TD Takes Heat for its Collateral Mortgages

Thank you Canadian Mortgage Trends for this great article!

I'm hoping more and more people start to realize how important it is to speak to a professional who is NOT tied to one lending institution. This is not just with a mortgage, it's with investments, insurance and so forth.

There's a reason why we're here...to help educate you and to help you make the right decisions...with only you and your goals in mind. No one elses, ie shareholders, big CEO's etc...

Collateral charge mortgages got more bad press on Friday after CBC’s Marketplace ran this report.
The gist of it is that collateral mortgages "effectively trap you at the bank," says the CBC (which is not entirely true…more on that below).
TD Canada Trust, which sells only collateral charge mortgages, was caught in CBC’s crosshairs. An undercover reporter went into a TD branch with a hidden camera, asking the mortgage rep what made TD mortgages different than those at other banks.
After being questioned in four different ways, the TD rep finally disclosed that TD’s mortgage was a collateral charge, saying:

"This could be considered a con for clients who want flexibility to have the choice of transferring out (to another lender).”

CBC approached TD corporate for comment, but TD apparently wouldn’t respond about its collateral mortgages on camera.
Collateral charges are designed so that you don’t need to pay refinance fees if you add more money to your mortgage. But they’re also criticized because, in most cases, they force you to pay legal/registration fees to switch to another lender (due to the way they’re registered). In turn, that roadblock helps the lender retain more customers.
Even TD itself does not accept collateral mortgages from other lenders. In its mortgage guidelines (which we obtained freely off the Internet) TD says: “Collateral mortgages (e.g. Manulife One accounts and Scotia Total Equity Plan accounts) are secured by collateral mortgages and cannot be transferred [to TD].”
It should be noted, however, that a handful of lenders currently pay legal fees to attract business from people with collateral mortgages. ICICI Bank (for status brokers) and Royal Bank (according to a rep we spoke with) are two such lenders.
One of the bones CBC picked with TD was that its collateral registration is not disclosed to clients until the customer is signing in the lawyer’s office, at which point it's too late to switch lenders. CBC might have been referring to old documentation, however, because TD’s approvals now clearly disclose that their mortgages are a “COLLATERAL CHARGE.” (Whether the borrower reads this disclosure and understands it, and whether the TD rep or broker explains what it means, are separate issues.)
Collateral mortgages are useful and can save you roughly $500 to $800 in legal costs if you:

a) have a high likelihood of refinancing before maturity, and
b) the lender approves you for those additional funds (a big caveat).

But they also have potential drawbacks, over and above the additional switching cost:

• Since they’re often registered for more than the mortgage amount, collateral charges can sometimes prevent you from obtaining a second mortgage or a secured line of credit elsewhere (unless you pay any penalties and fees required to leave the collateral mortgage lender, or unless that first lender reduces the mortgage amount it has registered and permits secondary financing).
• Title insurance premiums can sometimes be higher for a collateral mortgage than for a regular mortgage.
• In some cases, defaulting on another debt owed to a collateral mortgage lender can put your house at risk. That’s because that lender can theoretically seize your home equity if you don’t pay that other debt. (This is called “offsetting” in legal parlance.)

A number of other lenders sell collateral charge mortgages besides TD. They do so even if the borrower wants just a regular mortgage with no line of credit. Such lenders include ING Direct, National Bank and various credit unions, for example. And most of these lenders don’t give you an option to refuse this type of registration.
All in all, collateral mortgages are right for some but clearly unsuitable for many. A few years ago, TD said that “20 times” as many customers refinanced with them versus leaving for another lender. But that figure has to be less now, given that government rules prohibit refinances above 80% loan-to-value, and given that home price appreciation isn't what it used to be.
To that extent, the net benefit of collateral mortgages is questionable for most of today's borrowers.

Source: http://www.canadianmortgagetrends.com

Painful Breakage Costs

Great article from Canadian Mortgage Trends. The big 6 have been proven to be very expensive to get out of their mortgage.

Personal Finance Columnist Rob Carrick deserves a tip of the hat for bringing TD’s inordinate mortgage breakage fees to light. More here. Yet, while Carrick's article focuses on TD's excessive fees, TD is far from the only lender that exacts extra pounds of flesh for breaking a mortgage contract.
Others lenders do things like:

• Charge 3-month interest penalties based on posted rates instead of your actual rate like most lenders (See: 3-Month Penalties Aren’t Always Clearcut)
• Charge $300-$1,000 “reinvestment fees” on top of your penalty and discharge fees
• Charge interest rate differential based on posted rates (common among the Big 6 banks) instead of cheaper discount rates 
• Impose IRD charges based on bond yields (which can sometimes be more expensive than even posted rate penalties)
• Apply IRD penalties to variable-rate mortgages
• Charge 6-12 month interest penalties, instead of three months
• Prevent early termination altogether.

