30 Jan

BCREA revises Fraser Valley’s 2013 forecast

General

Posted by: Kimberly Walker

BCREA revises Fraser Valley’s 2013 forecast

On January 30, BCREA’s senior economist Cameron Muir released the first quarter housing market forecast for BC including breakdowns for Fraser Valley and Greater Vancouver.

The 2013 predictions for Fraser Valley have changed since last fall, becoming more conservative. Muir still expects home sales to increase in 2013 compared to 2012, but not to the degree that his department anticipated three months ago. In addition, he’s forecasting home prices will moderate at a slightly faster rate.

Fraser Valley REALTORS® can expect sales to increase by 2.4 per cent this year compared to 2012; and average MLS® prices will continue to slide 3.3 per cent this year on top of the 3.7 per cent reduction during 2012.

Muir states in the report, “Headwinds in the global economy continue to constrain growth in British Columbia. The US has yet to generate enough employment to take a serious bite out of their jobless rate, while early signs of burgeoning domestic demand in China weren’t enough to keep economic growth from slipping to a ten-year low in 2012.”

The forecast describes 2013 as a transition year to next year when sales are expected to rebound even further and prices will stabilize. In 2014, BCREA is predicting an increase of 7.5 per cent in Fraser Valley home sales and prices to remain flat (-0.6 per cent) compared to this year.

Muir describes lower home prices in the Fraser Valley as a move in a positive direction improving affordability and encouraging potential buyers back to the marketplace. “In addition, many potential buyers that stayed on the sidelines in 2012 will likely enter the marketplace over the next year as the relatively strong financial condition of BC households precludes any deflationary spiral.”

For Greater Vancouver in 2013, Muir is forecasting slightly stronger sales than Fraser Valley, an increase of almost 10 per cent this year compared to 2012, and not quite as high reductions in MLS® home prices -2.2 per cent on average in 2013 and -0.3 per cent in 2014.

CMHC’s Housing Market Outlook, released in the fall of 2012, anticipates sales in the Fraser Valley will increase by 1.4 per cent in 2013 compared to 2012, while prices remain relatively stable. CMHC only releases two forecasts per year — spring and fall — while BCREA releases quarterly.

21 Jan

Title Insurance Tidbits

General

Posted by: Kimberly Walker

January 14, 2013

Title Insurance Tidbits

                        Title insurance is usually an afterthought for people getting a mortgage. But it’s becoming more of a decision point since so many lenders now require it.

The purpose of title insurance is to protect you if there’s a problem with your title. Those problems can turn into expensive nightmares in the small chance that you encounter them. Examples include ownership disputes on your property, title fraud, un-discharged liens, encroachments, zoning issues, survey problems, property tax arrears and so on.

Real estate lawyer Bob Aaron wrote a recent overview of title insurance here. He says, “Most real estate lawyers today regard title insurance as a critical component…and will usually not close a purchase without it.”

And no, lawyers don’t get big kickbacks for pushing title insurance. Aarons says lawyers “are not permitted to get referral fees/commissions” on title insurance. Lawyers recommend it because it protects the homeowner, limits the lawyer’s liability and makes closing more efficient.

*******

There are two broad types of title insurance:

  1. Homeowner policies, which:
    • Cover the homeowner
    • Last as long as you own       the property
    • Are priced based on the       property value
  2. Lender policies, which:
    • Protect the lender’s       interest in your mortgage
    • Last as long as you       have your mortgage
    • Are priced based on the       mortgage size

The cost of title insurance varies widely depending on the location, type and value of the transaction. It starts at roughly $150-$350, but can climb from there. Here’s a calculator to estimate policy cost from FCT (First Canadian Title), Canada’s top provider of title insurance.

Once you pay for title insurance, you can often avoid paying for it again. Here are some cases where that’s true:

  • You purchase a homeowner      policy and stay in your home
         (Homeowner policies generally cover your property for as long as you own      it.)
  • You pick a lender that      doesn’t require a lender title policy
         (Many do, but some don’t.)
  • You refinance and choose      a lender that pays for its own mortgage-only title policy
         (A broker can tell you which lenders do this. Keep in mind, a lender-only      policy doesn’t protect you.)
  • You switch lenders and      your existing policy is “ported” to the new lender
         (If it can’t be ported, many lenders will pay the new title insurance      premium for you on a straightforward switch.)

Title insurance can be switched to a new lender only under certain conditions, says Reta Coburn, president of FNF Canada, the Canadian division of the world’s largest title insurance organization. “Loan policies for lenders are transferable when the original mortgage is not being discharged from title and is simply being transferred by way of a registered assignment of mortgage,” she says.

The stipulations are that, “The original mortgage security must remain unchanged and no additional funds can be advanced, unless provided for under the original mortgage terms and conditions. The date of policy is the date of registration of the original mortgage, so the new lender assumes the coverage under the policy of the original lender at the date of that mortgage registration.”

