7 ms·

To maybe offer a different perspective: I think the Canadian mortgages linked to Chinese accounts will likely all be paid. What may be happening is that there

To maybe offer a different perspective: I think the Canadian mortgages linked to Chinese accounts will likely all be paid. What may be happening is that there is a lot of underground chinese financial activity that is not recorded in Canada and part of this 'network' is utilized to get money out of china.

silent_cal 3y ago
It's still fraud
- jabbany 3y ago
  You can label it however you want, if both the lender and borrower are willing participants, it will be difficult to prevent this from happening. Like mentioned in the article, often times the material is very obviously suspicious and banks probably know this and still turn a blind eye to it because these borrowers are low risk and much less sensitive to the high/rising interest rates of today...
  - deleted 3y ago
    [deleted]
  - ak217 3y ago
    It's not that difficult. You just appoint an auditor and make the bank pay progressively higher fines until they figure it out. American banks learned to be much better at it after 2008. And given 2008 and the MBS balance sheets at central banks and the municipal budgets propped up by property values and national mortgage programs intended to encourage homeownership, this is by no means just a matter between the bank and its clients, even if you put aside the money laundering angle. Mortgage fraud destabilizes economies.
  - topspin 3y ago
    > if both the lender and borrower are willing participants Eventually this behavior goes overboard and everything crashes. In the meantime, law-abiding people are screwed by the bubble. Then they are made to pay for the clean up. Fraud is costly, and rationalizing it contributes to the problem.
    - jabbany 3y ago
      > this behavior goes overboard and everything crashes Maybe... but you need to keep in mind most of these people are not really building a bubble. Unlike the subprime mortgage crisis, where things were built on inflated valuations, many borrowers in this "scheme" do have more than enough funds to cover the entire mortgage. It's just that their capital is relatively illiquid. This is also why the high interest rates have not significantly affected this. The effects on housing cost is because of natural market merging where chinese properties are "overvalued" domestically. This is actually not new, and happened with Japan at some point as well. That being said, the main risk for this is actually geopolitical... Should capital controls tighten (or, like, if war were to occur etc.) then there is a much bigger risk, but many are banking on the fact that, at least given the signs today, that is still unlikely.
      - deleted 3y ago
        [deleted]
      - deleted 3y ago
        [deleted]
      - topspin 3y ago
        > Maybe... but you need to keep in mind most of these people are not really building a bubble. No, I'd don't need to keep anything of the sort in mind. I've lived through multiple real-estate and speculation bubbles and crashes now. The arguments you make are the same sort heard before each one, and I can easily anticipate the rationales and excuses that will be offered after the next one. You don't know how widespread this is. You don't know how many other banks are leaning on this latest house of cards, or how much of this is going on in the US and Europe as well. As far as the banks are concerned it's just one big world of suckers and they play these games everywhere, simultaneously. And there is no "should." Capital controls will tighten. Wars will happen. Eventually, inevitably, the overhang destabilizes and this heinous crap will blow up. Again.
      - themaninthedark 3y ago
        No single snowflake triggers the avalanche.
  - JumpCrisscross 3y ago
    > You can label it however you want, if both the lender and borrower are willing participants, it will be difficult to prevent this from happening These aren't purely private transactions. If HSBC Canada fails, Ottawa is on the hook. The defrauded party here is the public. (And possibly the bank's lenders and shareholders.)
    - jabbany 3y ago
      This is somewhat counterintuitive but... the fraudulent mortgages are not more risky, they are often times more stable than other local borrowers. I think what many people are imagining is the subprime mortgage situation of yore. But in this case, a lot of the "fraud" is the result of knock on effects from capital controls in the PRC. Many (new and aspiring immigrants) have capital from sales of their property in China, but due to capital controls, cannot get it out quickly. They have to do it in $50k/year chunks. Usually a loan or mortgage is the solution for this, but those depend on _income_ rather than _wealth_, so normally these people can't take out as much as they need to, even though they could easily back actual value of the mortgage. So there's a little collusion between banks and mortgage brokers to get in on this market gap (probably more so now that interest rates are high, which these borrowers are much less sensitive to). Of course, there are risks, but those risks are tied to more geopolitical circumstances and less market-driven, and apparently banks are more willing to take their chances on that.
