O Canada, you sensible land!

You may already know that the U.S. dollar and Canadian dollar are almost identical in value . Currently the US dollar will buy about $1.10 Canadian. Just a few months ago the situation was reversed. Toronto and Vancouver homes are as expensive or more expensive than the same property in Los Angeles. Their housing boom tracked the U.S. boom before 2008. The exception is they did not experience the melt down. The price of homes has continued to rise throughout Canada. To quote the Financial Post: “Home ownership a passion for Canadians. It is a passion for ownership that has put Canada in the elite company of countries with estimates that more than 70% of households now own their own home.”

O Canada, you sensible land!

What’s the best way out of our bubble-bust-bubble mortgage muddle that has resulted in a record 2.87 million  American foreclosures last year alone? The answer may lie due north.

O Canada, you have no doubt watched our housing-driven Great Recession with  the stern if sympathetic eye of a schoolmaster who well knows the fate of all  undisciplined schoolboys.

During our financial meltdown, not a single Canadian bank failed. Less  than 1 percent of Canadian mortgages are in arrears. And this in a land that  doesn’t even afford its homeowners the courtesy of a tax break on their mortgage  interest!

I was gob-smacked by a recent McClatchy report out of Toronto with the  headline, “Canada’s mortgage system works.” Of course, compared to our system,  falling as it does somewhere between a faulty pachinko game and three-card  Monte, most of the developed world could make the same claim.

Canada owes its housing stability in large part to a conservative regulatory  environment that holds its 71 federally regulated lenders to stricter  underwriting standards and larger reserve requirements for potential losses than  does its U.S. counterpart.

There is no Canadian equivalent of Fannie Mae and Freddy Mac, which purchase  mortgages from banks and bundle them into bonds. Did I mention that Fannie and  Freddy have been in government conservatorship since mid-2008?

As far as tax incentives go, Canadian homeowners are allowed an exemption on  capital gain from the sale of their primary residence, period. Yet their  homeownership rate is equal to or greater than ours here in Sud Moosejaw.

Stuart Gabriel, a finance professor at UCLA, sees it this way:

“They’ve insisted all along on the more rigorous mortgage underwriting, and  because of that never found themselves originating subprime and no-doc mortgages … some very basic items such as stringency of underwriting seem to go a long  way.”

Indeed. Now I’ll grant you, corralling a total of 71 lenders for 34 million  citizens may be a tad easier than wrangling 8,000-plus FDIC-insured lenders  serving 310 million. But it’s still ironic that Canada’s conservative mortgage  system is unfazed while our “free market” version – and I use those quotation  marks intentionally – has resulted in the largest financial meltdown since the  big one.

O Canada, please send some of your common sense our way as we attempt to  dismantle our house of cards and start over. Hopefully with  two-by-fours.

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