Welcome to my blog heresnothing. I have created a WordPress.com blog as I got seriously tired of managing a self-hosted blog. This blog will cover random topics from my thoughts on investing, rants and raves, Canada, Taiwan and Minimalism and everything in between.
Mortgage qualification loophole. The use of teaser rates in qualifying individuals is a game the banks have played to increase their mortgage volumes. This spins back into the Canada Mortgage and Housing Corporation insurance scheme. It allows Canadians to spend more than would otherwise be the case, and puts thousands of homeowners at risk. The Government of Canada is where this all ends up. The loose, who cares attitude displayed by successive governments has created this house of cards. This is another US-style residential estate “melt-down” in the making. Nero (Justin Trudeau) continues to fiddle. Just wait to Rome starts to burn! There won’t be a firehose in the place.
This is discussed in a MoneySense article highlighted above. It’s an article well worth reading.
Under current Canadian mortgage qualification rules, home buyers can only get a mortgage if their debt-ratios show that they can make payments based on the Bank of Canada’s qualifying rate. This mortgage qualifying rate (MQR) is based on the posted five-year fixed rate and, as of June 10, hovered around 4.65%.
Even if a home buyer opted for a five-year variable rate mortgage, at 2.4%, they’d have to prove to the lender that they could make monthly mortgage payments based on the 4.65% MQR. On a $650,000 home, with 10% down, that’s a difference of almost $700 per month.
The rationale for using the posted rate to qualify buyers is to “…protect Canadians by ensuring sufficient flexibility to support mortgage payments at higher interest rates in the future, for example, when the mortgage term is up for renewal. This requirement also protects taxpayers who support homeownership through government-backed insured mortgages,” explained the Department of Finance through email.
“But home buyers who opt for a five-year fixed rate are exempt from having to qualify at the posted rate,” explains Ross. “These buyers can qualify at the discounted rate.” In 2015, the average discounted rate for fixed-term mortgages was 2.8%. This mortgage qualification loophole was confirmed in an email from the Department of Finance, which stated: “…borrowers with five-year fixed-rate mortgages may qualify based on their contract rate.” A contract rate is the equivalent of a discount rate—and, at present, about 200 basis points below the stress-test mortgage qualifying rate.
It seems likely that there have been renewals of five year fixed rate mortgages that whose qualifying rates were lower than the posted rate. It begs the question as to how these renewals have been handled. Why has there been no stress on the borrowers to date?
I used to consider myself fairly open-minded when it came to politics. But this video clip shows you what I believe is wrong with the left in the United States. Michael Moore, that self-appointed know it all now calls all Trump supporters stupid, uneducated, just to pick a few of the name calling words that he’s used. The left, in his snobbish view, has the moral high ground. Anyone that disagrees with him is stupid. You pick based on this and other comments he has made where you fall politically.
This is an attempt to dehumanize those on the right. You don’t have to treat stupid, misguided people with respect.
Anastasia Chipelski has not given retirement much thought. In part that’s because, at 31, she has only recently found full-time work pursuing her passion – journalism.
There’s another reason, however, that Ms. Chipelski – who has a degree in cultural studies – isn’t planning for life after work: She believes she may never be able to retire.
For Ms. Chipelski – even with her full-time job – retirement is likely an unachievable goal because saving remains a luxury she can’t afford. “Day-to-day survival is a little more pressing.”
Canada Mortgage and Housing Corporation – the Government of Canada’s homegrown real estate insurance giant. This entity which was created to ensure Canadian’s access to residential housing has grown into a financial monster. CMHC bubble is 100% made in Canada. This article makes the case that the Canada Mortgage and Housing Corporation is responsible for the seemingly ever pending Canadian housing bubble.
Ottawa has been creating a housing bubble in Canada with taxpayer money, which is why residential real estate prices rise in defiance of high unemployment and recession.
Ottawa’s low interest rate policy and Crown agency Canada Mortgage and Housing Corporation’s dramatic increase in mortgage backstopping, for people who put only 5% down, have pushed up activity and prices.
This article was written a few years back when the Conservatives were in power in Canada. It makes a number of other interesting and rather serious points:
Ottawa has been creating a housing bubble in Canada with taxpayer money, which is why residential real estate prices rise in defiance of high unemployment and recession.
