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Canada's Bank Mortgage Purchases

At a news conference in Toronto yesterday, Canada's Finance Minister, Jim Flaherty said the government will buy up to an additional $50 billion in insured mortgages by the end of the fiscal year. That will bring to $75 billion the total amount of money available under the program, announced last month. The aim of the program is to encourage lending by taking mortgages off banks' books in exchange for cash.

What is mortgage loan insurance?

Mortgage loan insurance protects lenders against mortgage default. It is usually required when homebuyers make a down payment of less than 20 per cent. To get the insurance, lenders pay an insurance premium, which they typically pass on to the buyers.

Premiums go up on an escalating scale from 0.50 per cent of the loan amount to as much as 2.9 per cent depending on the amount of down payment.

What is the purpose of the latest mortgage purchases?

"What it comes down to is getting the mortgages off the portfolios of the lenders and giving them cash, increasing their ability to loan by improving their risk-weighted capital ratios since cash is less risky than a mortgage," said Tsur Somerville, who holds the real estate foundation professorship in real estate finance at the University of British Columbia.

Doesn't this expose taxpayers to more risk?

In one sense, it does, Somerville said. "Mortgage defaults will rise with the downturn in the economy and from drops in housing prices."

But he said there is no overall increase in absolute risk because "these are all mortgages that are insured under the National Housing Act, so the mortgages all carry insurance either from CMHC or one of the two private providers. If the insurers are unable to cover the value of the mortgage and missed interest resulting from default, the government already provides a 100 per cent guarantee for CMHC insured mortgages. Basically, if there are a lot of defaults, the government already has to cover those costs if the insurers cannot, so we already have the risk."

November 13, 2008 in Arranging Mortgage Financing | Permalink


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Great Post. Thanks for sharing.


Posted by: Prince Of Wales Condos | Aug 15, 2012 11:05:42 AM

well is thats the case its better to do lending business for mortgages

Posted by: condos toronto sale | Nov 26, 2008 4:43:28 AM

RBC Bank President Gordon Nixon - Salary $11.73 Million


I'm a commercial fisherman fighting the Royal Bank of Canada (RBC Bank) over a $100,000 loan mistake. I lost my home, fishing vessel and equipment. Help me fight this corporate bully by closing your RBC Bank account.

There was no monthly interest payment date or amount of interest payable per month on my loan agreement. Date of first installment payment (Principal + interest) is approximately 1 year from the signing of my contract.
Demand loan agreements signed by other fishermen around the same time disclosed monthly interest payment dates and interest amounts payable per month.The lending policy for fishermen did change at RBC from one payment (principal + interest) per year for fishing loans to principal paid yearly with interest paid monthly. This lending practice was in place when I approached RBC.
Only problem is the loans officer was a replacement who wasn't familiar with these type of loans. She never informed me verbally or in writing about this new criteria.

Phone or e-mail:
RBC President, Gordon Nixon, Toronto (416)974-6415
RBC Vice President, Sales, Anne Lockie, Toronto (416)974-6821
RBC President, Atlantic Provinces, Greg Grice (902)421-8112 mail to:[email protected]
RBC Manager, Cape Breton/Eastern Nova Scotia, Jerry Rankin (902)567-8600
RBC Vice President, Atlantic Provinces, Brian Conway (902)491-4302 mail to:[email protected]
RBC Vice President, Halifax Region, Tammy Holland (902)421-8112 mail to:[email protected]
RBC Senior Manager, Media & Public Relations, Beja Rodeck (416)974-5506 mail to:[email protected]
RBC Ombudsman, Wendy Knight, Toronto, Ontario 1-800-769-2542 mail to:[email protected]
Ombudsman for Banking Services & Investments, JoAnne Olafson, Toronto, 1-888-451-4519 mail to:[email protected]


"Fighting the Royal Bank of Canada (RBC Bank) one customer at a time"

Posted by: Paul Fraser | Nov 14, 2008 9:00:45 PM

I guess that shit hit the fan.

Posted by: | Nov 13, 2008 11:31:29 PM

Great information. It's helpful to know what to look for when deciding on an insurance carrier.

Posted by: Mortgage Loan | Nov 13, 2008 2:40:58 PM

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