I've talked about collateral mortgages a few times in the past.
Today I opened up the latest edition of the CMP (Canadian Mortgage Professional) Magazine and came across an article that I had to share.
"Beware of collateral-charge mortgages"
While private lenders are increasingly looking for 'opportunity financing' that expands their portfolio beyond refinancing and debt consolidation, that core business remains an industry pillar. The growing use of collateral-charge mortgages by the big banks, however, is threatening to erode that support, said David O'Gorman, broker/owner of MortgageLand Inc., an independent firm brokering private lending deals.
'We're saying 'no' more often now than we did in the past, and i can think of no less than six people since last year that we've simply had to turn away because there was nothing we could do for them,' he told CMP. 'It's because they've signed up for a collateral mortgage with the banks, and have pledged all their equity to that bank. It makes it all but impossible for a second lender to come behind and provide a second mortgage or refinancing or even for a homeowner to switch lenders at renewal.'
Last fall, O'Gorman and other brokers working with private lenders raised the specter of a loss of business stemming from collateral mortgages at the big banks. They are securing mortgages with a promissory notes backed by collateral charges. That translates into a first or second lien on the property for as much as 125% of its value. That doesn't, in fact, mean the borrower is guaranteed access to all those funds.
The private lenders that O'Gorman deals with - along with most banks and monolines - refuse to accept the transfer of collateral mortgages, forcing homeowners to pay additional fees to register a new mortgage in order to move the loan from the original lender for a much-needed second mortgage or refinance.
O'Gorman wrote to people, with 'different to the norm' conditions and increasing the borrower's exposure to significant loss, all the while flogging a cheap closing service, enticing the borrower to go without the opportunity of having an independent legal opinion of the documents they are signing, just plain stinks' he wrote in the two-page letter.
A policy adviser for Flaherty did contact O'Gorman for a brief discussion, although the broker doubts the matter will move beyond that.
Be leary of collateral mortgages. Ask a professional to explain them to you and why they may not be the best option for you.
Thursday, July 14, 2011
Wednesday, July 6, 2011
Mortgage Apprenticeship
The write up well below belongs to http://www.canadianmortgagetrends.com However I thought it so important I wanted to put my words into it and pass it along. For comments and other greatly written articles in our business, I encourage you to go to their website.
Here's my take:
I've been in the Mortgage business approaching 7 years. My first couple of years were very difficult. Fortunately I was able to be mentored by one of the best brokers I know today.
In my first year of the business I did place a few mortgages, with the help of my mentor. My MAIN focus though was learning products and learning them well. I used to go for coffee on a daily basis with lender reps so I can gain knowledge. I still do this. I thought that this was mandatory as, why would I want to put someone in such a big investment and not know what I was doing???
So often I see "Mortgage Professionals" come right out of school and try to jump in and sell mortgages to people without knowing if that's the best product for someone. All they worry about is having the best rate. As you've read in my previous posts, IT'S NOT ABOUT RATE. It's about knowing your products and finding the right match for that person(s) need, for the short term AND the long term.
As a true mortgage professional, I am still consistently going out with my lender reps to gain product knowledge and being an AMP, (Accredited Mortgage Professional) I am required to do a minimum 12 hours of education, which I consistently do more than every year. Not to be a bad mouth, however, bank reps do NOT have to go to school to get licensed. They also do not have to do training hours yet I do know some that do.
I truly believe to keep our industry as professional as possible, we must be adhered to proper training in the beginning 2 years and mandatory education for EVERYONE no matter if you have the AMP designation or not. We have to stay on top of our products and make sure we always do the right thing for the client.
Article from http://www.canadianmortgagetrends.com
Mortgage Apprenticeship
Plumbers can't get a license without an apprenticeship.
Makes sense. You wouldn’t want a botched pipe job putting your house under water and costing you thousands.
The advice of a mortgage banker or broker could cost you just as much—if it’s bad.
That might make you wonder: Why is there virtually no legislation to ensure that bank reps and brokers have the practical knowledge to advise you properly?
We as brokers do have to write a licensing exam (depending on province). That, however, doesn’t prepare us to skillfully counsel you about:
term selection and suitability
mortgage restrictions
refinance analysis
mortgage portability rules
prequalifying with atypical income or credit
credit rebuilding
financing condition removal
porting default insurance
…and dozens of other mortgage topics where advice could cost (or save) you thousands.
