I saw this article, which has little to do with personal wealth (unless you are a banker, or a home-owner in Canada) but couldn’t resist weighing in on with my own personal philosophy. ‘Cuz I have, like, opinions ‘n stuff.

Due North: Canada’s Marvelous Mortgage and Banking System

There’s a lot that we folks south o’ the border could probably learn from this. If we truly dislike nasty boom-bust cycles. But there are a few examples I’d wish we wouldn’t learn from. Here are my opinions (given absolutely free and worth every penny):

#1 – Full Recourse Mortgages: I guess we have this in some states, but not in others. I’m not a fan. Everyone takes a risk when mortgages are written. For the consumer, their skin in the game is called a DOWN PAYMENT. The bank assumes the risk of lost value on the collateral.That’s the way it ought to be.

#2 – Shorter-term fixed rate mortgages: What the freak? While not nearly as bad as our balloon mortgages or variable-rate mortgages, this seems like it could be a contributing cause to the problem, not a cure. It exposes the home owner to open-ended risk.

#3 – Mortgage Insurance: Yeah. Many mortgages in the us (including FHA loans, I think) require mortgage insurance at least until 20% of the house is paid off (or something like that). This is probably not a bad idea.

#4 – No Tax Deductibility for Mortgage Interest: Sigh. I love being able to take my interest on my house off of my taxes. But I gotta agree. I lean in the direction of having flat taxes, anyway.

#5 – Higher Prepayment Penalties: I agree, but this should only be for a limited time. Say, five years, tops. And only for fixed-rate mortgages. Kinda like a cell-phone contract. The original lender gets that as a reward / guaranteed payoff for taking the initial risk.

#6 – Public Policy Differences for Low Income Housing: Amen. IMO, a big chunk of the mortgage crisis can be traced directly to government intervention to try and get people who couldn’t afford it to be home owners. It raised demand on the low-end, which raised demand (and cost) across the board, and created a bubble on a risky foundation. Home ownership is its own reward. We shouldn’t center government policy around it. Let the landlords make money!

#7 – Canada’s Bank Concentration: While it’s great that power is concentrated in the hands of a relatively small consortium, I don’t really see that being an improved survival factor. I prefer to see the risk spread out.

#8 – Loan origination: Can’t say I really know enough to say. Banks service their own loans: AMEN! Another factor in this bubble was that banks were making crappy loans not only because of government mandate, but because they were simply traders of these loans, selling them off immediately to Fannie and Freddie when possible. Electronic Payment: Meh. Yeah, I can see this as a positive factor for the banks. As long as it is encouraged but not mandated ($5 off if you pay electronically!), I’m cool with that.

The other factor I liked hearing was that Canada’s banks are “non-politicized.” You hear that, Washington?