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My #tweetstorm to clarify a few things re @CMHC_ca’s posture. 1st, we expect prices to fall 9% on average if we have a prompt post-COVID recovery in Canada; our “moderate stress” case (worse than expected) results in -18%, both extrapolate from tentative @bankofcanada forecast.
12% of mortgages are in deferral; that could be 20% by Sept. Deferred mortgages are not in arrears since they are deferred with lender ok. That 20% is *at risk* of being in arrears 90 days after a required payment is missed.
Household debt was already too high and the GDP/income collapse, along with capitalized payments, will drive debt multiples of income much higher. High levels of debt cheat us of future economic growth and create fragility. CMHC must consider systemic as well as business risks.
10% down payments would provide more cushion and there is merit IMO in reassessing availability of 95% loan to value. For now, we still can increase credit score minimums, limit effective debt service coverage and/or reduce auto-adjudication.
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