Canada's Housing Bubble

Mar 14 2012 fishyre.blogspot.com

The Honorable Jim Flaherty

Minister of Finance

March 9th 2012

As you are no doubt aware the CMHC has now reached the level of leverage attained by Fannie Mae and Freddie Mac in the US prior to the US housing collapse.

2) Rates are at all time lows, banks are falling over themselves to lend at very low rates and prices are at all time highs. To provide insurance at such a time to vulnerable borrowers is setting these borrowers up for disaster should there be the slightest change from the current ideal circumstances and exposing us all to excessive risk.

May I offer some suggestions, at this late hour to mitigate the risk we are all now exposed to:

In fact the CMHC should have its horns clipped significantly. As mentioned, insuring vulnerable lenders at all time low rates and all time high prices is doing no one any favours. I would encourage you to continue on your path of tightening lending requirements.

Privatizing the CMHC would be the ideal solution to allowing the market-place to properly evaluate risk and reduce the burden on the tax-payer.

3) The Board of the CMHC needs to revamped. I have reprinted the names and occupations of the Board members taken from the CMHC site, below:

We need to rein in one of the largest enablers of this debt explosion, the CMHC, and reduce the liability that we will all face once there is a correction in housing.

Canadian banks have already shown with their ultra-low rates, cash back mortgages and stated income loans that despite their rhetoric and reputation they are following the same pattern as the US banks prior to their housing collapse, let us at least try and mitigate some of this by removing the CMHC's gasoline from the fire as much as possible.