Before choosing your next mortgage, ask your lender or broker for a written list of early termination charges, as well as the lender’s penalty formula.
The fairest lenders impose only a discounted penalty and a simple discharge fee. If you’re going to deal with a lender that charges you through the nose to break early, you better be confident that you won’t need to. And, your interest rate better be well below all other comparable lenders. (This assumes you’re well qualified because your options may be limited if you’re not.)
When accepting harsher termination charges in exchange for a low rate, remember that it’s not always possible to know where life will lead you 3-4 years down the road (that’s when most folks break a 5-year mortgage).
People terminate their mortgage before maturity for numerous reasons, including:

• equity take outs (People use these for debt consolidation, buying other properties, investing, educational borrowing, renovations, business start-up, etc. Many lenders let you tack on extra money to your mortgage without a penalty. Some don't. Others charge no penalty but bend you over on the interest rate.)
• job change
• new marriage (e.g., consolidating residences)
• separation/divorce
• upsizing or downsizing (if a port isn’t advisable)
• rate improvement
• amortization extension
• adding a readvanceable line of credit
• health issues
• unemployment
• relocation.

Source http://www.canadianmortgagetrends.com

Stain removal

Household cleaning tasks:

To clean deodorant stains on clothes: Mix a past of baking soda and a small amount of water, then work it into the stain and allow it to sit for a few hours. Brush away and repeat as necessary. Alternatively, try lemon juice with a liberal sprinkling of salt. Scrub with an old toothbrush, and let dry in direct sunlight.

To clean burnt pots and pans: Mix baking soda with water, bring to a boil, let cool, then scrub with a non-abrasive scouring pad. White vinegar is also an option (instead of baking soda) but this can create a rather strong odour. Tough stains may call for a detergent paste or even oven cleaner, but try milder solutions first.

To get gum out of carpeting: Apply an ice cube wrapped in a thin towel or plastic bag to freeze the gum, and then chip it away with a spoon or dull knife. The smaller bits can be loosened with a degreasing product, cooking oil or even peanut butter, but these could stain your carpet, so always test first.

Note: Always test any cleaning solution on an inconspicuous area or surface before using.

Why it's SO important to talk to a Mortgage Professional

In the last couple weeks I have begun to feel really bad for a couple of my trusted realtor partners.

They have had clients whom have gone to their bank for financing and have been given the green light to go out shopping. Well, in these few cases all of them were unable to purchase.

This being the best and worst case. Clients go into the branch, (I wont mention the actual bank as I've heard it happening at others) sits down with the supposed 'mortgage specialist' and the person behind the desk says this... From looking at what you've told me for income etc. I believe you can purchase for the $300k you are looking for. Clients say great, can we have a pre-approval to be certain. We don't do pre-approvals, we tell you yes and go write an offer and then we'll get everything going, is what they were told.

Well they went out shopping and wrote an offer. The realtor finally convinced them to talk to me, which was a good thing. First off, what they were being offered in terms of product and price, was way offside of current market conditions. Secondly, if this person at the branch would've done his homework up front, i.e pull credit and check income, he would've found out that there was a concern with credit and they were NOT financeable. So ALL that work, writing offers, seeing homes, was for not. Again, he didn't even pull their credit, nothing!

I see this happening more and more these days. As banks ramp up their 'mortgage specialists' to try and get rid of us, Mortgage Professionals. They're hiring people that really don't have a true clue. Of course by all means, this is not everyone. Just seems to be the norm. There are some really good bank reps and I have relationships with them. And don't get me wrong, there are some misguided brokers out there too!

Remember, we as Mortgage Professionals have to go to school and educate ourselves all year round to stay on top of the industry. Well, most of us do anyway! More often than not, the person at the bank has done his duty and gets pulled to a different position within 6 months, and to be a 'mortgage specialist' they do NOT need any real education etc. How can you really trust anyone that has no education, real guidance, or only has the small couple products to sell to you, with your biggest financial purchase? In my opinion it's very hard!

I hope more and more people will start getting the word out and help the general public understand that we are professionals and do this day in and day out. I've been here for 8 years and have no reason to go elsewhere! It's my passion and I LOVE helping people!



