Letter from the CEO of CMHC a little “extreme and alarmist”: the former CEO of RBC Nixon

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The recent letter from Canada Mortgage and Housing Corporation CEO Evan Siddall to lenders urging them to avoid risky mortgages is a bit “extreme and alarmist,” according to former Royal Bank of Canada CEO Gord Nixon.In a three-page letter dated August 10, Siddall warned that excessive borrowing would worsen the economic pain triggered by the COVID-19 pandemic.

“I have to say I was a bit surprised. I don’t think I’ve ever seen or received a letter like this, ”Nixon told BNN Bloomberg’s Amber Kanwar in a television interview Thursday.

“I think the intention and the concern is certainly real,” he added, noting that Siddall had been bearish in the Canadian housing market “for some time”.

In his letter, which came out a little over a month after CMHC tightened its underwriting standards, Siddall said there was “a bad economic stomach in this business that I want to expose.”

Nixon said that while Siddall’s concerns are valid, the Canadian mortgage market has always been very responsible.

Despite continued signs of strength in the country’s hottest real estate markets, CMHC has warned that average prices could drop as much as 18% from pre-pandemic levels.

“There are obviously different points of view in the market,” Nixon said. “And CMHC’s competitors are certainly more aggressive. And [Siddall is] which raises the fear that in the event of a significant slowdown, it will have an impact on borrowers. ”

Nixon said the unemployment rate, which currently stands at 10.9%, is the single biggest factor when it comes to defaults and mortgage deferrals.

“I would say the letter was probably a little extreme and alarmist, but that said, who knows what the impact of COVID will be in a year,” he said.



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