6 ms·

Are US banks just a lot more strict about source of income than Canadian banks?

mistrial9 3y ago
a non-trivial portion of residential real estate transactions across the USA never apply for a loan. In certain areas it is more so. When real estate retail value rises fast, money appears from everywhere -- hint, not from first time home buyers. The USA Federal system of mortgage loan gurantees has been gamed seriously, over and over since the 80s. It is a whack-a-mole for enforcement. All the parties close to the transactions have exactly the wrong incentives, most of the time. One of the defendants in a recent "pay cash to get your kid into elite school via fake sports" scandal was a mortgage broker in San Diego County. The Judge after reviewing evidence, reportedly told the man on the record "you are a thief." etc
JumpCrisscross 3y ago
> Are US banks just a lot more strict about source of income than Canadian banks? American financial regulators are much more comfortable letting banks fail than their Canadian or European counterparts. (In part this is because of the sheer diversity of banks we have.) Being fined out of existence is a real possibility for an American bank. That shapes behavior.
cbsmith 3y ago
Short answer: no.
dghlsakjg 3y ago
Total conjecture: 1. US banks do not face nearly as diverse a set of applicants, and 2. are only required to hold the loan for 5 years. 1. It is very common in Canada for a person with wealth acquired outside the country to apply for a home loan. At the time I was approved as a guarantor for a home loan for over half a million CAD, I had only been in the country for 2 years, and had no credit history with any Canadian institution (out of laziness I just was added to my wife's accounts as a signer and cardholder when I moved). They accepted copies of my American credit history and bank statements, but had no real way to verify their truth. In the US, I don't think that (relatively) wealthy immigrants wanting a home loan are nearly as common. Richmond, BC is a great example of this: avg home price is 1.5mm and 60% of the residents are immigrants. 2. Canadian mortgages are refinanced every five years, traditionally (it is possible to get a longer term, but very uncommon). Combine this with the fact that Canadian real estate has ALWAYS gone up (until now), and financing a home really wasn't a risky thing. If a bank didn't like a customer, they could refuse to refinance after 5 years. If a bank foreclosed, they were basically guaranteed to be made whole.
- raydev 3y ago
  > They accepted copies of my American credit history and bank statements, but had no real way to verify their truth I'm skeptical here, given how closely the US and Canada work together, both US and Canadian banks share an incredible amount of info with each other and not solely because of cross-border commerce. There is also a non-trivial number of US citizens living and working in Canada so there are services available to them given their special tax requirements.
  - dghlsakjg 3y ago
    If you have information that contradicts what multiple banks have told me I would love to know it, since it would be very nice to have that information available to my Canadian bankers. In the 3 banks I've worked with in Canada, all were completely unable to access my American credit history. The governments do share tax data, but AFAIK the banks have no way to link "John Smith SSN:123-45-6789" to "John Smith SIN:098-76-54321". They even have my US SSN number since Canadian banks report to the IRS. Edit: here's experian explaining it: https://www.experian.com/blogs/ask-experian/u-s-credit-history-will-not-transfer-to-canada/ https://www.experian.com/blogs/ask-experian/u-s-credit-histo...
    - joshuabaker2 3y ago
      Yes this is accurate. I work at a lender that operated in both Canada and the US and the credit bureau integrations were with totally different companies and had different APIs (even for Equifax on both sides of the border)
      - VK538FY 3y ago
        It's been a while but I don't even think that a credit score in Canada is comparable to a credit score in the US. Sure, an Equifax terminal in either country spits out a number in the same range but the formula and calculation are probably different, with different legal frameworks regarding the information contained therein.
- 3y ago
bonestamp2 3y ago
No. I've purchased homes in both countries and from what I've seen, US banks are far less strict. Policies, procedures, and operations are very undisciplined at many US banks (compared to Canadian banks). I have noticed some are starting to become more strict in the past 5 years though.
deleted 3y ago
[deleted]
rconti 3y ago
TFA says: "The official noted that other nations require tax agencies to verify incomes for mortgages, which isn’t the case in Canada." I don't know if it's a legal requirement, but I sure know I had to hand over all of _our_tax information to the bank to validate income when getting a mortgage in the US. You have to sign a form saying the bank is allowed to pul your data from the IRS; you're not just handing over paperwork and promising that it's legit.
- pxmpxm 3y ago
  This - not sure where the sentiment in this thread is coming from, but you have to disclose your tax filings for the last 2/3 years along with all your bank accounts and recent statements.
joshuabaker2 3y ago
Yes, but it’s partly the government’s fault. There’s literally no way for mortgage lenders to pull your tax records in order to verify income. There used to be some third party services to connect to the CRA but they got shut down and replaced with… nothing.
cbsmith 3y ago
Looks like my short answer wasn't well received, so I'll try a longer answer: https://www.reuters.com/world/us/us-seeks-crack-down-real-estate-money-laundering-new-rule-2024-02-07/ https://www.reuters.com/world/us/us-seeks-crack-down-real-es... The irony is the US talks a lot about financial transparency for other countries, but the US itself is the preferred place if you're looking to launder money.

