Author Topic: Garth Turner - Real Estate in Canada  (Read 211707 times)

TBW

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Re: Garth Turner - Real Estate in Canada
« Reply #1390 on: March 20, 2017, 07:19:03 AM »
I suggest you watch the video I linked.  Explains how Genworth does all the things I mentioned.

There certainly is some chance I wrong and EQB and HCG are conservative lenders.  But I am sceptical.

frank87

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Re: Garth Turner - Real Estate in Canada
« Reply #1391 on: March 20, 2017, 07:24:54 AM »
I suggest you watch the video I linked.  Explains how Genworth does all the things I mentioned.

There certainly is some chance I wrong and EQB and HCG are conservative lenders.  But I am sceptical.

Yes, I'm aware of remedial programs that Genworth (and CMHC for that matter) uses for mortgages in delinquency or default. These programs are there to help avoid foreclosure, which is a costly situation for both the homeowner and the lender.

CalvinL

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Re: Garth Turner - Real Estate in Canada
« Reply #1392 on: March 20, 2017, 07:44:02 AM »
This is the typical belief system in Canada. You don't need cash flow because houses always rise. Why bother with cashflows? Borrow larger amounts and keep bidding asset prices higher so everyone can borrow even more.

It is a beautiful thing. If only the rest of the world could figure this out we would all have limitless funds.

The truth is you still need to "prove" cashflow. But that proof is where some brokers would bent the rules. I went to 2 different mortgage brokers and they both suggested me to "prove" cash flow by simply drafting a renting agreement with someone. There will be tax on those rental income, but the interest would be deductible. They really dont care if those rental incomes are legit. The message was "this is common sense and everyone does it. You are missing out if you don't" Their job is to present a case to the underwriters so that they don't have a reason to reject them.

EliG

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Re: Garth Turner - Real Estate in Canada
« Reply #1393 on: March 20, 2017, 09:21:09 AM »
This is getting comical.

My aunt and uncle who live in Woodbridge have been borderline bankrupt for years just refinanced their house with none other than Home Capital Group. Home Cap gave them a $700K mortgage and they are in their 70's! My uncle is retired and my aunt works as the deli manager at Metro. How on earth can they ever pay this back? There only hope is to sell before the market goes down. If they don't they're bankrupt. But how can a lender give someone in their seventies $700K? And this is to people who have been on the verge of bankruptcy for years. They have only kept their house because they have borrowed over $150K from family members. This makes no sense to me.

50, you need to provide some context otherwise your statement makes no sense.
how much is the house worth ?

if it's worth $2M.  a 700k loan is no big deal at all.  even if they default or if market corrects 30%, the bank is still ahead by repossessing.

$950K but it depends on bidding war. So it doesn't matter about paying back the loan. Only selling the house?

Is it an insured mortgage?

$950K number is kinda curious. Hight enough to keep LTV under 75% but low enough to be eligible for CMHC insurance (< $1M). I wonder if HCG deliberately low-balled the appraised value to off-load the risk to the taxpayers.

SafetyinNumbers

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Re: Garth Turner - Real Estate in Canada
« Reply #1394 on: March 20, 2017, 09:58:22 AM »
I thought CHMC insurance is only applicable if the LTV is more than 80%?

wisdom

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Re: Garth Turner - Real Estate in Canada
« Reply #1395 on: March 20, 2017, 10:28:23 AM »
Above 80% is required but you can get it for lower amounts.

scorpioncapital

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Re: Garth Turner - Real Estate in Canada
« Reply #1396 on: March 20, 2017, 02:02:48 PM »
The thing with insurance it's fun while not paying out, but when you have to pay out, things can get messy. It's like theory vs practice .


bbarberayr

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Re: Garth Turner - Real Estate in Canada
« Reply #1397 on: March 21, 2017, 12:12:46 PM »

clutch

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Re: Garth Turner - Real Estate in Canada
« Reply #1398 on: March 22, 2017, 05:11:01 AM »
I live in Toronto, and this bubble is definitely insane, but I can't wrap my head around whether I can bet against it or not.

Because to me, the premise "this bubble must pop" is not good enough, obviously because of the timing aspect. In some sense, I need to identify potential catalysts for the bubble to pop, and be sure that the catalyst(s) would happen soon.

Here are some scenarios that I though about...

- Highly levered, speculative local investors default on mortgage payments or must sell the property for other reasons. This requires one of 1) interest rate rising fast, 2) cannot find tenants (or rental market tanks), or 3) the investors lose their sources of income / wealth. 1) is unlikely given that the government can control it to prevent popping the bubble, 2) is also unlikely looking at Toronto's rental market right now (no sign of population decline) and 3) likely means some sort of global financial melt down, which is hard to predict.

- Foreign investors suddenly need to sell, perhaps because they suddenly need the money, or they now have an incentive to sell (better investment opportunity elsewhere or maybe China says bring your money back now and you can legitimately keep it?) or they figure that the investments no longer meets their hurdle rates. I really don't know whether any one can predict timing of these events...

Anyone else can think of other catalysts and their estimated timing?

mcliu

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Re: Garth Turner - Real Estate in Canada
« Reply #1399 on: March 22, 2017, 06:52:46 AM »
I don't think you can really time these things..