It’s a mortgage slush fund that distorts the market. It allows banks to lend recklessly without consequences and pushes up the price of housing for everyone. It rewards those willing to speculate with leverage and discriminates against those who are prudent. It’s unfair because the Canadian banks charge the same mortgage interest rates to those who put only 5% down with CMHC backing as those with skin in the game and large down payments.
“Since CMHC is insuring so many mortgages, the banks have no incentive to test the credit-worthiness of home purchasers. Then the mortgages can be neatly packed into MBS securities and have a CMHC 100% Canadian guarantee on the back of the investments, thus insuring end-investors these papers are insured from loss,” Bruce wrote.
Since that time, the Government of Canada has changed the minimum down payment, but it’s still way below the 25% we used to have to put down in years gone by. Putting substantial down payments on a house makes sure that the buyer has something to lose if they away from the house.
Canada is a “power of sale” jurisdiction. The borrower still has responsibility for any shortfall between the sales proceeds and the amount of the outstanding mortgage. A short discussion on Power of Sale and Foreclosure in Canada. You’ll note that in the United States when you have a foreclosure the homeowner loses their equity. You would have thought that given that the homeowner is responsible for any shortfall in Canada, they would act more responsibly.
Here is where CMHC steps in providing mortgage insurance that mitigates the risk of both the lender and the owner. With mortgage insurance in place, the borrower can comfortably walk away from the house without fear of being chased by the lender for any unpaid amounts. Hence CMHC provides both parties with protection in the event of a mortgage default. It’s called a win-win situation. Add to this that because it’s a government creation, CMHC is unregulated and does not have to adhere to any of the regulatory guidelines one would expect to find with a financial entity, certainly one this large.
CMHC helps Canadians meet their housing needs. As Canada’s authority on housing, we contribute to the stability of the housing market and financial system, provide support for Canadians in housing need, and offer objective housing research and advice to Canadian governments, consumers and the housing industry. Prudent risk management, strong corporate governance and transparency are cornerstones of our operations.
Mortgage Loan Insurance
Mortgage loan insurance is mandatory for federally regulated lenders in Canada when the buyer of a home has less than a 20 per cent down payment. This insurance protects the mortgage lender against loss if a borrower defaults, and allows qualified borrowers to access homeownership at interest rates comparable to those offered to buyers with larger down payments.
As a public mortgage insurer, CMHC has a mandate to provide service in all parts of the country and for a range of housing forms. A significant portion of CMHC’s mortgage loan insurance business is in markets or for housing options that are not served or less served by private mortgage insurers. In addition to being the primary insurer for housing in small and rural communities, CMHC is the only insurer of mortgages for multi-unit residential properties, including large rental buildings, student housing and nursing and retirement homes. Our exclusive support for these forms of housing helps ensure that Canadians have access to a range of housing options.
CMHC’s prudent underwriting standards and market presence serve to minimize risk to taxpayers and contribute to stable and efficient housing markets across the country. Our commitment to prudent risk management is reflected in the strength of our insured loan portfolio. CMHC follows capital and other risk management practices set out by the Office of the Superintendent of Financial Institutions.
Have a look at the financial statements of CMHC and see if you can figure out what the heck they are up to. The corporation has assets of over $250 billion. Claims paid in 2015 were around $360 million. It is astounding how low the losses are, but the whole insurance scheme has never really been tested by adverse housing market conditions for an extended period of time. Trying to work through their financial statements would require a forensic accountant who is far more skilled than I am at this kind of work.
Here is an interesting article on CMHC as a ticking time bomb written in 2010: CMHC: Canada’s very own ticking economic time bomb. Why has this topic fallen off the radar screen? Don’t know. But not much has changed, if anything, it’s only gotten worse. Hang on to your hats. But the world still provides Canada with breathing spacing every time we have another economic stumble in some part of the industrialised world. Now it’s Brexit. No rising interest rates soon. Unless Donald Trump is elected. Then all bets are off.