a non-trivial portion of residential real estate transactions across the USA never apply for a loan. In certain areas it is more so. When real estate retail value rises fast, money appears from everywhere -- hint, not from first time home buyers. The USA Federal system of mortgage loan gurantees has been gamed seriously, over and over since the 80s. It is a whack-a-mole for enforcement. All the parties close to the transactions have exactly the wrong incentives, most of the time. One of the defendants in a recent "pay cash to get your kid into elite school via fake sports" scandal was a mortgage broker in San Diego County. The Judge after reviewing evidence, reportedly told the man on the record "you are a thief." etc

JumpCrisscross 3y ago

> Are US banks just a lot more strict about source of income than Canadian banks? American financial regulators are much more comfortable letting banks fail than their Canadian or European counterparts. (In part this is because of the sheer diversity of banks we have.) Being fined out of existence is a real possibility for an American bank. That shapes behavior.

cbsmith 3y ago

Short answer: no.

dghlsakjg 3y ago

Total conjecture: 1. US banks do not face nearly as diverse a set of applicants, and 2. are only required to hold the loan for 5 years. 1. It is very common in Canada for a person with wealth acquired outside the country to apply for a home loan. At the time I was approved as a guarantor for a home loan for over half a million CAD, I had only been in the country for 2 years, and had no credit history with any Canadian institution (out of laziness I just was added to my wife's accounts as a signer and cardholder when I moved). They accepted copies of my American credit history and bank statements, but had no real way to verify their truth. In the US, I don't think that (relatively) wealthy immigrants wanting a home loan are nearly as common. Richmond, BC is a great example of this: avg home price is 1.5mm and 60% of the residents are immigrants. 2. Canadian mortgages are refinanced every five years, traditionally (it is possible to get a longer term, but very uncommon). Combine this with the fact that Canadian real estate has ALWAYS gone up (until now), and financing a home really wasn't a risky thing. If a bank didn't like a customer, they could refuse to refinance after 5 years. If a bank foreclosed, they were basically guaranteed to be made whole.

raydev 3y ago
> They accepted copies of my American credit history and bank statements, but had no real way to verify their truth I'm skeptical here, given how closely the US and Canada work together, both US and Canadian banks share an incredible amount of info with each other and not solely because of cross-border commerce. There is also a non-trivial number of US citizens living and working in Canada so there are services available to them given their special tax requirements.
- dghlsakjg 3y ago
  If you have information that contradicts what multiple banks have told me I would love to know it, since it would be very nice to have that information available to my Canadian bankers. In the 3 banks I've worked with in Canada, all were completely unable to access my American credit history. The governments do share tax data, but AFAIK the banks have no way to link "John Smith SSN:123-45-6789" to "John Smith SIN:098-76-54321". They even have my US SSN number since Canadian banks report to the IRS. Edit: here's experian explaining it: https://www.experian.com/blogs/ask-experian/u-s-credit-history-will-not-transfer-to-canada/ https://www.experian.com/blogs/ask-experian/u-s-credit-histo...
  - joshuabaker2 3y ago
    Yes this is accurate. I work at a lender that operated in both Canada and the US and the credit bureau integrations were with totally different companies and had different APIs (even for Equifax on both sides of the border)
    - VK538FY 3y ago
      It's been a while but I don't even think that a credit score in Canada is comparable to a credit score in the US. Sure, an Equifax terminal in either country spits out a number in the same range but the formula and calculation are probably different, with different legal frameworks regarding the information contained therein.
3y ago

bonestamp2 3y ago

No. I've purchased homes in both countries and from what I've seen, US banks are far less strict. Policies, procedures, and operations are very undisciplined at many US banks (compared to Canadian banks). I have noticed some are starting to become more strict in the past 5 years though.

deleted 3y ago

[deleted]

rconti 3y ago

TFA says: "The official noted that other nations require tax agencies to verify incomes for mortgages, which isn’t the case in Canada." I don't know if it's a legal requirement, but I sure know I had to hand over all of _our_tax information to the bank to validate income when getting a mortgage in the US. You have to sign a form saying the bank is allowed to pul your data from the IRS; you're not just handing over paperwork and promising that it's legit.

pxmpxm 3y ago
This - not sure where the sentiment in this thread is coming from, but you have to disclose your tax filings for the last 2/3 years along with all your bank accounts and recent statements.

joshuabaker2 3y ago

Yes, but it’s partly the government’s fault. There’s literally no way for mortgage lenders to pull your tax records in order to verify income. There used to be some third party services to connect to the CRA but they got shut down and replaced with… nothing.

cbsmith 3y ago

Looks like my short answer wasn't well received, so I'll try a longer answer: https://www.reuters.com/world/us/us-seeks-crack-down-real-estate-money-laundering-new-rule-2024-02-07/ https://www.reuters.com/world/us/us-seeks-crack-down-real-es... The irony is the US talks a lot about financial transparency for other countries, but the US itself is the preferred place if you're looking to launder money.