Regulators are supposed to discourage "pro-cyclical lending" -- the tendency of lenders to make credit more available in good times and less available in bad times, leading to frothier economic peaks and deeper troughs, respectively. Canada has done the opposite, contends a new report from the Canadian Association of Accredited Mortgage Professionals. Federally-backed mortgage insurance criteria became "very liberal" at the 2006-2007 peak of Canada's housing market and now, the criteria has tightened "at the wrong time, and to too great a degree," CAAMP says. The 8% drop in housing resales from August to October after the fourth-round of rule tightening in July foreshadows an overall housing-market decline and creates "unnecessary risk" to job creation and the economy, CAAMP says.
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