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CMHC flawed data? Or is this just a shock value article?

 The Globe and Mail’s Grant Robertson and Tara Perkins wrote a shocking article entitled “Potentially flawed data used by banks and lenders bump up house prices”.   Wow, that headline is sure to get a lot of attention.  I mean that’s a really serious allegation. Let’s continue…

They claim to have documents that quote “confidential statements from banks, appraisers and mortgage insurers show rising worry over the use of a database operated by the Canada Mortgage and Housing Corporation (CMHC). The documents suggest the data are flawed and help push home prices up.”

But keep reading this article… and tell me if you see any substance to this allegation.   The article goes on to explain that CMHC has been using an automated evaluation system called EMILI, since 1996 that can determine house values.   They also say CMHC will order appraisals when they deem necessary.   They even quoted an appraiser that says the system is flawed… So this article must be right… after all, it’s in the Globe and Mail!!

I read this article a few times over, to try and find any real facts to suggest that CMHC is using flawed data….  but I came up empty.   Did they make any mention of how many times the EMILI system was used over the past 16 years?  Or how many instances this system produced a wrong property valuation?  How about how many appraisals were required when EMILI couldn’t support a value?  What about the $$ losses that CMHC has incurred due to incorrect property valuation using EMILI?   NO.. no data provided… Just a reference to some document that raised concerns about the EMILI system.   My guess is that any losses were limited or we would have heard a lot more about it….

Folks, this article is another example the media using shock value to get you reading… This is the type of ‘water cooler talk’ that causes us to panic, to make mistakes.   We tend to flock to the negative… bad news travels faster than good news…it’s human nature.     Last night, when I saw this article, there were 62 comments…. as of this morning, when I wrote this article, there were over 300.

I want you to read these comments.… full of angry people… all celebrating the possible scandal of a flawed property valuation system…  Hooray!  There’s a scam…banks, and homeowners got ripped off!  Let’s celebrate!!… The attitudes were disturbing…  Hey, I want to associate with positive people.. not pessimists…  If this is the audience that the Globe is attracting, then maybe we should rethink where we get our information from.

Sensationalism is a dangerous thing.  Let’s continue to take emotion out of it… Let’s make sure we look at facts and clearly separate our opinions.   Buying a house for personal use or as an investment needs to be given careful consideration.   You’ve heard me say that real estate should be a 7 year investment.   History shows us that this is how long it takes to amortize the expenses involved with buying and selling a home.   It’s also how long it takes to go through an up and down economic cycle.    Real Estate isn’t about making a quick buck.

Interest rates are at historical, all-time lows… Have you seen any articles about this lately?   Not many… but that’s because it’s lost it’s shock value.  This won’t grab your attention. But’s true… and for most of us, it still makes good financial sense to buy a house.

Make decisions based on fact… based on your own personal circumstances… based on what works for you… based on what your goals are…based on professional advice…

As always, I welcome your comments and questions… If you have any questions about mortgages or mortgage related issues, please free to contact me.

Steve Garganis

416 224 0114

Steve Garganis View All

As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.

7 thoughts on “CMHC flawed data? Or is this just a shock value article? Leave a comment

  1. Got to say I disagree with the overall tone of your email. I’d say that Emili is a flawed system as well. Perhaps it’s not as dramatic a flaw as is outlined in the article BUT tell me this: a home in Leslieville sells for $439K in 2011. Crappy renos later it’s listed for $739K. Want to bet $100 that if someone put down 5% on this property Emili would appraise it? Probably most likely yes.

    I’m not denying that the article was a bit over – the – top, but “if it bleeds it leads”. Papers are in the biz of selling papers. HOWEVER the truth is that the system needs a bit of a change because the commenters are right (the not disclosed ones) – the values are not accurate and people ARE overpaying for properties because realtors are pushing people to do so.

    • Its all accusations at this point. Still haven’t seen proof that its that easy. I’m not so sure the Leslieville home would pass through the EMILI system. A $300k increase in 1 year would most likely trigger an appraisal request. That’s based on my own experience.

      But my article was less about the Globe and Mail subject, it was more about the negative people out there. We are better off staying away from that crowd. Let’s focus on how we can benefit from today’s circumstances. I want to hear about constructive advice. I want to provide constructive advice.

      And if we’re gonna point out the negatives, let’s give real data to back it up. And let’s give some alternative choices.

      • oh and welcome to the last 500 years of newspaper publishing – guess what, newspapers don’t print many positive articles and when they do they do so in the back back pages. negativity sells and this story is going to have legs whether you like it or not.

  2. the naysayers have been calling for Real Estate to drop for 20 years….a bit like Chicken Little “the sky is falling” i guess they think like a broken watch…that has the right time twice a day…if they keep propagating this bullshit they just might will the people into it….keep trying while I and others are buying….

    • Len, that’s funny. Whoever you know has been saying it for “20 years” is non-existant. shoudl give you a pretty good understand of basic price movements in Toronto. Notice how prices FELL from 1990 to until 2002 – a 12 year run. Second, go ahead and join the chorus of people who are buying – esp those who JUST bought a condo or house in the last 6 months. Umm, you bought at the peak.

      • Denny I trust your spelling errors are a result of typing to fast,,,it can lead to credibility issues when people read your responses. However, I beleive that you only buy real estate and never sell it (I know the obvious, either I or on my my heirs will eventually sell). I continually have bought homes in Kingston and Burlington over the past 20 yrs. Think of those you know around you, in family or your circle of friends. Those with true wealth, multi-generational wealth, generally, have earned it in real estate. It is not an overnight exercise but one of taking a long run approach. We stay away from fad areas, condos and other too good to be true deals. In closing, I wish you the best. Stay true to yourself and ideals and I hope you win in the end. Happiness, family, health and laughter are the real measuring sticks. I just want to have our money work hard for us so we can enjoy the above in leisure for longer!

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