[vc_row][vc_column width=”1/1″]A game of broken telephone…
Fact – Jenny says ‘I like Johnny’s friend Jim’.
Fiction – School newspaper runs with ‘Jenny caught kissing Johnny in gym’.
Detachment from Reality – Student chatter converts the already inaccurate headline into: ‘Jenny impregnated by gym teacher’.
Fiction converted to ‘fact’ – National newspaper picks up the inaccurate headline and reports it as if it were a fact. It is not a fact.
Four steps from something simple to something ridiculously untrue and being touted by ‘dependable sources’ as true.
So it goes with recent comments made by the CEO of Scotiabank…
THE FACTS
May 31, 2016
Scotiabank CEO’s actual comments
Mr. Porter is “a little concerned” about price activity in Vancouver.
“I think there are some levers the government could use and it would be prudent to do so,” Porter said. “The main lever is down payments, so maybe you want to escalate the down payment higher and we would be in favour of that.”
Mr. Porter also suggested a review of qualification standards, specifically stress testing five-year fixed applications via a higher artificial rate on the five-year fixed mortgage.
That’s it. These are the key comments made about mortgages and the Vancouver market
THE HEADLINES
May 31 Global News Hour runs with a story titled ‘Ottawa needs to cool housing market: Scotiabank CEO’, which leads with text on the site stating ‘Scotiabank is sounding the alarm about Metro Vancouver’s hot housing market, fearing the bubble will burst and take a lot of people down with it’.
A bit of a stretch, and then this…
May 31 CKNW News 1130 states that ‘A major bank says it’s going to back off issuing mortgages in Metro Vancouver’.
News 1130 goes on to state ‘Essentially, Scotiabank is looking at our market and getting a sense there’s too much risk here and in Toronto to keep letting people borrow money to buy a home’.
Then it repeats Mr. Porters actual quote: ‘We’re a little concerned about housing prices in the greater Vancouver area and Toronto’.
Yet ‘a little concerned’ somehow constitutes a shift into fantasyland where NEWS1130 appears to have wandered. NEWS1130 in turn draws quotes from two intelligent economists, adding artificial credibility to an invented story.
‘Economist Tom Davidoff with the Sauder School of Business breaks down why Scotiabank is making this move’.
There is no problem with Mr. Davidoff’s subsequent comments and analysis, other than they are comments and analysis of something that is not actually happening, as there was no move to back off issuing mortgages. None.
In fact, on April 23 2016, Scotia did the exact opposite of what is being suggested by NEWS1130 and many other media outlets. Scotia made a positive adjustment to their ‘sliding scale’ guidelines – which previously limited the amount of mortgage money available on homes priced above $1,200,000.00 – and increased mortgage funds available for homes priced above this level.
That’s right – Scotia policy actually created greater availability of funds for Vancouver buyers than was previously available.
This is an incontrovertible fact. A policy guideline.
A written procedural guideline.
Every Broker in BC received this update April 23.
And it is a good policy, a prudent one that the market requires.
But hey, why report on something like this? A subtle policy shift is not as exciting, especially a factual one. It is perhaps more fun to instead create a false headline and invent a story where the is none.
But it gets better still.
RUMOURS ON THE STREET
Over the past week I have had emails from concerned clients asking me if I heard the news…
‘Have you heard Scotia stopped lending in Vancouver as of last Tuesday?’
Stopped lending?
Stopped lending?
That is where we are at now.
From fact to complete detachment from reality.
Fact – “We’re a little concerned about housing prices in the greater Vancouver area and Toronto,” said Scotiabank CEO Brian Porter.
Fiction – Major bank easing off on mortgage lending in Metro Vancouver
Detachment from Reality – ‘Scotia out’ (drops the mic)
Fiction converted to ‘fact’– The Globe & Mail run a story citing the fictional headline as a fact. (eighth paragraph)
Excerpt – ‘The Bank of Nova Scotia has gone to the exceptional step of curtailing its mortgage lending in Vancouver (and Toronto) because it recognizes the market surge is not mostly based on…’
Um no, again guys – Scotia has not curtailed anything at all, quite the opposite in fact.
CONCLUSION
Lesson #1. The media take a comment and create fictitious headlines from it.
Lesson #2. Your co-workers hear the fictitious headline and create their own fantasy story.
Lesson #3. Get your facts from actual practioners of their trade who are working with the actual lenders.
Otherwise all you have is the wrong end of a game of broken telephone.
Speak only of what you know to be truthful, positive, and useful.
Thank you.
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