From Monday's Globe and Mail
April 6, 2009 at 12:00 AM EDT
Transparency would be an asset of great value to Canada as the country faces perplexing policy issues on home ownership and mortgage lending in the current recession.
As things stand, however, the severity of the problems in question is largely a matter of anecdote and guesswork.
If financial institutions and other housing market participants supplied data to Statistics Canada, these issues could be lucidly discussed and resolved.
Canadians may congratulate themselves on a less troubled real estate market than that in the United States, but how much less troubled is unknown. The world economic crisis was triggered by inflated housing prices in the United States, but Canada and other countries had a housing bubble, too.
The number of subprime Canadian mortgage borrowers, for example, remains a mystery, as is the number of people who have lost their homes by power of sale and foreclosure; in the U.S., the equivalent figure is a matter of clear public record on a continuing basis.
Because of the credit crunch, some significant number of Canadians who are successfully meeting their mortgage payments, though their credit ratings show relatively high risk, are in danger of losing their homes when their mortgages come up for renewal.
The lenders that accepted their mortgage applications in the first place would have to advance new cash, because they sold or “securitized” the original mortgage debts.
Some of these non-bank lenders will now be unable to fund what amounts to a new loan, under present economic conditions.
Moreover, the value of the security – the homes – has fallen.
From $3-billion to $5-billion in mortgages and as many as 25,000 borrowers may be affected, but these are only estimates.
Similarly, the question of whether mortgage-loan insurers should compete on a level playing field with respect to the federal government's complex guarantees in favour of insured mortgage lenders is obscured by the lack of information on its implications.
Currently, the insurance policies issued by Canada Mortgage and Housing Corp., a Crown corporation, are 100-per-cent guaranteed, while the policies of private insurers, now principally Genworth Financial Inc., are 90-per-cent covered.
In July, the federal government wisely cracked down on mortgages with no down payments and long, 40-year amortization periods. But, again, the effects of the risky mortgages previously backed are unknown.
The government is rightly trying to keep credit flowing, in housing as in other sectors. It would greatly help if the size of the problem could be discerned.
