Canadian Banks are More Prudent on Mortgage Lending than US Banks; I Can Prove It

Canadian reader Vince sent me a tongue-in-cheek email: "When it comes to lending, we are much more prudent than you Americans".

Vince offered this CIBC Up to 7% Cash Back Offer advertisement as proof.

CIBC Up to 7% Cash Back Offer could be for you if you:

• Want to renovate, furnish or decorate your home
• Would like to take a dream vacation
• Want to prepare for any unexpected moving expenses
• Want to make an additional lump sum payment on your mortgage
• Need money for a special upcoming event such as an anniversary, wedding or child on the way
• Want to renew an existing mortgage early, or transfer your mortgage from another financial institution and have prepayment costs to pay
• Want to purchase investments, open an RESP or make an RRSP contribution

CIBC Up to 7% Cash Back Offer Key Benefits:

• You get up to 7% cash back based on your mortgage amount and term1, to spend however you choose
• This cash back amount is completely tax-free **
• There are no cash maximums - the larger your mortgage, the more cash back you receive

What the hell can possibly go wrong with that?

• For CIBC, not much, at least that I can tell right now. The reason is the Canadian Central Bank is on the hook if the buyer defaults.
• For the idiots who pay too much, take cash out and blow it on a vacation in the Bahamas, quite a bit.
• For the innocent bystanders unwilling to pay bubble prices, content on the sidelines until they have to bail out the above idiots with tax hikes or debased currency, also quite a bit.

On the whole, this looks pretty prudent to me, for CIBC, not for anyone else, until of course the whole mess blows sky high and most lending screeches to a halt with defaults running rampant.

In the meantime, party on CIBC executives. Just remember to take your bonuses for huge profits in cash, not shares. It's the American way.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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