Tag Archives: Downpayment

Canada’s finance minister proposes changes to mortgage lending laws

From the National Post.

Excerpt:

On Tuesday, the Department of Finance announced three changes to the standards governing government-backed mortgages, that come into force April 19. Here are a summary of the changes.

QUALIFYING FOR A FIVE-YEAR RATE

The adjustments to the mortgage framework will require mortgage insurers to ensure that new borrowers qualify for a five-year fixed rate mortgage when calculating the gross debt service and total debt service ratios. The measure is intended to protect Canadians by providing them with additional flexibility to support mortgage payments at higher interest rates in the future.

LIMIT THE MAXIMUM REFINANCING

Borrowers seeking financial flexibility can currently refinance their mortgage and increase the amount they are borrowing on the security of their home up to a limit of 95% of the value of the property. The adjustment will lower the maximum amount of the mortgage loan in a refinancing of a government-backed high-ratio mortgage loan to 90% of the value of the property, consistent with the principle that home ownership is a tool for savings.

DISCOURAGING SPECULATION

This measure will require a minimum down payment of 20% for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation. At present, borrowers may purchase a residential property with a 5% down payment. The change will require a 20% down payment for small non-owner-occupied residential rental properties. Borrowers purchasing owner-occupied residential properties which also include some rental units (such as a duplex) will still be able to access government-backed mortgage insurance with a 5% down payment.

But the CEI reports that the Democrat mortgage bailouts encourage fiscal irresponsibility.

Excerpt:

Economists and real estate experts are saying that a $75 billion mortgage bailout program designed by the Obama administration has backfired and harmed the housing market…

[…]Earlier, the government pushed through billions more in other mortgage bailouts, to bail out even reckless high-income borrowers, and forced financial institutions the government took over in the name of fiscal responsibility, like Freddie Mac, to run up billions in losses bailing out irresponsible borrowers.

Banks will now be pressured to make even more risky loans. The House has approved Obama’s proposal to create the so-called Consumer Financial Protection Agency. Government pressure on banks to make loans in economically-depressed neighborhoods was a key reason for the mortgage meltdown and the financial crisis. Yet Obama’s disturbing proposal would empower the new agency to enforce the Community Reinvestment Act without regard for banks’ financial safety and soundness.  The Community Reinvestment Act was a key contributor to the financial crisis.

The mortgage crisis was also caused by the reckless government-sponsored mortgage giants Fannie Mae and Freddie Mac, and by federal affordable-housing mandates. But Obama’s proposed financial rules overhaul does absolutely nothing about Fannie Mae and Freddie Mac, admits Obama’s Treasury Secretary, tax cheat Timothy Geithner, even though he admits that “Fannie and Freddie were a core part of what went wrong in our system.”

Worse, the Obama Administration lifted the $400 billion limit on bailouts for Fannie and Freddie, so that they could continue to buy up junky mortgages at taxpayer expense, and showered their executives with $42 million in compensation.

Obama’s financial-regulation plan is “largely the product of extensive conversations” with two lawmakers responsible for the corrupt status quo, Chris Dodd and Barney Frank, and it expands the reach of regulations that have been used by left-wing groups to extort pay-offs from banks.

This is why we should have elected an economist like Stephen Harper.

Thomas Sowell explains how politicians cause recessions while getting elected

Article here at Townhall.com. (H/T ECM)

Excerpt:

After the cascade of economic disasters that began in the housing markets in 2006 and spread into the financial markets in Wall Street and even overseas, people in the private sector pulled back. Banks stopped making so many risky loans. Home buyers began buying homes they could afford, instead of going out on a limb with “creative”– and risky– financing schemes to buy homes that were beyond their means.

But politicians went directly in the opposite direction. In the name of “rescuing” the housing market, Congress passed laws enabling the Federal Housing Administration to insure more and bigger risky loans– loans where there is less than a 4 percent down payment.

A recent news story told of three young men who chipped in a total of $33,000 to buy a home in San Francisco that cost nearly a million dollars. Why would a bank lend that kind of money to them on such a small down payment? Because the loan was insured by the Federal Housing Administration.

The bank wasn’t taking any risk. If the three guys defaulted, the bank could always collect the money from the Federal Housing Administration. The only risk was to the taxpayers.

Does the Federal Housing Administration have unlimited money to bail out bad loans? Actually there have been so many defaults that the FHA’s own reserves have dropped below where they are supposed to be. But not to worry. There will always be taxpayers, not to mention future generations to pay off the national debt.

