Episode 38 – A wonderful government program

You’re live here with Jessi Johnson and what I would like to talk to you about right now is this recent 25 billion dollar security purchase through CMHC that the Federal government has orchestrated or is in the process of doing so. A lot of people don’t really understand what that is and in one of my prior video blogs I break down what that is but there’s a little bit more to what’s going on that I would like to enlighten you about. One of those major points is that this is not a buyout. I have a number of people telling me, oh this is just another buyout. It’s not at all. No taxpayer is going to see this as a deficit so to speak. What’s happening is this 25 billion dollar buyout, they’re doing it in five segments, so 5 billion a piece. They’re walking in and they’re buying 5 billion dollars worth of mortgages at a time. What they’re doing is an auction process. So what they are doing is they are taking bids. You are allowed to bid, all the major banks are allowed to bid. No bank is allowed to exceed 1.25 billion dollars when buying. Essentially what is going to happen when they auction off, for each package at a time, the highest bidder gets it. What I mean by that is, the highest bid is who’s willing to cough up the most money to free up that liquid cash, essentially is what it is. Here’s the kicker though, the government is buying these mortgages not with taxpayer money. They basically are borrowing the money, essentially from themselves but they’re borrowing it at a very discounted rate. The Bank of Canada lending rate is only 2.5% and will be 2% quite shortly. So they’re getting 5, 6, 7%, whatever they’re getting off these mortgages right now. They’re going to be making a considerably large amount of money. That being said, on this first 25 billion dollar bailout, they are expected to make 250 million dollars in the first year alone. Which is awesome because that is just going to go back into the taxpayers pocket. Something you may want to realize is this is a very, very good thing. Either way I hope you are very well and you can reach me at www.firsthomeinfo.ca. Have a good day, bye!