I recently read a statement made by someone from the Government of Canada that the Canadian housing market was sound, except for a couple of hotspots – Toronto and Vancouver. This is the normal positive spin that Canadian politicians put on everything. No bad news, the Canadian market is sound. But the two hot spots are Toronto and Vancouver which are a large portion of the Canadian housing market. As I have said elsewhere, welcome to Canada! There is no bad news here. It’s all good! CMHC, housing, everything! Talk about managing the airwaves. We’re experts.
The great fun house – the stock market. Today was a great day for the stock markets which resulted from the Brexit vote. My link is a primer on Brexit, the UK vote to leave the European Union. I have to laugh listening to all the talking heads about the stock market doing this, the stock market doing that. Rubbish. If they truly knew where the markets were going they would spend zero time being a talking head.
The stock markets globally took it on the chin today as a result of the vote. It creates uncertainty for investors, and as a result the Dow Jones Industrial Average took a 3.0% plus drop. Interesting enough, the shares that were most affected were the shares with the highest proportion of exposure to the EU. I guess when you think about it, it’s fairly obvious that these would be the victims.
It doesn’t take long to figure out that investors in European stocks have had a pretty rough ride. Although there are some great European companies who because of their diversification outside of Europe still manage to provide good returns to their shareholders.
I have always thought that Europe can never be united, too many geographical, cultural and language barriers. They have been at each other’s throats for thousands of year so the existence of the EU is a blip in history.
So for me, notwithstanding all the great free advice out there, investing in corporations based in the United States seems the best bet. The commentators all talk about diversification and then tell you that the world’s stock markets are linked through the international capital markets. So which one is it?
As to what happens now is anyone’s guess. But the United Kingdom will not disappear and sink into the ocean. The world will continue to function and the stock markets will sooner or later reflect reality rather than this herd mentality. It’s happened before and it will happen again.
If you are an investor, stay the course and don’t panic. Buy when others are selling, sell when others are buying. You’ll seldom go wrong.
You have to love Canada Post. It’s another example of the great Canadian mirage. Doing business in Canada seems to always attract a high ranking on the surveys that are looking at the jurisdictions where it’s good to do business. But if you don’t have a functioning Post Office, how can small businesses survive?
Let me give you an example of how things work here, or rather how they don’t work. Yesterday I was sent a package from Toronto, Ontario. The seller selected the service called Expedited Post. Don’t kid yourself, it has nothing to do with expedited in the end. The delivery standard as set by Canada Post is next day delivery. Guaranteed. The package was posted in Richmond Hill, Ontario. It traveled about twenty kilometers to the Canada Post plant in Mississauga, Ontario. It never left the plant and is now going to be delivered one day late.
For this pleasure, you pay premium pricing. But the good news is that if they deliver late, you can get your money back for the postage. The point, in my opinion, is this. Canada Post is incapable of reliably moving mail 200 kilometers. This is not overseas to Asia, Europe or other far off locations. 200 kilometers. If I need something sent to someone by a certain deadline, I cannot rely on Canada Post to get it there on time, consistently. The fact is that the refund notwithstanding sometimes things need to be there on time. If you cannot rely on the Post Office to do it, you’re forced to use Fedex or UPS. They will get it there on time consistently. No one is perfect, but you can rely on their service.
Canada Post, in my opinion, is incapable of consistently providing Canadians with quality postal service. It’s bloated with high-cost staff with attitude (also known as unions). As I mentioned elsewhere, they are no longer civil servants. They are the bosses and Canadians must suffer their shenanigans.
Shipping by Canada Post in Canada is expensive. They claim that the small population spread over a large territory causes the high-cost. The fact is that because of pricing, outlying areas are getting a free ride. They don’t necessarily pay more, it just takes longer to get there. The zonal pricing that they have on some of the premium products does not reflect true population density. It costs the same to send a letter XpressPost in Toronto as it does from London, Ontario to Ottawa. That’s just plain stupid.
The Government of Canada can fix this problem by having zonal pricing that truly reflects the cost of service. It should not cost the same to send a letter by any method two blocks as it does to send it 200 kilometers. The answer my friend is that in Canada politics always trumps economics. The Government will argue that we are all Canadians and subsidies of this sort are normal. This, however, stifles business, particularly small business. Why someone living in densely populated Vancouver should subsidize someone living out in Nunavut is beyond me. The days that this kind of thinking made sense are long gone. We should pay based on the cost of service and not continue to subsidize those who make lifestyle choices on living on farms or remote locations. No one subsidizes Canadians when they buy an iPhone because the cost is lower in the United States.
