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Yahoo Finance published an article last week about why the Canadian housing market didn't collapse.

They outlined three main reasons why the Canadian housing market has barely flinched in the wake of global turmoil, recessions, and housing problems south of the border and around the world.

  • The Canadian banks don't sell off their mortgages.  They hold them and service most of them. This means that they will make sure that a potential homeowner can afford where they live before giving out loans.
  • The Canadian banks didn't get in the sub-prime mortgage game – What's interesting here is that the Canadian laws, just like the American laws, allowed them to get into this market if they so desired.  They didn't.
  • The Canadian laws do not let homeowners simply walk away with only their credit score in peril – Canadian law states that if you walk away, the banks can not only seize your house but can go after other assets to cover their losses.  I've made it clear in the past how I feel about this issue, so I love this one.  Holding people accountable, what a concept!

This shows that with a little bit of common sense, the housing market collapse could have most likely been avoided or certainly dampened in the severity in which it took is taking place.

The crazy part is that the United States could probably follow their lead, both from a governmental policy perspective and from a corporate policy perspective, but my guess is that none of this will happen.  The banks are too greedy and they have their hands in the pockets of Washington via lobbyists and campaign donations, so this influence isn't going away anytime soon.

Kudos to Canada for getting it right.