Friday, April 27, 2012

Garth takes it to Flaherty- for the record.

The Flaherty and Carney circus act keeps going. They pump and pump and then hope a few stern words will dampen the animal enthusiasm that has driven the biggest Housing bubble in Canada's history.

You remember Canada, the country with the world's second largest land mass.

Well Flaherty is trying to shift the CMHC monster to the OFSI and hope that any bust fall-out falls on them. Here's what Garth had to say: (I agree with him 100% BTW)

It might have been F’s finest hour to date. The man who brought us government-insured 0%-down mortgages. The guy who invented lifetime amortizations. The dude who, for three long years, refused to let the B-word depart his lips. The elfin protector of the real estate industrial complex. Amen, brother Flaherty. Have you finally repented? Does it matter anymore?

Of course, what could be more unfavourable, unforeseen or shocking than F?
So, here’s what he did. As I told you a month ago just before the federal budget was unveiled, the little pecker knows the real estate market is on borrowed time and our debt binge must be corralled, but he doesn’t want the spray. That’s why the plan was always to shove the blame on the bureaucrats and regulators. And it’s happened.
The budget implementation bill tabled this week will make mortgages more expensive and harder to get. It slaps CMHC around and puts the whole home lending business under the thumb of OSFI – the bank cop regulator with the Tommy Lee Jones swagger. No longer will CMHC slop around as a thinly-controlled quasi-department of the government, with a board of directors that might as well be running HGTV. As befits the stature of a financial behemoth with a balance sheet the size of the national debt, this agency will now be stress tested, microscoped and regularly reamed.
Gone is government-backed insurance for mortgages the banks use to back their covered bonds. That means their borrowing costs will rise, and so will mortgages – by about .15% very soon. More later. This is deliberate – a way for F to bump lending costs and cool housing without jacking up interest rates in general and knifing the economy.
This tightening in mortgage funding for the banks will likely make it harder for people without money, the self-employed or misguided property virgins to get financing. As one risk-management guy said after hearing the news:  “It will have the beneficial effect of preventing the most vulnerable borrowers from getting access to mortgages, so these people will have to wait longer to get into the game.”
See the irony? Here’s the father of the 0%-down, 40-year am, government-backed mortgage. The chief money guy of a government which brought in a home-buying tax credit and bloated the RSP Home Buyer’s Plan for first-timers. Now scrambling to chill the market through the back door.
Nobody is more responsible for houses in Toronto, Vancouver, Saskatoon, Calgary or Winnipeg that people can no longer afford, than F.  He’s the architect of the family debt he decries. Now that detached homes cost a million, while incomes trail inflation, he lectures us. How weak and disappointing.