Side notes: Remember that bank employees are generally paid a base salary and a commission on how high of a rate they charge you. This is why in the example above their offer was a lot higher. Once the bank knows a broker is involved they all of a sudden come down. Well, why wouldn't they offer you this to begin with???

If it wasn't for us we'd all be paying posted rates or rates much higher than they are today. We are competition and have access to lenders that ONLY do mortgages. So they are able to provide MUCH better products and services.

There's my rant for the day! Something that's been on my chest for a couple days.

Vancouver Daily Province - February 23, 1920

This past weekend I was cleaning out an old barn on a property I have. In the barn I came across a Vancouver Daily Province newspaper dating back to 1920.

The article that stood out was the one I'm showing here. This was a marketing technique used by someone in real estate. It's very interesting and made me smile!

In case you can't see the wording in the picture, here's what it says.

You have property to sell. You know that somewhere in the city is a man to whom that property would appeal strongly. Perhaps there are many such men - but in the group of 'possible buyer's for your property there is ONE MAN to whom it would be especially valuable. To this man it would represent the successful end of his search. It is what he wants, what he needs, what he is going to keep on looking for until he finds it.

If you knew who this man is you could make a prompt sale of your property. But you don't know him. You have no clue. So far as you are concerned he is lost in the crowd. There is one chance in a million that he may happen to find out about your property through somebody else. It is too long a chance. YOU MUST FIND HIM.

He reads the real estate advertisements - of that you may be sure. He may have read an advertisement of YOUR PROPERTY - but failed to have identified it as WHAT HE IS LOOKING FOR through your own failure to describe it adequately.

You can find him by making it easy for him to find you. It will not be easy for him to find you unless you tell him all about your property - answer, in your advertisement, all of his probably questions about it. If you do that, in your advertisement, you will find yourself in DIRECT COMMUNICATION WITH HIM.

BC First time, new home buyers bonus

BC First-Time New Home Buyers' Bonus - a one-time payment worth up to $10,000 for BC residents who are first-time home buyers and who purchase an eligible new home.
BC Resident - if you file a 2011 BC resident personal income tax return, or if you move to BC after Dec. 31, 2011, or you file a 2012 BC resident personal income tax return (you will not be eligible for the bonus if you move to BC after Dec. 31, 2012)
First-time home buyer - an individual who has never previously owned a primary residence anywhere in the world. If multiple buyers, each must be a first-time home buyer (unlike PTT).
Primary residence - generally a house that you own, jointly or otherwise, that you intend to live in on a permanent basis.
An eligible new home includes new homes (i.e. newly constructed and substantially renovated homes) that are purchased from a builder and that are owner-built.
Other conditions:

• Contract of purchase and sale is entered into on or after February 21, 2012;
• HST is payable on the home;
• no one else has claimed a bonus in respect of the home;
• construction of the home is complete, or the home is occupied, before April 1, 2013

How much is the Bonus - equal to 5% of the purchase price of the home (or in the case of owner-built homes, 5% of the land and construction costs subject to HST) to a maximum of $10,000.
Bonus will be reduced if income is too high:

• for individuals, bonus reduced by $.20 for every $ in net income over $150,000 (bonus is reduced to zero at $200,000 net income),
• for couples, bonus reduced by $.10 for every $ in family net income over $150,000 (bonus is reduced to zero at $250,000 family net income).

The builder sent in my BC HST New Housing Rebate. Am I still entitled to the bonus? Yes, so long as you meet all the other eligibility requirements.
Is the bonus taxable? No. The bonus is a refundable personal income tax credit, meaning it will not be added to your income on your tax return.

Information from http://www.bcrealestatelawyers.com

Bank of Canada holds steady, again

The Bank of Canada is keeping its trendsetting policy interest rate at one per cent for a while longer, and likely a whole lot longer.

The central bank said the Canadian economy continues to expand, but that housing activity is starting to decline and exports remain weak.

Still, the bank said growth will average 2.2 per cent this year, one-tenth more than it had projected in July.

Analysts had been expecting bank governor Mark Carney to soften his hawkish tone about future interest rate hikes and he obliged, saying modest withdrawal of stimulus will be required over time.

That suggests the time may be a long way off.

The bank also notes it will consider the health of the household sector in setting monetary policy, something it hasn't done in previous interest rates announcements.

Source: The Canadian Press

Flaherty: No more room for rule changes

 Brokers have heard it before, but the Finance minister is saying it again – this time with more conviction – arguing the government simply has no more room to play with the mortgage rules in order to curb household debt.