      - JumpCrisscross 3y ago
        > the fraudulent mortgages are not more risky, they are often times more stable than other local borrowers You don't know. The paperwork's fraudulent. > Many (new and aspiring immigrants) have capital from sales of their property in China, but due to capital controls, cannot get it out quickly The Chinese property market is in freefall. And capital controls can get tightened. Either condition will result in default.
        jabbany 3y ago
        > You don't know. The paperwork's fraudulent. They don't offer these services to anyone. Because the paperwork is fraudulent, a lot of people involved are/will be personally implicated (could easily lose their job and/or face legal challenges on top) in the scheme. It's not like banks are not monitoring delinquency/default rates already, and if the stats are start indicating problems they will certainly investigate... So while outside observers can't verify anything, those perpetrating the scheme do have to balance their own personal risk and many will in exchange request invasive details around the clients' assets in China to cover their own ass. Not admissible evidence to the bank, of course, but they're not handing these out like candy. > The Chinese property market is in freefall. Realistically, people involved have already sold so this doesn't affect them. At least in the Vancouver area, the brokers (who are the usual point-of-contact to the clients) won't even proceed unless you've already sold and have the cash. > And capital controls can get tightened. This is the main real risk that those in the scheme look out for, but it's a geopolitical risk rather than a market-based one. Which makes more sense when rates are high, like now. When rates were low, this didn't happen as much since there are plenty of clients to go around. --- Also, in the grand scheme of things, even if the bubble bursts, the broader economy is still not worse off. Each cent paid into these mortgages is real "new money" being introduced into the economy. This is not the subprime mortgage days where at the end it became just a transfer of wealth to the banking industry. For the most part "the public" is not the one being defrauded, it's China...
  - fennecbutt 3y ago
    Willing participants huh. Was the taxpayer a willing participant when we had to pay for the monumentous fuck up of 2008? Did the banks and investors pay for it, go to prison? Pretty sure it was just one scapegoat and that's it.
    - PeterisP 3y ago
      The 2008 bailouts were all loans and taxpayers made a profit on them as they got repaid - see https://money.usnews.com/investing/articles/2017-01-19/financial-crisis-bailouts-have-earned-taxpayers-billions https://money.usnews.com/investing/articles/2017-01-19/finan...
      - FireBeyond 3y ago
        Where do you think the banks got the money that enabled them to repay the loans?
        PeterisP 3y ago
        From the mortgages, just as they should, and just as the borrowers (i.e. "the willing participants") deserved to pay - it's not a burden on some unrelated taxpayers.
- deleted 3y ago
  [deleted]
- logicchains 3y ago
  It's a small wrong to right the much bigger wrong of the tyrannical Chinese government preventing people from taking their money out of the country.
- cm2187 3y ago
  I won't throw a stone at anyone trying to circumvent chinese capital controls. Though Canada isn't the place I would go to escape financial repression.
deleted 3y ago
[deleted]
mtalantikite 3y ago
Tangentially related, there was an undercover Vice News report on the connections between Chinese Triads and the Mexico/US fentanyl trade a couple months ago [1]. I also wouldn't be surprised if there were underground networks of capital in Canada that were related to these mortgages. [1] https://www.youtube.com/watch?v=E8wEGVIPJ_4 https://www.youtube.com/watch?v=E8wEGVIPJ_4
uLogMicheal 3y ago
It's not a matter of if they get paid, it's the unfair advantage this gives in an already competitive market. 2/3 of these properties are probably rented out at inflated prices and the two probably pay the mortgage of the third owners live in. This is a free money glitch, aka fraud.
- jeffbee 3y ago
  If the market will bear the rent, why does changing the nationality of the owner improve anything?
  - uLogMicheal 3y ago
    This has nothing to do with nationality and everything to do with fraud. If other nations are doing this, it should stop too. Telling lies to acquire loans is illegal and inflates prices for everyone working legitimately.
