID and do that several times under several different aliases, then skip the country before the ID theft or the loan fraud is discovered. How tempting will that be for someone who maxxed out their HELOC?
Just as a mental exercise, I’ve often considered how easy it would be to scam all those “pre-approved” credit cards that come in the mail. I could go on one hell of a trip, then just declare bankruptcy and they couldn’t touch me. No need to even leave the country. Or take cash advances out for years and hide it somewhere, then declare bankruptcy and slowly start laundering my cash. Think of it, the money just drops into your lap. (As the post above says.) Since when do con artists just leave money lying there? If it can be done, they’re doing it.
is this what the eagles sang about?
My regional bank in the U.S. calls every so often and asks if we want money for anything. Trouble in the U.S. right now is banks don’t have enough economically sound people to lend to (their favorite profit center after fees). Either you are in the black and don’t want debt no matter the interest rate or you are a risky bet for yet another loan. There isn’t much in between.