Two related notes:

  • The loan-to-value cannot      increase if a title policy is being transferred to a new lender.
  • Lenders don’t usually      accept assignments of collateral charges, so for practical purposes a      title policy on a collateral charge mortgage isn’t generally      transferrable.

Eric Haslett, LLB, VP Residential Title Insurance at FCT, adds that: “Provided the new lender agrees to take an assignment of the existing mortgage, the…title insurance policy will follow the mortgage to the new lender and no additional title insurance premium is charged.”

But lenders don’t always accept a mortgage that a prior lender has registered. That’s because, as Haslett puts it, “The new lender is stuck with whatever the language is in the existing lender’s mortgage documents.”

And here’s an interesting side note:

Haslett says, “New lenders often don’t request assignments from an existing lender because (doing so) provides that lender an opportunity to…retain the borrower.”  If the old mortgage is discharged and a new mortgage is registered, however, “The existing lender often doesn’t know about the borrower moving until it’s too late.”

In addition, when clients change lenders using a refinance instead of an assignment, the party requesting the discharge statement (from the existing lender) doesn’t need to disclose the new lender’s name. As a result, the existing lender cannot see who they are competing against.

Haslett adds that, “If a lender wants the old mortgage discharged and a new mortgage registered, it will attract a new title insurance policy in the name of the new lender and result in a title insurance premium

 

 

18 Jan

Farewell To ING

General

Posted by: Kimberly Walker

Farewell to ING
Article written by Boris Bozic

 

 

I feel like that old man slowly watching his friends die off; checking every day to see if his name has made into the obituary section, realizing it hasn’t he goes about his day.

In the short time that I’ve been blogging I’ve written a few farewell blogs to lenders who are no longer with us.  Ashes to ashes, dust to dust, we bid so long to ING in the broker channel.

Firstly, if the news that the ING brand will no longer be available in the broker channel, well, I’m surprised – anyone would be surprised.  Scotia Bank, who purchased ING Canada, is focused on franchising customers and their strategy is to enhance and grow their own brand.  So it was only a matter of time before orange would become totally red.  I guess the time is now.  The loss of any lender in our space is troublesome, on many levels. Competition has many benefits, pricing, product innovation, and credibility.  To think this announcement won’t create a dominos effect is a little naive.  Recently some lenders have announced a reduction in finder’s fee.  Why? Because they can.  That’s what happens when choices become limited.  Don’t believe me? Ask any broker in Australia.  I’m not suggesting there will be a mad rush by lenders to reduce compensation but with every announcement telling us another lender has exited the market the possibility increases.  It’s Darwin’s theory of business evolution. To continue reading, or for other articles, please click here.

To subscribe to “To The Point with Bozic”, please click here.

 

11 Jan

Things Your Burglar Won’t Tell You!

General

Posted by: Kimberly Walker


Thanks to Stuart Herder for this!

Things Your Burglar Won’t Tell You!

THINGS YOUR BURGLAR WON’T TELL YOU . Read all the way to the end. You just might learn something that will save you the hassle of having your home burglarized.

I am particularly interested in the part about the wasp spray…

1. Of course I look familiar. I was here just last week cleaning your carpets, painting your shutters, or delivering your new refrigerator.

2. Hey, thanks for letting me use the bathroom when I was working in your yard last week. While I was in there, I unlatched the back window to make my return a little easier.

3. Love those flowers. That tells me you have taste… And taste means there are nice things inside. Those yard toys your kids leave out always make me wonder what type of gaming system they have.

4. Yes, I really do look for newspapers piled up on the driveway. And I might leave a pizza flyer in your front door to see how long it takes you to remove it.

5. If it snows while you’re out of town, get a neighbor to create car and foot tracks into the house.. Virgin drifts in the driveway are a dead giveaway.

6. If decorative glass is part of your front entrance, don’t let your alarm company install the control pad where I can see if it’s set. That makes it too easy.

7. A good security company alarms the window over the sink. And the windows on the second floor, which often access the master bedroom – and your jewelry. It’s not a bad idea to put motion detectors up there too.

8. It’s raining, you’re fumbling with your umbrella, and you forget to lock your door – understandable. But understand this: I don’t take a day off because of bad weather.

9. I always knock first. If you answer, I’ll ask for directions somewhere or offer to clean your gutters. (Don’t take me up on it.)

10. Do you really think I won’t look in your sock drawer? I always check dresser drawers, the bedside table, and the medicine cabinet.

11. Here’s a helpful hint: I almost never go into kids’ rooms.

12. You’re right: I won’t have enough time to break into that safe where you keep your valuables. But if it’s not bolted down, I’ll take it with me.

