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Canada’s Mortgage Lenders Have Set Aside a Record Amount for Bad Loans

January 16, 2021

Canada’s Mortgage Lenders Have Set Aside a Record Amount for Bad Loans

It’s odd to see it occur while almost every market reports record home sales. 

Canada’s real estate markets are booming, but lenders are preparing for mortgage losses. Bank of Canada (BoC) data shows the allowance for credit losses due to mortgages reached a record high in Q3 2020. The record was reached with the biggest surge in the annual rate of growth since the Great Recession.

Today’s data point is the allowance for credit losses, specifically for mortgages. You might have already guessed what this is – the amount banks set aside in the event of non-payment. When lenders expect a loan has become unrecoverable, they have to add more money to this pile. We’re going to be looking at the aggregate amount across all lenders.

The amount set aside for losses has climbed to a new record high, and is growing unusually fast. Allowances reached $3.9 billion in Q3 2020, up 22.01% from the previous quarter. This represents an increase of 54.11% when compared to the same quarter last year. It’s not just a record high for dollars, but also the highest rate of growth in over a decade.

Biggest Growth Loss Allowances Since Great Recession

Mortgage loss allowances at Canadian lenders grew at the fastest pace since the Great Recession. There’s been consistent growth since 2018, but the annual rate of growth has been tapering. That is, until the most recently reported quarters. Both Q2 and Q3 in 2020, showed a very large surge in growth. It was Q3’s annual growth that was the largest print since 2009 though.

…click on the above link to read the rest of the article…

Behind Vancouver’s Housing Bubble: How Canadian Casinos Are Use To Launder Millions In Chinese Drug Money

October 1, 2017

Behind Vancouver’s Housing Bubble: How Canadian Casinos Are Use To Launder Millions In Chinese Drug Money

Nearly two years after we first observed that Vancouver‘s soaring real estate market is nothing but a bubbling melange of criminal Chinese oligarch “hot money”, desperate to get parked offshore in any piece of real estate, but mostly in British Columbia regardless of price, a new multi-year investigation has uncovered extensive links – including money laundering and underground banking – between China’s criminal underworld and British Columbia drug and casino cash and VIPs, and their connections to China, Macau and the norotious triads.

Here is Postmedia’s real estate reporter Sam Cooper reporting on and explaining how British Columbia casinos are used to launder millions in drug cash.

* * *

On Oct. 15, 2015, a Mountie burst through the front door of an office in Richmond, carrying a battering ram and with a rifle slung on his back. The door swung shut behind him, locking him inside. He was in the lobby of Silver International Investment, a high-end money transfer business, surrounded by bulletproof glass. Behind a second glass door, a woman rushed to make a call while hiding several cellphones. Under her desk was a safe stuffed with bundles of cash. The Mountie, a large man, counted seconds anxiously, wondering if the woman would unlock the interior door.

It was one of 10 police raids in Richmond that day — part of a major investigation that has uncovered massive money laundering and underground banking networks with links to Mainland China, Macau and B.C. casinos, allege the RCMP’s federal organized crime unit and China’s national police service.

Postmedia has spent six months looking into the case, involving freedom of information requests for thousands of documents and dozens of interviews with government and law enforcement sources that were not authorized to be identified.

…click on the above link to read the rest of the article…

Toronto’s land transfer tax revenue is booming, but the cupboard’s still bare

September 17, 2016

Toronto’s land transfer tax revenue is booming, but the cupboard’s still bare

‘The message to Toronto is, ‘Don’t spend it all,’ economist says

Toronto's red-hot real estate market has sent municipal land transfer tax revenues soaring. But the city's spending all that money, not saving it.

Toronto’s red-hot real estate market has sent municipal land transfer tax revenues soaring. But the city’s spending all that money, not saving it. (Sean Kilpatrick/Canadian Press)

In times of plenty, it can be easy to forget there may be leaner years ahead.

But Toronto city council and its city managers need only look westward for a cautionary tale about relying on a volatile source of revenue; here, it’s the municipal land transfer tax — but in Alberta it was oil.

Plunging oil prices have taken their toll on provincial revenues — down to $1.4 billion this year, from a high of more than $10 billion. That’s a glimpse of what could happen in Toronto when the housing bubble eventually bursts, real estate economist Frank Clayton says.

Unless, however, we choose to follow Norway’s example.

City Manager Peter Wallace

City Manager Peter Wallace says that the municipal land transfer tax is a volatile source of revenue – and the city shouldn’t count on it indefinitely. (CBC)

The Norwegian path

The oil-rich Scandinavian country has invested its energy revenues in a sovereign wealth fund since 1996, which now tops more than $1.158 trillion. Typically, the government can draw up to four per cent from that fund each year, slightly more than its annual 3.7 per cent rate of return, according to Norges Bank Investment Management.

And when the economy dipped last year, the country weathered it easily, taking its first-ever capital transfer from what Clayton dubbed its “rainy day fund”.

“So now that oil prices have gone down, Norway’s got assets and it’s producing income,” the Ryerson University professor said. “So the message to Toronto is, ‘Don’t spend it all.'”

…click on the above link to read the rest of the article…

 

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