“We’ve done enough,” Flaherty said during a weekend interview. “I do not intend to do anymore.”

If true, that's good news, say most mortgage brokers.

Many of them complained that the guidelines and rule changes introduced by the Conservative government this summer in order to slam the brakes on an overheated housing market were too harsh. Flaherty himself had earlier conceded that the economy could take a beating with the changes, but called the tighter mortgage rules around amortization and LTV for refinances necessary to prevent a housing bubble.

During Saturday’s interview, the minister said he was pleased by signs of a slowdown in vital segments such as condo markets in white-hot centres Toronto and Vancouver.

One broker, who operates in one of the regions where the rule changes has paved the way for a broker cull, said the revamp has effectively slowed down the market.

While he welcomed Flaherty’s remarks, Michael Marini, Toronto-based broker for Dominion Lending Centres Funds, said it could also be that the newly introduced rules are here to stay.

“I take it to mean that he (Flaherty) is satisfied with what the rule changes have accomplished,” he said. “We may not see any more tightening, but it’s also unlikely that the rules will be reversed.”
Source: http://www.mortgagebrokernews.ca

Title searches explained

This video was made by http://www.bcrealestatelawyers.com 

Very good information for everyone!

Interest penalties

Interest penalties between a big bank and a mortgage only lender. There is a huge difference as the calculations are much different.

Remember, it's not always about rate. That number you see is not the deciding factor. It should be what's behind that rate and what commitment your broker will give you to manage your mortgage for the foreseeable future.

Here's an email conversation used for one client comparing the penalty between RBC and MCAP, a lender we use.

RBC takes your “discount” off their original posted rate and compares it to the term remaining to calculate a penalty.  Therefore, if you got 3.09% with RBC today, that would be a 2.15% discount off their posted 5 year rate.  If we assume rates are the same as today in 3 years when you pay your mortgage off, they take the 2 year posted rate and deduct your 2.15% discount.  Today’s 2 year posted rate is 3.35%.   Leaving you a  1.20% comparison rate to your 3.09% contract rate.  That’s a difference of 1.89% to calculate an IRD.  The bigger this number (or spread) the bigger your penalty.  That’s a bad thing.

What MCAP does is take your contract rate, and compare it to their current contract best rate for a comparable term.  In the same scenario as above, they’d compare your 3.09% contract rate to their 2 year rate of 2.79%.  That’s only a spread of .30%, meaning IRD wouldn’t apply.  Only a 3 month interest penalty would occur.

For real numbers on your mortgage, assuming you owed $230,000 it could end out like this using the above scenario:

RBC penalty: almost $7,871

MCAP penalty: $1,776

That’s a $6,095 difference.  I’m not saying you will ever need to pay your mortgage off, but it’s nice knowing that if you did, the numbers would be reflective to your benefit if the situation did occur. 

What I’m saying – isn’t it great to get a great interest rate, but also a great mortgage!?

Here’s some calculators.  Info on how each institution calculates their IRD penalties are available on these sites as well. Of course the RBC one is a bit harder to plug in the right numbers as you'd need to know what your discounted rate was.

Here’s the link to the MCAP payment calculator.

Here isthe link to the RBC payment calculator.

Renewing with First Line now CIBC and in general

I've been a First Line mortgage holder for the last five years and am coming up to renewal.

First Line is owned by CIBC and as of a few months ago have made the decision to stop all mortgage dealings through this channel. It still stumps me as to why, as it was the largest mortgage broker channel for a long time!

One quote, (not exact words but you can get the idea) from a head at CIBC, we want to start building a stronger relationship, in house, with our clients so we don't have to discount rates so much. BMO did this a few years ago and it has done nothing to their share of mortgages in Canada.

I have included a picture of my renewal from CIBC, which comes with about 3 weeks to renewal. If you're not pro-active you can definitely feel stranded not knowing what to do. Which in turn can make you easily sign on the dotted line. You can see from this that they try and offer rates that aren't even close to market rates that we can get as mortgage brokers.






The transition from First Line to CIBC comes with a few changes as well.
Quotes from my 20 page renewal agreement:

-For a new variable product 'The interest rate will change every time there is a change in the CIBC Prime Rate. Even though the interest rate will change from time to time, your regular payments stay the same unless you change them"  "These changes will occur without you being notified"
           This poses the threat of negative amortization, which when prime is at it's lowest today, will happen later on. This will make your amortization increase and in some cases, by a lot. The fact that they do not notify you is a tactic as you will in the end pay them much more than needed. I do not allow any of my clients to get involved in such a mortgage as I've seen the bad happen, a number of times. If anything changes, you are notified that day by me and we can strategize about the future.

