Peregrine

There is no way a bank takes them out. Why would they do it when they have a risk free model with the government? I was thinking more along the lines of EQB taking them out or doing some sort of merger since EQB is in the same situation as HCG. For the record, HCG and EQB are leaders in the alt-A regulated market. There's not many players, and it's a highly niche-type market. Take a look at their non-performing numbers over time - it doesn't jive with the fraud thesis. I used to think this. However it doesn't really pass the reality test to me anymore. I think their numbers are too good to be true. Genworth Canada is a good example. Their delinquencies are really low. Part of the reason is that they restructure a lot of these loans and then don't disclose it. They amend payments, delay payments etc and I think this gets them out of having to show these actual troubled loans more clearly in their accounting (ie. the semantics become different and thus not needed to report). In Genworth's case the number of cases where they are 'proactive' is buried in one report they put out annually (I forget which one atm). Here is a video that explains their process https://www.youtube.com/watch?v=ECHZ0a_-Ojw. I suspect the other suspects EQB, HCG do something similar. Read those SA articles on how HCG was selling off some of their Brampton originated loans. Too much smoke here, anecdotal evidence for me to believe their deliquentcy numbers or more importantly that they will stay this low. Seems impossible to me that you can lend in lower quality borrowers and face less risk. Normal US banks has loan loss provisions in the 1 to 2% - and EQB and HCG are 0.10% - doesn't make intuitive sense to me. Genworth Canada as a mortgage insurer doesn't hold mortgages, they guarantee them. They can't amend payments or delay them. If a mortgage that they insure goes into default, they reimburse the lender for any losses. Typically, losses get minimized because of the substantial LTV cushion. But if you're worried about their underwriting, look at their combined ratios. It doesn't make sense to you, so you're trying to distort the facts so that it does make sense to you. Have you considered the possibility that your initial premise is wrong?

One thing I should add about the Fujian people with respect to the Chinese take-out business: the Fujian people are especially known for being hard-working and entrepreneurial, even among the Chinese. They are very hard people to compete with in businesses characterized by efficiency and power of will.

50, you need to provide some context otherwise your statement makes no sense. how much is the house worth ? if it's worth $2M. a 700k loan is no big deal at all. even if they default or if market corrects 30%, the bank is still ahead by repossessing. Agreed with this. One more thing to add: as a federally regulated lender, Home Capital needs to abide by debt servicing ratios to qualify mortgages on affordability. 50, you're probably not privy to all the details.

Thanks to all the people contributing to this thread. It's been a fantastic and illuminating read :).

There is no way a bank takes them out. Why would they do it when they have a risk free model with the government? I was thinking more along the lines of EQB taking them out or doing some sort of merger since EQB is in the same situation as HCG. For the record, HCG and EQB are leaders in the alt-A regulated market. There's not many players, and it's a highly niche-type market. Take a look at their non-performing numbers over time - it doesn't jive with the fraud thesis.

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/azp-pr-b-atlantic-power-corp-preferreds/ http://bit.ly/2mVOHfu http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/vsn-veresen-inc/ http://bit.ly/2np33CE And some other stuff that's gotten bought out. Let us know when you come up with your first idea post, Frank. Same goes to you, Mr. Gibbons. I'm seeing you're a member since 2009, but you have no idea posts over the whole time. http://www.cornerofberkshireandfairfax.ca/forum/profile/?area=showposts;sa=topics;u=107 Lol - my fault. My post was partly tongue-in-cheek and partly a reaction to seeing his name reappear whenever a Trump thread starts getting hot again. But thanks for correcting the record.

Am I the only one who thinks this is an idiotic analysis? It is playing on fears instead of credible analysis. In 2000 certain industries were absurdly high (internet, telecom, and some other mega caps) so the indexes were overvalued but that had nothing to do with the median stock valuation. There were hundreds of dirt cheap "old economy" stocks in 2000. 2007 was different but the crash was not about over valuation but a largely unforeseen housing crash that damaged everything else. No, you're not wrong. Using means may diffuse some of the extremes better, but it doesn't do it entirely either.

NEWSFLASH: After January 20, 2017, it's no longer racist to make jokes about the President's intellect. Lol. You may well disagree with Obama's positions, but it is a false equivalence to suggest that Obama did as much as Trump already has done to legitimately call into question his level of intellect.

LOL! Nothing could've encapsulated the essence of that article as well as this post.

Actually 200x to 250x is the norm now if it's in reputable school zones. The chart doesn't show price to rent ratios. It shows a range of price to rent ratios relative to the price to rent ratio in 1980.

Lol - this thread is quickly devolving into past shitstorms. Quick question: does Cardboard contribute anything to this board other than threads like these? Those 1,000+ posts can't be all logical fallacies, false equivalencies and reality distortion.

You asked why detached homes were selling below their June 2016 prices. And I proposed that perhaps it was due to: 1) strong sales activity in the run up prior to the foreign buyers tax being enacted; and 2) a different mix of sales making a comparision of average sales prices of detached homes difficult. Yes, I'm aware that the 14% I cited is from a broad index.

There was a rush of sales activity prior to the foreign tax being enacted. Plus changes in mix of sales in any given month so the average figure may not be as comparable. Anyway, y/y February sales prices were up 14% from what I've read. Sales activity is slowing for sure though.

