In an interview with MarketWatch, Paul Martin noted that while his country has its own version of the Consumer Financial Protection Bureau, the Canadian housing market did not collapse because of its conservative mortgage banking standards.
‘We had higher down-payment equity requirements for borrowers who bought a home,’ said Martin, who served as prime minister from 2003 to 2006. ‘People who put lower down payments had to be insured, and the fact that a borrower is responsible for the debt was key.
‘We also were under a lot of pressure to allow deductability of mortgage interest,’ he added. ‘We didn't do it. What all that meant was that banks held onto those mortgages, so they made sure those were good mortgages. In the U.S., with this idea of slice and dice and piece sell them offâ�¦American financial institutions didn't give a damn if you could buy your house. All they really wanted was a mortgage broker to get their share.’
Martin also believes that deductibility of mortgage interest payments inflated housing prices and contributed to the current problems facing the U.S. housing market.
‘I think the deductibility of mortgages in the U.S. not only inflated housing values, but it inflated yacht values because people were mortgaging their homes to buy yachts,’ he said. ‘I think it is a problem. I'm not sure the U.S. is going to change that law.’