Could The U.S Housing Market Crisis Happen Up North?

Two articles today had interesting view points:

"Here at home(Canada), only about 5% of mortgages are of the sub prime variety (I prefer the more explanatory, "sub credit-worthy"). Experts insist the crisis is simply not as great a threat to Canada. But it's still a threat.

Canadian high-ratio mortgages - loans where the purchaser has only made a down- payment of 20% or less of the purchase price - have to be insured for default by the government-backed Canada Mortgage and Housing Corp. or one of the private companies that perform this service. The insurance covers the lenders' losses, not the borrowers', which, to say the least, is an important distinction.

Using that backup, some lenders, even the big banks, approve mortgages with zero down. In addition, an alarming number of folks almost routinely increase the value of those loans in lockstep with the increasing price of their properties. Instead of basing the maximum loan value on a borrowers' ability to repay, there seems to be a tendency toward using the appraised value of the real estate. It's the same tactic haunting U.S. lenders today.

Any correction in house prices can potentially create loans suddenly worth more than the housing stock backing them." Read More

Or

"Many people think that somehow Canada is immune to all of this ... but the likelihood is they're wrong, writes the Tory turned Liberal MP, who appears hellbent on bringing down Prime Minister Stephen Harper.

He warns that Canadians have never had as much of their net worth in real estate "more than 80%, on average," which makes them undiversified and prone to the kind of misery that has hit American homeowners.

Scary stuff, though some critics will argue his crystal ball hasn't always seen eye-to-eye with the future." Read More