Except for conjecture, do you have any real facts to back up these claims? I'm honestly curious. The countless articles that have been written about all this stuff that's going on and how it's done is not enough? What exactly are you looking for? Being a member of CoBF doesn't give you subpoena power. Frank, are you a realtor? Lol, I have no professional connection with the real estate industry. This being a discussion forum, I am open to learning new things. I prefer views to be backed by hard facts and data and not conjecture and anecdotal evidence. Don't mistake me asking for facts as me being biased in favor of Canadian real estate. PS: I don't even own any real estate as I do believe that prices right now make it a poor long-term investment currently.

Except for conjecture, do you have any real facts to back up these claims? I'm honestly curious.

Again, to correct another misconception: all insured mortgages now have to qualify at the 4.6% posted rate, which is over 2% higher than contracted rates. Uninsured mortgages also have to qualify at the high posted rate - except for 5 year and longer terms. But yes, interest rates act like gravity on all kinds of assets - including real estate. This rule is recent, most didn't have to go through it, and qualifying at a time when they lend to everyone isn't the same as being disciplined enough with your finances to actually have the spare cash flow when the time comes... Many wouldn't qualify without the bank of mom and dad providing a down payment that they couldn't save organically. Everyone wants to focus on debt service, but in the end, the absolute size of the debt always ends up mattering... Again, not exactly true. All variable rate mortgages and fixed rate mortgages under 5-year terms had to qualify at the higher posted rate prior to the new mortgage insurance rules last fall. The new rules made it so that ALL insured mortgages have to qualify at the higher posted rate now. Obviously debt service matters. The situation makes it particularly hard on the new home buyer who is challenged more than ever due to high prices and tightened rules. They aren't the ones driving the sales activity though.

Again, to correct another misconception: all insured mortgages now have to qualify at the 4.6% posted rate, which is over 2% higher than contracted rates. Uninsured mortgages also have to qualify at the high posted rate - except for 5 year and longer terms. But yes, interest rates act like gravity on all kinds of assets - including real estate.

I'm not sure we're debating about the same thing. I have no idea where home prices will go. I'm just saying that what happened in the US in the mid-2000s and what's happening here are two completely different things.

Yes - in Alberta. The point I was making is that what happens in practice matters.

It is true that there are recourse states in the US - in fact, only 12 are 'non-recourse'. But in practice, many borrowers who were underwater during the foreclosure era still picked up and left in recourse states. Lenders often don't pursue deficiency judgments in a default event due to legal costs, length of delay and uncertain recovery. Defaulting in Canada is a completely different story.

I do and I am glad that he did.

This is unbelievable. So debt-to-income rations now don't matter in lending. And Canadian mortgage underwriting is substantially different from the US..... because it's driven mainly by income ratios. <head scratch>. In addition banks don't really have a way to independently verify borrower income and there have been lots documented cases of doctored income. Also as you said average figures don't matter and in the US the marginal buyer was the problem. So Canada is ok because on average Canadians have more equity in their homes and the marginal buyer until recently was able to buy property with 2% down and thanks to a new program in BC they can buy with 0% down over there. Got it. Your response seems like a jumbled interpretation of what I posted. 1) I did not say it doesn't matter, of course debt/income matters but it doesn't completely measure the ability to service that debt. Obviously, all regulated lenders in Canada must qualify borrowers on TDS and GDS ratios. Mortgage debt service ratios are not out of line compared to what it has been in the past. 2) The Canadian mortgage market is substantially different from what that of the US for a whole host of reasons that requires a far longer explanation than I care to delve into currently. I don't know why you brought up debt/income. 3) You need to provide a minimum number pay slips, notice of assessments, tax returns and sometimes a phone call to your employer to qualify on income at a regulated lender. There are regulatory safeguards to prevent shenanigans from happening but obviously there are still people who will try to get around the rules. Doesn't make it right but it's a reality. The idea that this is systemic or widespread is completely unfounded and not backed by data. 4) I didn't say that averages don't matter - I said that average figures can be misleading. Take a look at Countrywide's annuals back in 2006. Their average credit scores, LTVs and such didn't look bad. It was the marginal borrower that really did them in. Also, I didn't say that Canada was ok because on average they look better but I would say that mortgages in Canada are a lot more homogenous than the kind of stuff coming out of the US from 2003-2007. There are no exotic products like option ARMs, negative amortizing and teaser rates here. Plus, what's truly sub-prime is a speck of the mortgage market here compared to damn near 1/3 of originations in the US circa 2006. Lastly, I'll leave this: http://condo.ca/wp-content/uploads/2013/12/arrears-mortgage-Canada-United-States-comparison-Condo.ca_.jpg I know that history isn't a predictor of the future, but there's a reason for this.

Without getting into specifics, I would say that the mortgage underwriting in Canada is substantially different than what took place in the US. In fact, I would say that the whole system is entirely different from that of the US. Comparing the two, in my view, is a major false equivalence that has been repeated ad nauseum by some economists. Soundness cannot be solely evaluated on debt-to-income ratios. For one, Canadians have a lot more equity in their homes. And second, the cost to service that $1 in debt has declined substantially. Also, you're painting the US with a broad brush when in fact the US housing collapse was particularly prominent in a few locations. Moreover, it's not the average home buyer that caused the most damage - it was the marginal buyer. So using simple average measures to gauge safety can be misleading.

No one argues that recent price increases in the GVA or GTA are sustainable. What prices will do in the future is anyone's guess. In my view, real estate is not likely to be a great investment in the long run for the average person. But I don't think it ever has. Whether housing prices will crash, who knows? But the factors in play in Canada right now are vastly different than what happened in the US a decade ago despite the fact that the two situations often get conflated.