Very few people are likely to connect the dots back to those members of Congress who voted for bigger mortgage guarantees and bailouts by the FHA. So the Congressmen’s and the bureaucrats’ jobs are safe, even if millions of other people’s jobs are not.

Congressman Barney Frank is not about to cut back on risky mortgage loan guarantees by the FHA. He recently announced that he plans to introduce legislation to raise the limit on FHA loan guarantees even more.

Congressman Frank will make himself popular with people who get those loans and with banks that make these high-risk loans where they can pocket the profits and pass the risk on to the FHA.

So long as the taxpayers don’t understand that all this political generosity and compassion are at their expense, Barney Frank is an odds-on favorite to get re-elected. The man is not stupid.

Can you guess which political party Barney Frank represents?

Thomas Sowell and Walter Williams are my two favorite living economists

UPDATE: Welcome visitors from Free Canuckistan! Thanks for the link, Binks!

Let’s see some of their recent posts.

Is Obama’s weak foreign policy going to get us killed?

My biggest concern about Jimmy Carter II is for the nations that rely on us to protect their liberties. Our armed forces project strength abroad that safeguards the liberties of our allies against our enemies. Thomas Sowell just nails this point in his post about the dangers of weak foreign policy, a point most of us don’t even think about.

As if it is not enough to turn cutthroats loose to cut throats again, we are now contemplating legal action against Americans who wrung information about international terrorist operations out of captured terrorists.

Does nobody think ahead to what this will mean– for many years to come– if people trying protect this country from terrorists have to worry about being put behind bars themselves? Do we need to have American intelligence agencies tip-toeing through the tulips when they deal with terrorists?

…Repercussions extend far beyond issues of the day. It is bad enough that we have a glib and sophomoric narcissist in the White House. What is worse is that whole nations that rely on the United States for their security see how easily our president welshes on his commitments. So do other nations, including those with murderous intentions toward us, our children and grandchildren.

Who caused the subprime mortgage crisis?

Thomas Sowell writes about who caused the subprime mortgage crisis. And he has a new book out about it, too!

Beginning in the 1990s, getting a higher proportion of the American population to become homeowners became the political holy grail of government housing policies. Increasing home ownership among minorities and other people of low or moderate incomes was also part of this political crusade.

Because banks are regulated by various agencies of the federal government, it was easy to pressure them to lend to people that they would not otherwise lend to– namely, people with lower incomes, poorer credit ratings and little or no money for a conventional down payment of 20 percent of the price of a house.

Such people were referred to politically as “the underserved population”– as if politicians know who should and who shouldn’t get mortgages better than people who have spent their careers making mortgage-lending decisions.

My own comprehensive post on this topic is Democrats caused the recession and Republicans tried to stop it.

What happens when the secular left undermines morality?

I’ve blogged about how atheism cannot ground the rationality of moral values, moral duties and moral accountability. The presumption of materialism is inconsistent with rationality, consciousness and free will which are necessary pre-conditions for non-ephemeral morality. So what happens to civil society when atheists push religion out of the public square? Walter Williams explains.

To see men sitting whilst a woman or elderly person was standing on a crowded bus or trolley car used to be unthinkable. It was common decency for a man to give up his seat. Today, in some cities there are ordinances requiring public conveyances to set aside seats posted “Senior Citizen Seating.” Laws have replaced common decency. Years ago, a young lady who allowed a guy to have his hand in her rear pocket as they strolled down the street would have been seen as a slut. Children addressing adults by first names was unacceptable.

You might be tempted to charge, “Williams, you’re a prude!” I’d ask you whether high rates of illegitimacy make a positive contribution to a civilized society. If not, how would you propose that illegitimacy be controlled? In years past, it was controlled through social sanctions like disgrace and shunning. Is foul language to or in the presence of teachers conducive to an atmosphere of discipline and respect necessary for effective education? If not, how would you propose it be controlled? Years ago, simply sassing a teacher would have meant a trip to the vice principal’s office for an attitude adjustment administered with a paddle. Years ago, the lowest of lowdown men would not say the kind of things often said to or in front of women today. Gentlemanly behavior protected women from coarse behavior. Today, we expect sexual harassment laws to restrain coarse behavior.

I personally feel alienated by how impolite, unchaste, unromantic and unchivalrous my generation has become.