    - jeffbee 3y ago
      Yeah but you seem to be suggested that without this yellow peril, the tenants would be, for some reason, getting a better deal. As if the problem is actually that Chinese people are better at price finding.
    - VK538FY 3y ago
      Good point. Well I know Canadians, Chinese, immigrants and banking. I'm not surprised that some Chinese (or any) immigrants in Canada try to take advantage of the linguistic barrier to obtain credit. And since important Canadian documents are often less standardized than in other countries, one can surely employ a bit of artistic creativity with a stamp here and a stamp there to put through a false document. I've personally dealt with fraudulent credit applications, submitted and approved, because the bank employee (Canadian, no relation to the client) wanted to improve his numbers. At least when I was involved in credit, because of the workflow, the middle office made decisions first based on the numbers provided to them by the front office. Of course they were supposed to control all supporting documents but they weren't exactly zealous and if you knew their work habits, you could probably deduce the best time and language for the submission of a questionable application.
JumpCrisscross 3y ago
> think the Canadian mortgages linked to Chinese accounts will likely all be paid Out of curiosity, why? China's stock market is melting down in the midst of persistent deflation. A lot of people who thought they had liquidity may not anymore. Beijing could open the taps, but then that puts pressure on the currency.
- cbsmith 3y ago
  > Out of curiosity, why? China's stock market is melting down in the midst of persistent deflation. A lot of people who thought they had liquidity may not anymore. Beijing could open the taps, but then that puts pressure on the currency. The whole point of the money laundering operation is to get the money out of the country. China going to pot only accelerates it.
  - JumpCrisscross 3y ago
    > China going to pot only accelerates it You have to have money to launder it. Also, if the currency keeps getting hammered, Beijing will crack down on the exit channels.
    - alephnerd 3y ago
      Most Chinese don't invest in their stock market. The accredited investor qualification is much harder to get than in the US. Most investment is in real estate, which has remained fairly stable in Tier 1 cities (which is where most of the post-2008 Chinese Canadians are from) To get more than the $50k limit out, people would use a hawala type system where you'd use assets in China as collateral and get guaranteed cash from a broker abroad.
      - JumpCrisscross 3y ago
        > Most Chinese don't invest in their stock market Most Chinese aren’t buying British Columbian property. > accredited investor qualification is much harder to get than in the US On a relative basis, right? In absolute terms, it’s still very low. Similar to the practical requirements for opening an American brokerage account. > Most investment is in real estate, which has remained fairly stable in Tier 1 cities Do you have data for this? My impression was sales are being discouraged.
avidiax 3y ago
> I think the Canadian mortgages linked to Chinese accounts will likely all be paid. This is a "heads, I win", "tails, you lose" type of scam. The mortgage holders are all judgement proof. They have no income or assets to go after. So if the housing market crashes, the banks have no recourse. It's the same as taking out a mortgage and instead of buying a house, you go to the casino and bet double or nothing. Sure, the intention to pay back is there. But it is contingent on the investment performing, and the bank is taking on unknown risks.
- gscott 3y ago
  There is probably an unlimited number of people in China would would like to own Canada real estate. As long as you don't block those sales it can continue forever.
- deleted 3y ago
  [deleted]
- raydev 3y ago
  > So if the housing market crashes, the banks have no recourse The housing market must first crash before the problem is tangible, and there's no sign of that happening.
  - shutupnerd0000 3y ago
    Yes that's exactly what the person you're replying to said
- joshuabaker2 3y ago
  Mortgages in Canada are different than mortgages in the US in that they are full recourse. If the sale price during foreclosure doesn’t cover the costs, the banks can go after you personally for the balance. So you’d have to either a) leave the country, or b) declare bankruptcy. So, not exactly a risk-free option.
  - avidiax 3y ago
dddddaviddddd 3y ago
> I think the Canadian mortgages linked to Chinese accounts will likely all be paid. If Canadian banks agree with this risk assessment, they have little incentive to actually verify income in these cases.
- deleted 3y ago
  [deleted]