-Annual lump sum payment changes to a measly 10% from 25% which is significant.
           At least you can still do it as many times a year as you wish. Minimum $100 a time. I believe you'll have to go to a branch to do this. First Line allowed you to do this by phone and on the web which most other lenders I deal with do as well.

-IRD calculations are much more in favour for CIBC.
          In a recent study done by a very respected individual in the business and a huge sampling of lenders, (banks and broker only lenders) the IRD calculations were all much higher at the banks.

-Converting your mortgage (from variable to fixed): "You must apply in person. You must pay any admin and processing fees. You must pay all legal expenses related to a conversion"
           Honestly, I'm not too sure about this, however, it's written in the agreement. In the past all we would do is call in, get a piece of paper faxed, sign it and the next payment is converted. There was no costs to this at all

The reason for going to the branch all the time is so they can cross sell you in to as many other products as they can.


In the end what we must all do is not simply agree with what's there. There are SO MANY options and features that you should know about. Both good and bad.

The best way I can sum it up is this: You may do 4 maybe 5 mortgages in your lifetime. I do them day in and day out, it's my passion. I've seen people take what they believe is good from this guy over here, however, down the road it's the worst thing they could've done. Even after the advise I give them in some cases. Unfortunately, I hear stories later on. I'm completely unbiased and work for you. I'm not pushing one product as that's all that I have. There are options out there and let someone who knows them work for you! Support your mortgage brokers as if we weren't around we'd all be paying much higher rates!!!

Household cleaning tasks

To clean deodorant stains on clothes: Mix a past of baking soda and a small amount of water, then work it into the stain and allow it to sit for a few hours. Brush away and repeat as necessary. Alternatively, try lemon juice with a liberal sprinkling of salt. Scrub with an old toothbrush, and let dry in direct sunlight.

To clean burnt pots and pans: Mix baking soda with water, bring to a boil, let cool, then scrub with a non-abrasive scouring pad. White vinegar is also an option (instead of baking soda) but this can create a rather strong odour. Tougher stains may call for a detergent paste or even over cleaner, but try milder solutions first.

To get gum out of carpeting: Apply an ice cube wrapped in a thin towel or plastic bag to freeze the gum, and then chip away with a spoon or dull knife. The smaller bits can be loosened with a degreasing product, cooking oil or even peanut butter, but these could stain your carpet so always test first.

Note: Always test any cleaning solution on an inconspicuous area or surface before using.

Stop stressing yourself out

Sometimes, you are your own worst enemy when it comes to stress. Susan Fletcher, a practicing psychologist and stress management expert, teaches these valuable techniques to help alleviate stress in your life:

Don't read into things so much. "Sometimes a look is just a look and a dirty coffee cup is just a dirty coffee cup. It's not a passive-aggressive way to say you are not appreciated," Fletcher says. Don't make things bigger than they need to be—with people or work. Some people make a project bigger than it needs to be in an effort to increase their own value, but they are increasing their own stress as a result.

Learn how to transfer trust. "I really like Stephen M.R. Covey's stuff from his book Speed of Trust. He says people have to be able to trust before they feel it. Just like with your kids when you give them a little rope. And with someone who works for you, you have to let them fail because failure is feedback," Fletcher says. "Don't just say, 'It's easier to do myself.'"

Recognize when you are being inefficient. "People who are stressed get stuck answering e-mails for two hours at the expense of higher-value items that need to be taken care of," Fletcher says. "Don't get lost in inefficient behavior. Ask yourself, 'What's my ultimate outcome I want here and what do I need to get there?'"

Find an accountability partner to help you meet goals. "Choose a friend or a family member—probably not someone who lives with you because you don't want to muddy the waters. It has to be someone you will listen to but who will hold you accountable."

Say no sometimes. "You have to say no to things you might enjoy, but are not in line with where you are professionally or personally at the moment," Fletcher says. Then you can spend your time on what matters to you most.

from "Seeds of Success"

Bank of Canada sticks to rate-hike message

As expected the Bank of Canada has held steady again. May be another year still until we see any hikes. 

OTTAWA (Reuters) - The Bank of Canada doggedly stuck to the message on Wednesday that it may have to raise interest rates despite a global slowdown, predicting the domestic economy would gain momentum this year and next and inflation return to target within a year.

