What is Mortgage Crisis?

In the United States, the subprime mortgage crisis was one of the initial determinants of the financial crisis. Wikipeg described this as an increase in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages.

Under general conditions, this situation might include taking out a mortgage on the house that a person owns hoping that the money that he or she obtains from the bank or any financial institution handling mortgaging needs would be sufficient to protect against monetary instability.
Reliable sources revealed that Canada and the U.S. have a lot in common. Both countries are wealthy, stable, technologically advanced democracies with highly developed financial systems. However, as many point out -- including the Wall Street Journal, which also recently asked why Canada avoided a mortgage crisis. There is no mortgage interest tax deduction. There are no 30-year fixed-rate home loans that can be freely refinanced and prepaid. Mortgage lending is far more conservative, and Canadian mortgage lenders have a lot more recourse than American ones.

What is Mortgage Crisis in Canada?

In Canada, a mortgage crisis is when a person takes out a mortgage on a house or on any property that he or she owns. This individual keeps that as collateral with a financial institution, and obtains a loan from the bank. The agreement is the mortgage should be paid off according to the stipulated time in the agreement. The financial has the right to seize or repossess whatever that has been mortgaged since the person who took the money and defaulted in payment. Mortgage crisis is a situation when a person takes out a number of mortgages on any piece of property and is not able to obtain any money to pay the bank back.
If Canadian homeowners default, their other assets and income are on the line, not just the property. Strategic defaulting is not an attractive option. There is more incentive to pay down mortgage debt because there is no tax deduction. Canadians mostly pay their mortgages electronically and automatically from their checking accounts -- so extra effort must be made to actually miss a monthly payment.

What are the Effects of Mortgage Crisis?

Some people suffer worse types of mortgage crisis because they have to end up taking two, or maybe even close to three mortgages on the same piece of property. If they are not capable of paying even one of the financial agencies or banks involved, they stand to lose their homes and money. Another aspect of the mortgage crisis is that a number of major money lending organisations have had major problems due to the global money crunch.
The Canadian government has been forced to set up a number of relief packages to save most of the major Canadian money lending organisations from bankruptcy. The mortgage crisis in Canada is a cause for concern which must be dealt with in a swift and efficient manner.
However, the Huffington Post says that in Canada, despite widespread speculation that, by now, world markets would be chugging along and inexpensive borrowing costs would be a distant memory, economic uncertainty is once again prompting investors to seek refuge in government debt, including Canadian bonds. That could push mortgage rates to historic lows.

What is being done by the Canadian Government?

The Canadian Government has been both alert and aggressive. According to, homebuyers with less than a 20-per-cent down payment are required to have their mortgage insured through the Canada Mortgage and Housing Corporation -- a Crown corporation -- or a handful of private firms that have entered the mortgage-insurance market.
In 2006, the government extended the maximum amortization period from 25 to 40 years, adding hundreds of thousands of dollars in interest costs. Last year, 37 per cent of mortgages taken out were for longer than 25 years.
A business publication said that Canadian banks generally provide 25-year mortgages, with 20 percent down payment. The first five years of the loan is a fixed rate, after which it adjusts to current market rates in five-year increments until the loan is paid off. Borrowers who opt not to put down 20 percent on a home purchase must purchase mortgage insurance to cover the debt in the case of default.

Political Will

The public and private sectors in Canada have shown resilience and political will to cope with the global economic crisis. In so doing, it has managed to keep economic problems including the mortgage crisis to minimum levels. It has cushioned the impact and has made things bearable for Canadian consumers.


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