We have gotten to what I think is an important new issue in the presidential race in the United States. The question of fashion. I’m not sure how this impacts the electorate, but it seems to. Here is an article that looks at Donald Trump’s wardrobe and makes some mention of Bernie Sanders and Hillary Clinton. Do a search on this article. Donald Trump’s bad case of big suit syndrome by Robert Armstrong. .
#donald-trump, #donald-trumps-candidacy, #donald-trumps-suits
I love pens and paper. Throughout the years, I have been a collector of many things, perhaps too many. One of the hobbies that I have retained is that of collecting pens and paper. It might sound irrational to have dozens of pens lying around in a time when we seemingly write nothing that’s not on the computer. But we all have our weaknesses.
For me it’s pretty simple, I love buying a new pen, dipping it in ink and writing on a fresh piece of paper. The only thing that distracts me from the experience is my pretty awful handwriting. I’m so jealous of people that have beautiful handwriting, although there seems to be less and less of them around. As the pen glides along the paper you can preoccupy yourself with a number of aspects of the writing experience – how smooth is it, does the ink “bleed” through the paper and how do you feel about the nib? Smooth? Rough? So many different aspects and they are all personal feelings and experiences.
Needless to say, I’m not the only one interested in pens as there are many, many online retailers of all sorts of pen products. And even more than pens, there are pen reviewers. The internet is great at spawning these businesses that seemingly have no right to exist!
Here’s a really long-standing pen review website called The Pen Addict. I am not entirely sure how some of these blogs become so large and popular with the subject of pens. But there you go!
Here’s the blogger looking for memberships or contributions:
Enjoy reading The Pen Addict? Then consider becoming a member to receive additional weekly content, giveaways, and discounts in The Pen Addict shop. Plus, you support me and the site directly, which I am very grateful for.
Membership starts at just $5/month, with a discounted annual option available. To find out more about membership click here and join us!
You’ll notice that this blog includes guest reviewers as well as the owner of the blog writing. In addition, you’ll notice that there is a lot of third party promotion going on to allow the blogger/owner to generate some revenue. I am not entirely sure whether the blogger buys the pens or has them “donated” to him by third parties.
I have a big problem with sponsored reviews where the reviewer receives the item to be reviewed for free, but that’s just me. I would prefer true impartiality but it’s a struggle to find reviewers that don’t seem to get the stuff that is the subject of the review for free. Just beware when you read this and other review blogs that it is possible that the reviewer is not completely independent.
After getting the pen, the next important thing is paper. Paper is a remarkable material as it has allowed people to communicate with each other over thousands of years. Recently displaced by your computer I truly believe that most people still like to read the printed word on paper rather than a computer screen. In fact, a lot of time is spent trying to get the computer to replicate the look of the printed word on a computer screen. Think about how stupid that is!
I hear and I forget. I see and I remember. I do and I understand.
Confucius
So after getting that brand new pen using it on paper is what it’s all about. Now there is paper and there is paper. It’s not all the same. There are varying qualities of notebooks, for example, ranging from a Hilroy notebook to fine Japanese writing notebooks at $20 a piece or more. But trust me, the writing experience is not the same. Fine notebooks have a life of their own.
So taking that nice pen and using it on good notebook paper is a feeling that is difficult to forget even by those who are most cynical about the whole business. Here is one website that sells fine Japanese paper, Nanami Paper. I’m not endorsing this web store by any means. It’s just an example of what’s out there and the costs of fine paper. Your local stationery store may stock some of these or similar notebooks, but don’t count on seeing it at Staples! Won’t happen.
So after putting pen to paper the experience is complete. Every time I get a new pen I get to do it all over again. It’s a great hobby in that it has so many followers, products and it doesn’t have to be expensive.
So if you are looking for a hobby that can either be very expensive or inexpensive, give it a try. You’ll be surprised how pleasurable an experience writing can be again!
Heresnothing 
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