13. A loud TV or radio can be a better deterrent than the best alarm system. If you’re reluctant to leave your TV on while you’re out of town, you can buy a $35 device that works on a timer and simulates the flickering glow of a real television. (Find it at http://www.faketv/.com/ )8 MORE THINGS A BURGLAR WON’T TELL YOU:

1. Sometimes, I carry a clipboard. Sometimes, I dress like a lawn guy and carry a rake. I do my best to never, ever look like a crook. I might even wear a 3-piece suit!

2. The two things I hate most: loud dogs and nosy neighbors.

3. I’ll break a window to get in, even if it makes a little noise. If your neighbor hears one loud sound, he’ll stop what he’s doing and wait to hear it again. If he doesn’t hear it again, he’ll just go back to what he was doing. It’s human nature.

4. I’m not complaining, but why would you pay all that money for a fancy alarm system and leave your house without setting it?

5. I love looking in your windows. I’m looking for signs that you’re home, and for flat screen TVs or gaming systems I’d like. I’ll drive or walk through your neighborhood at night, before you close the blinds, just to pick my targets.

6. Avoid announcing your vacation on your Facebook page. It’s easier than you think to look up your address. Parents: caution your kids about this. You see this every day.

7. To you, leaving that window open just a crack during the day is a way to let in a little fresh air. To me, it’s an invitation.

8. If you don’t answer when I knock, I try the door. Occasionally, I hit the jackpot and walk right in.

Sources: Convicted burglars in North Carolina , Oregon ,California , and Kentucky ; security consultant Chris McGoey, who runshttp://www.crimedoctor.com/ and Richard T. Wright, a criminology professor at the University of Missouri-St. Louis, who interviewed 105 burglars for his book Burglars on the Job.

Protection for you and your home:
If you don’t have a gun, here’s a more humane way to wreck someone’s evil plans for you.

WASP SPRAY

A friend who is a receptionist in a church in a high risk area was concerned about someone coming into the office on Monday to rob them when they were counting the collection. She asked the local police department about using pepper spray and they recommended to her that she get a can of wasp spray instead.

The wasp spray , they told her, can shoot up to twenty feet away and is a lot more accurate, while with the pepper spray, they have to get too close to you and could overpower you. The wasp spray temporarily blinds an attacker until they get to the hospital for an antidote. She keeps a can on her desk in the office and it doesn’t attract attention from people like a can of pepper spray would. She also keeps one nearby at home for home protection… Thought this was interesting and might be of use.

FROM ANOTHER SOURCE:

On the heels of a break-in and beating that left an elderly woman in Toledo dead, self-defense experts have a tip that could save your life.

Val Glinka teaches self-defense to students at Sylvania Southview High School . For decades, he’s suggested putting a can of wasp and hornet spray near your door or bed.
Glinka says, “This is better than anything I can teach them.”
Glinka considers it inexpensive, easy to find, and more effective than mace or pepper spray. The cans typically shoot 20 to 30 feet; so if someone tries to break into your home, Glinka says, “spray the culprit in the eyes”. It’s a tip he’s given to students for decades. It’s also one he wants everyone to hear. If you’re looking for protection, Glinka says look to the spray.

“That’s going to give you a chance to call the police; maybe get out.” Maybe even save a life.

Put your car keys beside your bed at night.
Tell your spouse, your children, your neighbors, your parents, your Dr.’s office, the check-out girl at the market, everyone you run across. Put your car keys beside your bed at night.

If you hear a noise outside your home or someone trying to get in your house, just press the panic button for your car. The alarm will be set off, and the horn will continue to sound until either you turn it off or the car battery dies. This tip came from a neighborhood watch coordinator. Next time you come home for the night and you start to put your keys away, think of this: It’s a security alarm system that you probably already have and requires no installation. Test it. It will go off from most everywhere inside your house and will keep honking until your battery runs down or until you reset it with the button on the key fob chain. It works if you park in your driveway or garage. If your car alarm goes off when someone is trying to break into your house, odds are the burglar/rapist won’t stick around. After a few seconds all the neighbors will be looking out their windows to see who is out there and sure enough the criminal won’t want that. And remember to carry your keys while walking to your car in a parking lot. The alarm can work the same way there. This is something that should really be shared with everyone. Maybe it could save a life or a sexual abuse crime.

P.S.
I am sending this to everyone I know because I think it is fantastic.Would also be useful for any emergency, such as a heart attack, where you can’t reach a phone. My Mom has suggested to my Dad that he carry his car keys with him in case he falls outside and she doesn’t hear him. He can activate the car alarm and then she’ll know there’s a problem.

Please pass this on even IF you’ve read it before. It’s a reminder.