The central bank held its key overnight rate at 1 percent, as expected, extending a two-year freeze on borrowing costs. In 2010 it became the first Group of Seven country to lift rates from emergency lows following the recession.

But as the U.S. Federal Reserve and other global central banks contemplate further rounds of easing, Canada repeated on Wednesday what it has been saying for months - that the time for removing stimulus could be near.

"To the extent that the economic expansion continues and the current excess supply in the economy is gradually absorbed, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate, consistent with achieving the 2 percent inflation target over the medium term," the bank said in a scheduled policy announcement, using language identical to its last two rate statements.

The Canadian dollar trimmed losses against the U.S. dollar after the rate announcement. The currency strengthened to C$0.9874 versus the U.S. dollar, or $1.0128, shortly after the announcement. It was trading at C$0.9884, or $1.0117 just before the bank's statement.

There was no sign of backpedaling by Bank of Canada Governor Mark Carney even as he highlighted the weak U.S. recovery, the European debt crisis and decelerating growth in China and other emerging economies.

"(The bank) retains a hawkish bias, with really quite limited changes since July, so those that were expecting a significant shift and more dovish tone are going to be disappointed," said Camilla Sutton, chief currency strategist at Scotiabank.

SKEPTICS IN THE MARKET

Still, analysts believe the bank will put off raising rates until the second quarter of 2013, according to a Reuters poll of financial institutions released on August 28.

That view is likely intact.

"There wasn't much meat on these bones ... And I think that's exactly what the bank wants. I don't think they were trying to send any big message here," said Doug Porter, deputy chief economist at BMO Capital Markets.

Despite the bank's rate-hike bias, markets reduced their bets of an increase this year slightly following the bank's statement, according to overnight index swaps, which trade based on expectations for the policy rate.

"We've had some interesting periods over the last few months where what Governor (Mark) Carney has said in terms of a hawkish bias has been totally discounted by markets in the sense that the market just doesn't believe he'll have the ability to tighten policy. I would suspect we continue to see a bit of that," Sutton said.

The bank judges the economy's underlying momentum to be roughly in line with its growth potential.

The bank has said the economy's growth potential is about 2 percent, despite being held back by global headwinds and growing only by an annualized rate of 1.8 percent in the second quarter.

"Economic growth is expected to pick up through 2013, with consumption and business investment continuing to be its principal drivers, reflecting very stimulative financial conditions," the bank forecast.

Since the economy is operating near its potential, the bank said it sees core inflation, softer than expected in recent months, returning to its 2 percent target over the next 12 months along with total inflation. Core inflation was 1.7 percent in July and total inflation was 1.3 percent.

Household spending is showing tentative signs of slowing, the bank said, although the overall household debt burden continues to rise. The bank has raised the alarm over a record high household debt-to-income ratio, which has been fueled in part by high housing prices and cheap lending rates.

Source http://money.ca.msn.com

Stop trying to force credit on me

Last night I received yet another call from my local CIBC branch trying to push credit on me.

It is the 4th time the same person has contacted me and the fourth time I have told him to leave me alone. I will not obtain any more unsecured credit nor do I want anything from you.

Here's kind of how the conversation went:

I'm calling today as you've been a loyal client of ours for 13 years and people with good credit like yourself, we are offering you a line of credit and a different option on you Visa.

Sorry sir, I do not need or want anything from you. I've been a Visa holder for 13 years and I do not want to deal with CIBC.

Well we could look at getting your mortgage switched over or investments.

No sir, I'm a mortgage broker and I have very close contacts in the financial planning side of things and am set up far better than CIBC could ever do for me. Now please, do not call me again and please, I do not want anything.

Well then, I beleive you have kids, how about some RESP's.

No, I do not want anything *click

When will the banks stop doing this. This was toned down a bit and made shorter. I can't tell you how forecful he was. Our country has a huge amount of unsecured debt, however, the problem as our law makers tell us, is that we take out too many mortgages and are all high in mortgage debt. This is smoke and mirrors. It's the unsecured debt that's the problem in my opinion. Having mortgage debt is to a lot, good debt as you have an asset to back that debt.

The banks make a killing of this unsecured debt and I swear they have some butt kissing they do to the law makers in Ottawa that says we'll allow you to change the mortgage rules and do this and that, however, you can not touch our unsecured debt!

Anyways, that's my rant for the day. I just seriously wish the feds would step up and talk to us in the trenches and make realistic changes. Yeah right, who am I kidding!

What going from 30 years to 25 years means

Here's is a rough idea of what going back to 25 years as opposed to 30 years will do in regards to purchase power and payments.

