Sub-Prime Mortgages: Canada’s Dirty Little Secret

Donald Ingram submits:

Canadians observed the sub-prime crises and consequent financial meltdown with morbid fascination, all the while congratulating themselves that it would not happen to them. After all, the laws forbade anyone from walking away from an underwater mortgage and strict rules were in place to even qualify for a mortgage.

The fact is, over 90% of existing mortgages in Canada are "securitized" – that’s the practice of pooling mortgages and other loans, then issuing new securities backed by MBSs, or Mortgage Backed Securities. In order to find buyers for these securitized mortgage pools, the Canadian Government has put guarantees on them by directing the Canadian Mortgage and Housing Corporation (CMHC) to guarantee ALL Canadian mortgages.

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