Few things would boost our industry’s creditability more than practical training requirements. A 12- to 24-month apprenticeship under an experienced sponsoring broker would ensure new brokers have a minimum degree of competence when advising consumers.
At the moment, our industry relies on a system whereby someone who passes a background check, completes a licensing course, and joins a brokerage firm, can counsel you on a transaction worth hundreds of thousands of dollars. Poor guidance generally goes unnoticed because, most of the time, customers don’t even know they’ve received bad advice.
Fortunately, the majority of practicing mortgage professionals are experienced and highly capable. But it takes time and a lot of mistakes (often at customers’ expense) before most new brokers have the skillset needed to be proficient.
Having a senior broker review and sign off on a new recruit’s applications for 12-24 months would be one way to help clients avoid paying for inexperience.
Rule of Thumb: Never be afraid to ask your bank rep or broker:
How long he/she has been a full-time mortgage professional
How much volume he/she has closed in the last 12 months.
If the individual has been full-time less than a year or has closed less than $5 million of mortgages in the last 12 months, take extra care when evaluating their expertise.
Here's my take:
I've been in the Mortgage business approaching 7 years. My first couple of years were very difficult. Fortunately I was able to be mentored by one of the best brokers I know today.
In my first year of the business I did place a few mortgages, with the help of my mentor. My MAIN focus though was learning products and learning them well. I used to go for coffee on a daily basis with lender reps so I can gain knowledge. I still do this. I thought that this was mandatory as, why would I want to put someone in such a big investment and not know what I was doing???
So often I see "Mortgage Professionals" come right out of school and try to jump in and sell mortgages to people without knowing if that's the best product for someone. All they worry about is having the best rate. As you've read in my previous posts, IT'S NOT ABOUT RATE. It's about knowing your products and finding the right match for that person(s) need, for the short term AND the long term.
As a true mortgage professional, I am still consistently going out with my lender reps to gain product knowledge and being an AMP, (Accredited Mortgage Professional) I am required to do a minimum 12 hours of education, which I consistently do more than every year. Not to be a bad mouth, however, bank reps do NOT have to go to school to get licensed. They also do not have to do training hours yet I do know some that do.
I truly believe to keep our industry as professional as possible, we must be adhered to proper training in the beginning 2 years and mandatory education for EVERYONE no matter if you have the AMP designation or not. We have to stay on top of our products and make sure we always do the right thing for the client.
Article from http://www.canadianmortgagetrends.com
Mortgage Apprenticeship
Plumbers can't get a license without an apprenticeship.
Makes sense. You wouldn’t want a botched pipe job putting your house under water and costing you thousands.
The advice of a mortgage banker or broker could cost you just as much—if it’s bad.
That might make you wonder: Why is there virtually no legislation to ensure that bank reps and brokers have the practical knowledge to advise you properly?
We as brokers do have to write a licensing exam (depending on province). That, however, doesn’t prepare us to skillfully counsel you about:
term selection and suitability
mortgage restrictions
refinance analysis
mortgage portability rules
prequalifying with atypical income or credit
credit rebuilding
financing condition removal
porting default insurance
…and dozens of other mortgage topics where advice could cost (or save) you thousands.
Few things would boost our industry’s creditability more than practical training requirements. A 12- to 24-month apprenticeship under an experienced sponsoring broker would ensure new brokers have a minimum degree of competence when advising consumers.
At the moment, our industry relies on a system whereby someone who passes a background check, completes a licensing course, and joins a brokerage firm, can counsel you on a transaction worth hundreds of thousands of dollars. Poor guidance generally goes unnoticed because, most of the time, customers don’t even know they’ve received bad advice.
Fortunately, the majority of practicing mortgage professionals are experienced and highly capable. But it takes time and a lot of mistakes (often at customers’ expense) before most new brokers have the skillset needed to be proficient.
Having a senior broker review and sign off on a new recruit’s applications for 12-24 months would be one way to help clients avoid paying for inexperience.
Rule of Thumb: Never be afraid to ask your bank rep or broker:
How long he/she has been a full-time mortgage professional
How much volume he/she has closed in the last 12 months.
If the individual has been full-time less than a year or has closed less than $5 million of mortgages in the last 12 months, take extra care when evaluating their expertise.
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