Home Finance: Is The Canadian Way Better?

Discussion in 'Economy' started by Madeline, Jan 16, 2011.

  1. Madeline
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    Madeline BANNED

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    They have a different economy, but still....only less than 1% of all Canadian mortgages are in default and no Canadian bank failed during this recession.....or during the Great Depression. The key seems to be higher underwriting standards, and yet the rate of home ownership is about the same as in the US.

    A few key features are:

    * The typical loan requires 20% down and lasts for 25 years.

    * There is no mortgage interest deduction, which is thought to encourage Canadians to pay down their mortgage debt faster.

    * These loans are recourse. If the debtor hands the keys to bank, he still owes.

    * There is no secondary mortgage market. No Fannie Mae or Freddie Mac will take a loan off a bank's books.

    Here's the entire article:

    Few foreclosures, no bank failures: Canada offers lessons | cleveland.com

    What say you? Should we borrow these ideas?
     
  2. uscitizen
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    uscitizen Senior Member

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    We pretty much had it that way in America 30 years ago.

    But the financial industry wanted more profit....
     
  3. boedicca
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    boedicca Uppity Water Nymph Supporting Member

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    The banking industry always wants more profit.

    (And so do you if you ever want a raise.)

    What changed in the last 30 years is government promoting home ownership via taxpayers taking the risk for subprime loans (loans without proper documentation and no or low down payments).

    Fannie Mae, Freddie Mac, the Federal Reserve, and the Federal Government enabled the mortgage bubble and burst.
     
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  4. uscitizen
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    uscitizen Senior Member

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    Yep, but I do not lobby the government like the finiancial industry does.
    Who do you think lobbied for Fannie and Freddie to be created?
     
  5. Madeline
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    Madeline BANNED

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    So should we be mimicing Canada? And if so, which ideas should we borrow?

    I'd like to see higher underwriting standards and elimination of the mortgage interest deduction, for starters.

     
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  6. boedicca
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    boedicca Uppity Water Nymph Supporting Member

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    And who encouraged and rewarded the lobbying?

    If the government is going to interfere in the private sector, the private sector is going to respond by trying to influence how the interference is implemented.

    You are focusing on symptoms instead of the root cause.
     
  7. Madeline
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    Madeline BANNED

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    Okay, what is the root cause IYO, then?
     
  8. boedicca
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    boedicca Uppity Water Nymph Supporting Member

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    How about we get the government out of Fannie Mae and Freddie Mac, get rid of the Federal Reserve as a branch of government, reform the tax code to a flat tax (get rid of the mortgage deduction and all other forms of social engineering in the tax code), and stop bailing out banks?

    Canada has also dramatically cut government spending and reduced its debt. We should emulate them in these areas as well.
     
  9. Madeline
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    Madeline BANNED

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    I am always amused by people who want to get rid of the Federal Reserve. How would modern banking work without it, boedicca?
     
  10. boedicca
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    boedicca Uppity Water Nymph Supporting Member

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    Big Government.
     

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