Should CMHC be More Honest about Foreclosures?
CMHC has landed itself in some pretty hot water, jumped right out and dried off a bit, and has since remained only slightly damp (and warm.) The Crown organization that is largely known for issuing mortgage insurance but in fact takes on many roles, has recently been accused of all kinds of misdoings and sketchy practices, as it’s recently been revealed that they haven’t been disclosing the fact that some of the properties they’re trying to sell are in foreclosure. The question is, were they honest or not? And does it matter?
The CMHC came into question this past week when Quebec Realtors broke out in an outcry that CMHC was asking them to withhold the fact that some of the properties they were showing clients were in the process of foreclosure. At the time, telling a client such information was mandatory by law, and Realtors were concerned that holding back that information would be an ethical breach.
In a statement to its members, the Quebec Federation of Real Estate Boards brought the matter to their attention, and stated in no uncertain terms that CMHC was putting them in a bad position by asking them to hide the truth from their clients.
“Because the repossession field is currently a mandatory field in the brokerage system you have no choice but to indicate ‘no,’ which goes against ethical rules stipulating that real estate brokers are obliged to publish information that is truthful and verified,” the statement said.
Since that time, CMHC and the Quebec Federation of Real Estate Boards have come to a new agreement, now making it legal and legitimate to withhold that information. But just because it was an agreed-upon decision, does that mean it was the right one?
The most severe critics have stated they believe CMHC wants to withhold the information about foreclosures because they’re trying to protect themselves from when housing prices collapse – a belief many still think is going to happen.
But, CMHC says that it’s nothing that sinister or shady. They simply want to avoid the crazy low-ball offers that are often associated with foreclosures. They also defended themselves by saying that they are sellers. And just like any other sellers, they want to get the most bang for their buck. Or rather, their foreclosed property.
Mark McInnis, vice-president of insurance underwriting, servicing, and policy with CMHC said when speaking with the Financial Post. “We establish our target prices and we stick to our guns. It’s more efficient to deal with people who are paying fair market value.”
And he has a point. Low-ball offers are notorious with foreclosed properties, because buyers know that banks don’t want to hang onto that home and are really just looking to recoup whatever costs they can. And he might be right when comparing CMHC with other sellers too. After all, if a private seller had to sell right away because they were being relocated for work, would they be obliged to disclose that to the seller, and show their desperation? No. So maybe CMHC should be held to the same standards.
Or perhaps they shouldn’t. If in fact they’re withholding any kind of information to protect themselves, that would be a risk to the Canadian public, and something they should be aware of.
Do you think the fact that properties are foreclosed should always be disclosed to buyers? Or do you think it’s fair to ask them to pay fair market value, even if the seller is in a bit of a situation?