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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@mortgagenow.ca

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