I really cannot get over the fact that Harper's Government is almost doubling the CHMC's ability to lend in just over a year.
What are thinking? What happened to the fiscal Conservatism?
Think about it..if you are a bank lending officer and sitting across from you is someone who has, with great difficulty, saved 15-20% down-payment but is subject to the vagaries of the job market or someone who can only scrape together 5-10% but has a government-issued CHMC guarantee behind them...which would you lend the most money to?
I know the concept of the CHMC is laudable. Help low earners get on the property ladder. It was the same rationale used by Fannie Mae and Freddie Mac and the HUD in the US.
In fact what happened was a catastrophe. A lot of these folks were too extended to get into their purchases, had very little 'skin' in the game and with the smallest drop they lost their equity and stopped payments.
Lower income earners are also, unfortunately, the most likely to get hurt first in a recession.
'The federal government has quietly given Canada Mortgage and Housing Corp. more financial muscle, raising concerns the multibillion-dollar agency is expanding at an unprecedented pace with little oversight.
For the second time since the beginning of 2008, Ottawa has raised the amount of mortgage insurance CMHC can have outstanding. The increase moves the cap to $600-billion, up from $450-billion and nearly double the $350-billion limit in place at the end of 2007.' Globe and Mail October 21st.
What does this all mean? It means when, and if the second round of the recession comes in 2010, there will be nothing left to fight it with. The Provincial and Federal Governments are already tapped out and the Federals will be dealing with CHMC losses and Baby-boomer costs. There will nothing left to stimulate with.
We will be forced to live within our means.
The governments here have made many decisions, some good and some bad, but this is one of the worst.
To 'Help' people to get into housing when the economy is so uncertain, when the prices are near or at their peaks, when interest rates at so low and could conceivably double in the next few years, is....IMVHO ECONOMIC LUNACY and purely political!!