Like mentioned in the article, often times the material is very obviously suspicious and banks probably know this and still turn a blind eye to it because these borrowers are low risk and much less sensitive to the high/rising interest rates of today...
American banks learned to be much better at it after 2008. And given 2008 and the MBS balance sheets at central banks and the municipal budgets propped up by property values and national mortgage programs intended to encourage homeownership, this is by no means just a matter between the bank and its clients, even if you put aside the money laundering angle. Mortgage fraud destabilizes economies.
Eventually this behavior goes overboard and everything crashes. In the meantime, law-abiding people are screwed by the bubble. Then they are made to pay for the clean up.
Fraud is costly, and rationalizing it contributes to the problem.
Maybe... but you need to keep in mind most of these people are not really building a bubble. Unlike the subprime mortgage crisis, where things were built on inflated valuations, many borrowers in this "scheme" do have more than enough funds to cover the entire mortgage. It's just that their capital is relatively illiquid. This is also why the high interest rates have not significantly affected this.
The effects on housing cost is because of natural market merging where chinese properties are "overvalued" domestically. This is actually not new, and happened with Japan at some point as well.
That being said, the main risk for this is actually geopolitical... Should capital controls tighten (or, like, if war were to occur etc.) then there is a much bigger risk, but many are banking on the fact that, at least given the signs today, that is still unlikely.
No, I'd don't need to keep anything of the sort in mind. I've lived through multiple real-estate and speculation bubbles and crashes now. The arguments you make are the same sort heard before each one, and I can easily anticipate the rationales and excuses that will be offered after the next one.
You don't know how widespread this is. You don't know how many other banks are leaning on this latest house of cards, or how much of this is going on in the US and Europe as well. As far as the banks are concerned it's just one big world of suckers and they play these games everywhere, simultaneously.
And there is no "should." Capital controls will tighten. Wars will happen. Eventually, inevitably, the overhang destabilizes and this heinous crap will blow up.
Again.
These aren't purely private transactions. If HSBC Canada fails, Ottawa is on the hook. The defrauded party here is the public. (And possibly the bank's lenders and shareholders.)
I think what many people are imagining is the subprime mortgage situation of yore. But in this case, a lot of the "fraud" is the result of knock on effects from capital controls in the PRC. Many (new and aspiring immigrants) have capital from sales of their property in China, but due to capital controls, cannot get it out quickly. They have to do it in $50k/year chunks.
Usually a loan or mortgage is the solution for this, but those depend on _income_ rather than _wealth_, so normally these people can't take out as much as they need to, even though they could easily back actual value of the mortgage. So there's a little collusion between banks and mortgage brokers to get in on this market gap (probably more so now that interest rates are high, which these borrowers are much less sensitive to).
Of course, there are risks, but those risks are tied to more geopolitical circumstances and less market-driven, and apparently banks are more willing to take their chances on that.
If BC property is being fraudulently leveraged against Chinese real estate, opaque decisions by the ccp can dramatically impact default rate for Canadian loans.
No market actor would expect that in a non-fraud based market. Instead a transparent pricing of Chinese assets would show them as much less valuable on a risk adjusted basis than their book wealth value. Especially compared to western income or equivalent wealth.
You don't know. The paperwork's fraudulent.
> Many (new and aspiring immigrants) have capital from sales of their property in China, but due to capital controls, cannot get it out quickly
The Chinese property market is in freefall. And capital controls can get tightened. Either condition will result in default.
