VERICO Designer Mortgages

Bank of Canada governor Mark Carney said in a speech recently that the Canadian economy has deteriorated more quickly than he had anticipated, hinting strongly he will cut interest rates at the next meeting on December 9.

This is also the first time that the Bank of Canada has conceded that the Canadian economy could be headed for a recession. “Starting from flat growth in the first quarter of 2009 and the second quarter of 2009 … recession is a possibility for Canada,” commented Carney.

The technical definition of a recession is two or more consecutive quarters of negative economic growth. The Canadian economy contracted in the third quarter ended and is expected to contract again in the current quarter ended Dec. 31.

Gina Burgio, Mortgage Agent
VERICO Designer Mortgages Inc.
Toll Free: 1-877-345-6265
Fax: 1-877-345-6256
Email: gina@ginaburgio.com
www.ginaburgio.com

Each VERICO Broker is an independent owner operator.

Finance Minister Jim Flaherty pledged today to triple the amount of mortgages the government can buy from banks to as much as C$75 billion.

The Canadian Gov’t, using its crown corporation, the Canadian Mortgage and Housing Corp. (CMHC), purchased $25 billion in mortgages last month.

Allow me to explain in simply terms what the government is in fact doing…

The gov’t via CMHC has insured many mortgages for the banks. In other words, CMHC has sold the banks default insurance on mortgages that the banks have provided to their clients, which guarantees that CMHC will cover any shortfall realized by the banks in the event of default by their clients. The banks issues these mortgages to their clients using their own money, and the bank waits for repayment based on the terms of the mortgage, as with any other typical mortgage.

As a result of the recent program announced by the Cdn Gov’t to purchase mortgages, CMHC is in essence purchasing mortgages from the banks that they have previously insured…. in other words, purchasing mortgages from the banks that they were already on the hook for. These purchases allow the banks to cash in these mortgages now (so that they can free up cash to ideally put towards lending to clients interested in new mortgages), while CMHC and the Cdn gov’t takes on no greater risk exposure for these mortgages since they were previously insured by them.

 Gina Burgio, Mortgage Agent
VERICO Designer Mortgages Inc.
Toll Free: 1-877-345-6265
Fax: 1-877-345-6256
Email: gina@ginaburgio.com
www.ginaburgio.com

Each VERICO Broker is an independent owner operator.