This is based on the assumption of good credit and no outside debt.

In the past four years my average mortgage amount is roughly $291,000 (this is kind of the norm south of the Fraser)

You would need an income of $48,500 to qualify for this amount of a mortgage. The payment based on today's 3.09% would be $1,241 with a 30 year amortization.

A 25 year amortization will need an income of $53,000 to qualify for this same amount. It will also increase your payment by roughly $150/m

If you have the income of $48,500 you would now only qualify in the amount of $259,000 which means, $32,000 less of a home.

I'm not entirely for or against the reduced amortization. There's pro's and con's to both and honestly when I started out, all we had was 25 years! Yes, I'm starting to become one of the seniors.


Please note: the above numbers are not perfectly accurate however, are deemed to be very close. Everyone is slightly different and there are other variances that can change the numbers i.e. Insurance premiums, actual property tax payments and strata payments etc.

OSFI Toughens Mortgage Underwriting

OSFI’s final mortgage underwriting guidelines are out, sooner than expected.
There are significant changes on the way for a variety of borrowers. TD’s chief economist Craig Alexander told BNN that the impact of these guidelines is equivalent to “well over a percentage point (increase) in mortgage rates.”
However, these guidelines are less concerning than OSFI’s original draft (which proposed things like requalification on renewal). Moreover, in many ways this news isn’t as market-shaking as today’s Department of Finance announcement.
That said, here is what’s changing (Note: this applies to federally regulated lenders only):

• HELOCs:  The maximum loan-to-value on a HELOC will drop from 80% to 65%. That will sting borrowers who leverage HELOCs for productive purposes (e.g., as substitutes for open mortgages, or as a low-cost borrowing source for income-generating investments or small business). However, lenders can still provide a 15% amortizing mortgage on top of a HELOC, for 80% loan-to-value total. OSFI tells us: “Existing HELOCs are not affected, but future offerings are subject to the limits.”
• Qualifying Rates:  The qualifying rate is being toughened for conventional mortgages. For variable rates and fixed terms less than five years, it will be “the greater of the contractual mortgage rate or the five-year benchmark rate published by the Bank of Canada.” This will push a small number of borrowers into 5-year fixed mortgages because they won't qualify for shorter terms.
• Stated Income: Going forward, all self-employed borrowers must provide “reasonable” income verification (e.g., a Notice of Assessment). Most lenders already have such policies. It appears that true “no-income documentation” stated income mortgages are officially a thing of the past at mainstream lenders.
• Down Payments:  “Cash back should not be considered part of the down payment,” says OSFI. This effectively eliminates 100% financing, and is one of the most common sense guidelines of them all.

There are also other changes that may affect non-prime mortgages. We’re awaiting clarification on those before commenting further.
Federally regulated lenders have until “no later than fiscal year-end 2012” to comply with these guidelines. That ranges from October 31, 2012 for major banks to March 31, 2013 for other institutions). However, OSFI expects them to comply sooner if possible, so we may see some of these changes within a few months, if not weeks.
There’s no telling yet if provincial regulators will impose the same guidelines on the lenders they regulate (like credit unions).

Information directly from http://www.canadianmortgagetrends.com

Canadian Home Income Plan - CHIP

So, what is CHIP, why CHIP, and why now?

What is CHIP?

• The Canadian Home Income Plan (CHIP) is a reverse mortgage giving seniors access to as much as 40% of their equity, with NO PAYMENTS for as long as they live in the home.  Instead of paying monthly, the interest is simply added to the mortgage balance that becomes due when the home is sold.
• CHIP is designed for clients that are 55 or older, lack cash flow, and don’t want to move. 

Why CHIP?

• There is no credit check, and no debt servicing.  The approval is simply based on the client’s age and the property. 
• There are many reasons to take a CHIP mortgage: 

-A traditional mortgage requires a monthly payment that many simply can’t afford, so they can’t access their equity without selling the home they love.  Even an LOC will eventually run    out of the ability to pay itself, still leaving the client with a payment they truly can’t afford.

-One spouse has passed away, leaving the survivor with the same monthly debts, but half the monthly income.  CHIP can give the cash flow needed to keep on going.

-The money can be used for anything: Investing to increase cash flow, paying out of foreclosure, paying property taxes, debt consolidation, early inheritance so they can enjoy giving the money without the worry of paying for it, higher quality of life, etc.

• With a 15 year average home appreciation of 6% in Canada, and the reverse mortgage typically going no higher than 40% LTV, history has shown that equity erosion is really not something to be worried about.