silent_cal 3y ago

It's still fraud

jabbany 3y ago
You can label it however you want, if both the lender and borrower are willing participants, it will be difficult to prevent this from happening. Like mentioned in the article, often times the material is very obviously suspicious and banks probably know this and still turn a blind eye to it because these borrowers are low risk and much less sensitive to the high/rising interest rates of today...
- deleted 3y ago
  [deleted]
- ak217 3y ago
  It's not that difficult. You just appoint an auditor and make the bank pay progressively higher fines until they figure it out. American banks learned to be much better at it after 2008. And given 2008 and the MBS balance sheets at central banks and the municipal budgets propped up by property values and national mortgage programs intended to encourage homeownership, this is by no means just a matter between the bank and its clients, even if you put aside the money laundering angle. Mortgage fraud destabilizes economies.
- topspin 3y ago
  > if both the lender and borrower are willing participants Eventually this behavior goes overboard and everything crashes. In the meantime, law-abiding people are screwed by the bubble. Then they are made to pay for the clean up. Fraud is costly, and rationalizing it contributes to the problem.
  - jabbany 3y ago
    > this behavior goes overboard and everything crashes Maybe... but you need to keep in mind most of these people are not really building a bubble. Unlike the subprime mortgage crisis, where things were built on inflated valuations, many borrowers in this "scheme" do have more than enough funds to cover the entire mortgage. It's just that their capital is relatively illiquid. This is also why the high interest rates have not significantly affected this. The effects on housing cost is because of natural market merging where chinese properties are "overvalued" domestically. This is actually not new, and happened with Japan at some point as well. That being said, the main risk for this is actually geopolitical... Should capital controls tighten (or, like, if war were to occur etc.) then there is a much bigger risk, but many are banking on the fact that, at least given the signs today, that is still unlikely.
    - deleted 3y ago
      [deleted]
    - deleted 3y ago
      [deleted]
    - topspin 3y ago
      > Maybe... but you need to keep in mind most of these people are not really building a bubble. No, I'd don't need to keep anything of the sort in mind. I've lived through multiple real-estate and speculation bubbles and crashes now. The arguments you make are the same sort heard before each one, and I can easily anticipate the rationales and excuses that will be offered after the next one. You don't know how widespread this is. You don't know how many other banks are leaning on this latest house of cards, or how much of this is going on in the US and Europe as well. As far as the banks are concerned it's just one big world of suckers and they play these games everywhere, simultaneously. And there is no "should." Capital controls will tighten. Wars will happen. Eventually, inevitably, the overhang destabilizes and this heinous crap will blow up. Again.
    - themaninthedark 3y ago
      No single snowflake triggers the avalanche.
- JumpCrisscross 3y ago
  > You can label it however you want, if both the lender and borrower are willing participants, it will be difficult to prevent this from happening These aren't purely private transactions. If HSBC Canada fails, Ottawa is on the hook. The defrauded party here is the public. (And possibly the bank's lenders and shareholders.)
  - jabbany 3y ago
