Re: pushing! – well not really! It’s more of the case that if you want this mortgage at that rate and with little down payment we (the bank) want it insured. Reason – if it isn’t insured the only risk we are prepared to accept is a loan with at least 25% down. Banks are very risk adversive and is probably why I surmize they make so much money.

This is not a defence of the banks but, what I think people forget is that loans, mortgages, lines of credit, credit cards or for that matter any form of credit vehicle represents a risk to the person or entity lending the money. This is not new science but, is one that seems to be swept under the carpet.

Fish I come to you and want to borrow $1000. You don’t know me from Adam. What is the first thing you will do? My bet is that you will want some information so that you can evaluate my ability to repay the loan. As well, you will ask what I have for collateral, (down payment). Historically I might offer a chicken or two goats as collateral but we have gone past that and now supply a downpayment in cash.

So I say well Fish, I got no chickens nor do I have goats but I do have a wife. She’s a good cook and keeps my goat skins clean, folded and tidy. You look at me and say fine. I will take your wife as ‘insurance’ but because I have to feed her I will need to charge you extra. [of course the added risk to you is that I might not want her back ] (and no I don’t need cards and letters chastising me for that statement)

Fish, this is a silly assed analogy but I’m sure you get the picture. The point is those borrowing money with little or no downpayment are by any standards – ‘high risk’ borrowers.

Along comes the government backed CMHC whose mandate is to make housing attainable for the greatest number of people. Now that CMHC will insure repayment, Mr. Banker can sleep better because his risk has been assumed.

Re: your self employed buddy. The risk of business failure is as you know, high. Ergo a higher risk borrower = calculated premium from the bank to accept that risk.

BTW these principals of risk apply to anything from pensions, to life insurance, to borrowing to buy a wheelbarrow. If you ever want a dry discussion on the math behind calculating risk make friends with an actuary.

Re: Downside – on the hook. Canadian society as we know it is on the hook for everything. EI to Canada pension. Isn’t that what makes Canada great! Solution make babies which will insure I get to sell your condo and help you find a bigger house.

Lookin good from my side!

What is it 1% or so?

Not that long ago, before the CHMC became the behemoth it is now, a self-employed buddy had to go the independant mortgage route as his income was too unreliable for the banks.

He ended up paying 3% over the bank ‘advertised’ bank rate (which is high anyway) and had to put 20%+ down.

So CHMC would have been better for him.

Downside = we are all on the hook for these loans.

Re graphs – No worries. Nice to see someone enjoy the work.

MOM’s can be sketchy as a basis on which to make a financial decision. The last few weeks of ‘neighbourhood numbers’ held some interest in that those numbers were providing a foreshadowing of the month end. Nothing rocket science about that other than it made for rancorous debate amongst some of my contemporaries. I think I’m getting free coffee for the next week.

Yes it would be nice to see everybody have the opportunity to own a home. This will sound brutal and I’m sure some Left of Left individuals will throw rocks at me but, the harsh reality is that not everybody will have that chance.

Re banks. It needs to be reiterated that CMHC does not insure the mortgagee. Rather it insures that the bank will not be left holding the can in the event the mortgagee defaults. If that’s what you were implying I apologize.

BTW if you manage 25% down you don’t need CMHC. Admittedly, the first house will probably require that you pay for CMHC because of the lower down payment. Ususally, the second time around there will be sufficient equity to manage the 25%. Funny how that saving is never taken into account as one benefit of a rising market. No doubt I’ll get more rocks through my window for that statement .

It is very important that those who have a mortgage and CARE about what happens if they are disabled or die have the proper insurance in place to take care of that disaster. Always check with an individual insurance agent aside from what the bank will try to sell you. If you don’t know a pro give me a call.

Ironically, insurance is one aspect of calculating costs to own a home that few people take into consideration. Going back I gotta say that in a previous career as a life agent I got to deliver a death benefit cheque once. This will sound sappy but it’s true – witnessing the relief on the face of that young mother of two who now knew she could continue to live in her home with her children was inspiring.

The small MOM drop gives a some minor hope that we may be starting another down-leg but I cannot read too much into that yet.

I have noticed banks getting a LOT tougher with mortgages though, or trying to push folks to deal with the CHMC so they are covered. Except some people cannot even afford the small rise in rates that CMHC insurance would bring.

Sure feels like Vegas and Freddy and Fannie.