1. Fraudulent applicants come to the bank with crazy stories to ask for enormous loans/mortgages toward a Toronto house, allegedly to turn hyper-suspicious big piles of cash into a more reputable-looking asset.
2. HSBC goes along with that because they want to suckle on the sweet regular payments of suspicious cash, even though they ought to damn well know that these customers are just a front for an organized crime ring.
3. As a bonus, this locally-concentrated money-laundering/speculative-investment thing screws up the property market for Torontonians. The local multimillionaire babysitter is willing to buy at almost any price because their secret financial goals are very different than yours.
While looking for other articles, I notice it's been ~16 months after the end of HSBC 10-year tangle with US regulators over their business with Mexican and Columbian drug cartels. [0]
[0] https://www.reuters.com/business/finance/us-fed-terminates-e...
1. They come with some money, enough for whatever minimum down payment is required (but notably, the issuing bank will also lower down payment requirements for clients with high income or assets, which are faked anyway)
2. HSBC is incentivized to issue mortgages, yes, that's their business. But the actual fraud here sounds more like cash kickbacks from the fraud buyer to the issuing agent themselves.
3. Home prices are made on the marginal sale, so a small amount of this activity can have a large upward pressure on prices. This leads to typical bubble scenarios, and you can keep rolling over or refinancing mortgages as prices keep rising (or even just sell). To get a sense of this, over the past few years, the average Canadian house gained in price something like double the average Canadian income.
So in summary, a lot of this could be explain by plain fraud, enabling foreign buyers to both perpetuate, and participate, in a giant housing bubble. If that's true, and it all comes crashing down, then god help us all.
There are so many Canadians waiting on the sidelines with their down payment ready to be deployed and are out competed year after year.
The pent up demand for housing is enormous. Even with the high interest rates.
Hell, with the rumors of interest rates going down, there is a frenzy to BUY now, suck up the high interest and get a relief in a few years, because people are afraid that if the rates go down, more people will qualify for a mortgage and it will bring more pressure, so better to buy now if you can.
I am convinced it will not go down in my life time ever. Too much demand, not enough supply.