Monday, October 08, 2012

We're All Subprime Now

I have been continually hearing that Canadians and Canadian lenders have been more prudent in lending than their American counterparts. I was more than a little interested to read:

The Province: Tighter mortgage rules thwarting sales

Pauline Kendall owns three houses and a condominium but she couldn’t get financing this summer when she tried to add to her real estate holdings.
The East Vancouver resident says the federal government’s new mortgage rules have complicated financing for self-employed people such as herself and for first-time buyers.
“I was a little bit shocked,” says Kendall, 62, who put in an offer on a home she had her eye on in July but had to pull back when the only option was expensive refinancing of the home in which she lives.
Kendall sees it as the ”federal government trying to protect us from ourselves.”
“It’s interesting times to have four properties in East Vancouver and not having a bank interested [in financing a purchase],” said Kendall, who works as general contractor and as a landlord for her properties.
Her homes “average out” to be worth $1 million each and the condo is worth close to $500,000.
“Now, no matter what we own, how much equity we have, we just don’t fit under the new rules,” she said.
Apparently recent changes to income qualification and amortization lengths are throwing wrenches into fancy plans. Just throwing it out there, if Vancouver prices are indeed as high as American housing expert Robert Shiller is claiming -- the same message this and other blogs have been calling out for over five years now -- perhaps those mountains of equity local property investors claim to have may be a tad ephemeral, and loaning more money to one whose ability to service loans depends heavily upon the cut and thrust of the local real estate market may be somewhat against "prudent" risk management guidelines.

It certainly seems the federal government is "trying to protect us from ourselves".

(Note: title taken from Calculated Risk)

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