    This is somewhat counterintuitive but... the fraudulent mortgages are not more risky, they are often times more stable than other local borrowers. I think what many people are imagining is the subprime mortgage situation of yore. But in this case, a lot of the "fraud" is the result of knock on effects from capital controls in the PRC. Many (new and aspiring immigrants) have capital from sales of their property in China, but due to capital controls, cannot get it out quickly. They have to do it in $50k/year chunks. Usually a loan or mortgage is the solution for this, but those depend on _income_ rather than _wealth_, so normally these people can't take out as much as they need to, even though they could easily back actual value of the mortgage. So there's a little collusion between banks and mortgage brokers to get in on this market gap (probably more so now that interest rates are high, which these borrowers are much less sensitive to). Of course, there are risks, but those risks are tied to more geopolitical circumstances and less market-driven, and apparently banks are more willing to take their chances on that.
    - JumpCrisscross 3y ago
      > the fraudulent mortgages are not more risky, they are often times more stable than other local borrowers You don't know. The paperwork's fraudulent. > Many (new and aspiring immigrants) have capital from sales of their property in China, but due to capital controls, cannot get it out quickly The Chinese property market is in freefall. And capital controls can get tightened. Either condition will result in default.
      - jabbany 3y ago
        > You don't know. The paperwork's fraudulent. They don't offer these services to anyone. Because the paperwork is fraudulent, a lot of people involved are/will be personally implicated (could easily lose their job and/or face legal challenges on top) in the scheme. It's not like banks are not monitoring delinquency/default rates already, and if the stats are start indicating problems they will certainly investigate... So while outside observers can't verify anything, those perpetrating the scheme do have to balance their own personal risk and many will in exchange request invasive details around the clients' assets in China to cover their own ass. Not admissible evidence to the bank, of course, but they're not handing these out like candy. > The Chinese property market is in freefall. Realistically, people involved have already sold so this doesn't affect them. At least in the Vancouver area, the brokers (who are the usual point-of-contact to the clients) won't even proceed unless you've already sold and have the cash. > And capital controls can get tightened. This is the main real risk that those in the scheme look out for, but it's a geopolitical risk rather than a market-based one. Which makes more sense when rates are high, like now. When rates were low, this didn't happen as much since there are plenty of clients to go around. --- Also, in the grand scheme of things, even if the bubble bursts, the broader economy is still not worse off. Each cent paid into these mortgages is real "new money" being introduced into the economy. This is not the subprime mortgage days where at the end it became just a transfer of wealth to the banking industry. For the most part "the public" is not the one being defrauded, it's China...
- fennecbutt 3y ago
  Willing participants huh. Was the taxpayer a willing participant when we had to pay for the monumentous fuck up of 2008? Did the banks and investors pay for it, go to prison? Pretty sure it was just one scapegoat and that's it.
  - PeterisP 3y ago
    The 2008 bailouts were all loans and taxpayers made a profit on them as they got repaid - see https://money.usnews.com/investing/articles/2017-01-19/financial-crisis-bailouts-have-earned-taxpayers-billions https://money.usnews.com/investing/articles/2017-01-19/finan...
    - FireBeyond 3y ago
      Where do you think the banks got the money that enabled them to repay the loans?
      - PeterisP 3y ago
        From the mortgages, just as they should, and just as the borrowers (i.e. "the willing participants") deserved to pay - it's not a burden on some unrelated taxpayers.
deleted 3y ago
[deleted]
logicchains 3y ago
It's a small wrong to right the much bigger wrong of the tyrannical Chinese government preventing people from taking their money out of the country.
cm2187 3y ago
I won't throw a stone at anyone trying to circumvent chinese capital controls. Though Canada isn't the place I would go to escape financial repression.