Why now?

• CHIP received bank status in Oct 2009, lowering cost of funds, and allowing the product to be offered at a much more reasonable interest rate.  CHIP offers, variable, 6 month, 1, 3 & 5 year terms.  Call or email for details.

• The baby boomers are reaching retirement years, and many have arrived with more debt and less income than they had planned for. 
• 84% of seniors want to stay in their home, but with limited cash flow, monthly debts, and a dwindling retirement fund, many are forced to sell the home they love and downsize to live.
• Ever tightening mortgage qualification rules are making it harder for people to access their equity, so no credit checks and no debt servicing makes this an appealing product.

OSFI nixes requalifying guideline

From CAAMP’s mouth to OSFI’s ear.  The federal regulator issued a letter Wednesday clarifying its position on re-qualifying borrowers at renewal  -- effectively maintaining the status quo and confirming CAAMP's understanding.

“The following provides a brief description of OSFI’s decisions on key issues, which will be reflected in the final Guideline,” writes the regulator in a letter sent to federally regulated financial institutions Wednesday. “Re-qualification at Renewal – current practice regarding residential mortgage renewals has served FRFIs well. OSFI agrees, for example, that having a good payment record is one of the best indicators of credit worthiness. OSFI, therefore, expects that FRFIs themselves will remain responsible for deciding what level of review to place on borrowers’ qualifications at the time of renewal.”

The letter confirms the message coming from CAAMP CEO Jim Murphy, the association leader telling MortgageBrokerNews.ca last week that OSFI was prepared to hold its fire on the most contentious component of its draft guidelines for mortgage underwriting.

At the same time, the message confirms that the regulator will uphold its guideline reducing the
the maximum loan-to-value ratio for HELOCs to 65 per cent.

Still, brokers appeared most concerned about the possibility of lenders having to re-qualify clients at each and every renewal.

The OSFI decision may leave some room for lenders to do just that, however.
"FRFI renewal practices should be articulated in internal policies governing their underwriting of residential mortgage loans," writes OSFI. "FRFIs, however, will be expected to refresh the borrowers’ credit metrics periodically (not necessarily at renewal) so that FRFIs can effectively evaluate their credit risk.”

http://www.mortgagebrokernews.ca

Report: OSFI has the wrong end of the stick

A new report is backing up broker concerns OSFI is about to fix what ain’t broke – this new research identifying already-reduced amortizations, low arrears and high levels of homeowner equity.
“Mortgage borrowers are making significant efforts to accelerate repayment, such as voluntarily increasing their regular payments (23 per cent) and making lump sum payments (19 per cent), with some borrowers (10 per cent) doing both,” finds CAAMP's spring consumers' report, released Wednesday. "And approximately 50 per cent of borrowers pay $100 per month (or more) above their required payments.”
The report relies on an online survey of 2,000 Canadians, including 800 homeowners with mortgages. It was conducted by Maritz Research and adds weight to the findings of a CMHC report issued last week.

It also suggests that recent buyers expect amortization periods will be about 20 per cent shorter than their contracted length, mirroring the current reality for many Canadian homeowners.

To boot, the report also suggests 83 per cent of Canadians have at least 25 per cent equity in their homes. Separately and collectively, those findings point to a mortgage market well positioned to handle the challenges of a correction in the housing market and to protect the investment of the vast majority of homeowners.

Brokers are also hoping the findings will encourage OSFI to reconsider some of the underwriting
guidelines it will likely bring into force next month.

Those measures – from re-qualification at renewal to slashing the maximum loan-to-value on HELOCs – are meant to throw up a firewall around Canada’s housing market.
Brokers haven’t been convinced of the need for it.

The position is garnering support outside of the CAAMP research, with the official opposition in Otttawa registering the same concerns as brokers.
"We just need to make sure that people are protected in some of these temporary situations (where they may have lost a job),” said Peggy Nash, the federal NDP’s finance critic, “if they have a good credit record and have never had a problem making their payment."
OSFI has floated the idea of forcing mortgage-holders to re-qualify at renewal, although exactly what that involves remains unclear.
Brokers, and their professional associations, were among the first to balk at the suggestion, arguing it could create the kind of market crisis the proposals aim to overt.
Nash appears to agree, with her party most worried Canadians temporarily out of work could possibly lose their homes. She’s asking the Harper government to back off.
But OSFI has suggested it has little intention of backing down, Its manager of policy developing expressing concern about the country’s ability to meet a significant housing correction head on.

http://www.mortgagebrokernews.ca