deleted 3y ago

[deleted]

mtalantikite 3y ago

Tangentially related, there was an undercover Vice News report on the connections between Chinese Triads and the Mexico/US fentanyl trade a couple months ago [1]. I also wouldn't be surprised if there were underground networks of capital in Canada that were related to these mortgages. [1] https://www.youtube.com/watch?v=E8wEGVIPJ_4 https://www.youtube.com/watch?v=E8wEGVIPJ_4

uLogMicheal 3y ago

It's not a matter of if they get paid, it's the unfair advantage this gives in an already competitive market. 2/3 of these properties are probably rented out at inflated prices and the two probably pay the mortgage of the third owners live in. This is a free money glitch, aka fraud.

jeffbee 3y ago
If the market will bear the rent, why does changing the nationality of the owner improve anything?
- uLogMicheal 3y ago
  This has nothing to do with nationality and everything to do with fraud. If other nations are doing this, it should stop too. Telling lies to acquire loans is illegal and inflates prices for everyone working legitimately.
  - jeffbee 3y ago
    Yeah but you seem to be suggested that without this yellow peril, the tenants would be, for some reason, getting a better deal. As if the problem is actually that Chinese people are better at price finding.
  - VK538FY 3y ago
    Good point. Well I know Canadians, Chinese, immigrants and banking. I'm not surprised that some Chinese (or any) immigrants in Canada try to take advantage of the linguistic barrier to obtain credit. And since important Canadian documents are often less standardized than in other countries, one can surely employ a bit of artistic creativity with a stamp here and a stamp there to put through a false document. I've personally dealt with fraudulent credit applications, submitted and approved, because the bank employee (Canadian, no relation to the client) wanted to improve his numbers. At least when I was involved in credit, because of the workflow, the middle office made decisions first based on the numbers provided to them by the front office. Of course they were supposed to control all supporting documents but they weren't exactly zealous and if you knew their work habits, you could probably deduce the best time and language for the submission of a questionable application.

JumpCrisscross 3y ago

> think the Canadian mortgages linked to Chinese accounts will likely all be paid Out of curiosity, why? China's stock market is melting down in the midst of persistent deflation. A lot of people who thought they had liquidity may not anymore. Beijing could open the taps, but then that puts pressure on the currency.

cbsmith 3y ago
> Out of curiosity, why? China's stock market is melting down in the midst of persistent deflation. A lot of people who thought they had liquidity may not anymore. Beijing could open the taps, but then that puts pressure on the currency. The whole point of the money laundering operation is to get the money out of the country. China going to pot only accelerates it.
- JumpCrisscross 3y ago
  > China going to pot only accelerates it You have to have money to launder it. Also, if the currency keeps getting hammered, Beijing will crack down on the exit channels.
  - alephnerd 3y ago
    Most Chinese don't invest in their stock market. The accredited investor qualification is much harder to get than in the US. Most investment is in real estate, which has remained fairly stable in Tier 1 cities (which is where most of the post-2008 Chinese Canadians are from) To get more than the $50k limit out, people would use a hawala type system where you'd use assets in China as collateral and get guaranteed cash from a broker abroad.
    - JumpCrisscross 3y ago
      > Most Chinese don't invest in their stock market Most Chinese aren’t buying British Columbian property. > accredited investor qualification is much harder to get than in the US On a relative basis, right? In absolute terms, it’s still very low. Similar to the practical requirements for opening an American brokerage account. > Most investment is in real estate, which has remained fairly stable in Tier 1 cities Do you have data for this? My impression was sales are being discouraged.

avidiax 3y ago

> I think the Canadian mortgages linked to Chinese accounts will likely all be paid. This is a "heads, I win", "tails, you lose" type of scam. The mortgage holders are all judgement proof. They have no income or assets to go after. So if the housing market crashes, the banks have no recourse. It's the same as taking out a mortgage and instead of buying a house, you go to the casino and bet double or nothing. Sure, the intention to pay back is there. But it is contingent on the investment performing, and the bank is taking on unknown risks.

gscott 3y ago
There is probably an unlimited number of people in China would would like to own Canada real estate. As long as you don't block those sales it can continue forever.
deleted 3y ago
[deleted]
raydev 3y ago
> So if the housing market crashes, the banks have no recourse The housing market must first crash before the problem is tangible, and there's no sign of that happening.
- shutupnerd0000 3y ago
  Yes that's exactly what the person you're replying to said
joshuabaker2 3y ago
Mortgages in Canada are different than mortgages in the US in that they are full recourse. If the sale price during foreclosure doesn’t cover the costs, the banks can go after you personally for the balance. So you’d have to either a) leave the country, or b) declare bankruptcy. So, not exactly a risk-free option.
- avidiax 3y ago

dddddaviddddd 3y ago

> I think the Canadian mortgages linked to Chinese accounts will likely all be paid. If Canadian banks agree with this risk assessment, they have little incentive to actually verify income in these cases.

deleted 3y ago
[deleted]