11 Jan

New Release: Jan. 2013 – SALES AT LOWER LEVELS IN 2012

General

Posted by: Kimberly Walker

News Release: January 3, 2013

FRASER VALLEY REAL ESTATE SALES AT LOWER LEVELS IN 2012

(Surrey, BC) – Fraser Valley’s real estate market in 2012 will be remembered as the year buyers and sellers took a breather reflecting quieter sales, an average number of new listings and prices overall remaining flat.

The president of Fraser Valley’s Real Estate Board, Scott Olson, says, “The last half of 2012 was like a Mexican stand-off. Buyers kept hoping for greater price drops while sellers who didn’t have to sell just took their home off the market rather than lower their price.

“With the economy so stable, we’re not in a situation where people have to sell their home, so they’re not. It’s a very different market than in 2008 when listings were at an all-time high and sales were at historical lows.”

The Board’s Multiple Listing Service® processed 13,878 sales in 2012 compared to 15,529 the previous year, a decrease of 11 per cent, while the number of new listings remained about the same – 31,009 in 2012 compared to 31,592 in 2011. Over the year, the number of active listings for buyers to choose from dropped by 3 per cent going from 7,399 properties in December 2011 to 7,187 in December 2012.

Although 2012 ranks the second slowest year for sales in Fraser Valley since 2003, the volume of new listings finished in the middle of the pack. Scott Olson, says, “Inventory levels are down, which is a sign of a healthy market where insufficient demand leads to reduced supply. This is also keeping prices in most areas either flat or down only slightly.”

In December, the benchmark price of a detached home in the Fraser Valley was $539,000, an increase of 1.2 per cent compared to $532,700 in December 2011 and a decrease of 1.0 per cent compared to November.

For townhouses, the benchmark price in December was $296,400, a decrease of 2.2 per cent compared to the same month last year when it was $303,000 and down 0.8 per cent compared to November. The benchmark price of apartments in December was $200,100, an increase of 1.6 per cent compared to December 2011 when it was $196,900 and a decrease of 1.3 per cent compared to November.

Average prices year over year show detached homes down 3 per cent – $576,709 in 2012 compared to $594,402 in 2011. The average price of townhomes increased by 3.7 per cent, going from $316,259 in 2011 to $327,935 in 2012 and the average price of apartments decreased by 0.2 per cent going from $218,235 in 2011 to $217,843 in 2012.

11 Jan

Insured Mortgage Lending Is Almost Riskless and Costless To Lenders

General

Posted by: Kimberly Walker

Almost “Riskless and Costless” Lending

 

“Insured mortgage lending is almost riskless and costless to lenders.”—Finn Poschmann (Source)

 

Really?

 

This statement implies that lenders are getting a free lunch off the taxpayer’s back…that lenders reap all the profits and offload almost all their risk to unsuspecting Joe Sixpack and Grandma Millie.

 

Let’s examine that for a brief moment.

 

In the first place, describing insured lending as “costless” is as amusing as it is perplexing. It’s quite difficult to launch and operate a successful underwriting and mortgage funding operation without:

 

A multi-million dollar upfront investment (sourced by people who expect to see their money back).

Significant capital (to be an insurer-approved lender, MBS/CMB participant, etc.).

Highly experienced personnel (with good reputations).

Ongoing expenses.

Such expenses become prohibitive if your arrears are abnormal and you get banned from securitizing (selling) your mortgages.

 

And riskless? Finn, if you want to see how riskless insured lending is, try:

 

a) starting a lender

 

b) underwriting poorly

 

c) incurring excess defaults

 

d) getting shut off by the insurers

 

e) going out of business and losing all or most of your capital.

 

Then write another column about how riskless your lender experience was.

 

Lenders have no shortage of incentive to manage exposure, keep lending and stay solvent—mortgage insurance or not.

 

See related: Skin in the Game

 

Rob McLister, CMT

 

 

9 Jan

Business January 8, 2013

General

Posted by: Kimberly Walker

Hello 2013

Article written by Boris Bozic on the 08 Jan 2013 in Business

“The only thing that is constant is change.”

Welcome back all and I hope you all enjoyed the Christmas season.  I know that may be somewhat politically incorrect to evoke Christ’s name during and after the holiday season.  Here’s my view on that, oh well.  I celebrate Christmas and if I say Merry Christmas, and someone responds by saying Happy  Hanukkah or Happy Big Bang Theory Day, I won’t be offended.  So let’s dispense with political correctness of Christmas past and focus on the future.

Things to look for in 2013?

As a start who will be in charge at the Bank of Canada.  Mark Carney’s reign is coming to end by mid-year so it will be interesting to see who his replacement will be; someone with “star power”?  Or a bureaucrat who goes about his business in the shadows?  The Globe is reporting that the Finance Department is not saddened about Carney’s departure.   According to the Globe, “Though the finance minister has worked closely with Carney and had helped catapult him into the exalted job of central bank chief in 2007, the once-tight relationship deteriorated in the following years as Carney’s star power threatened to leave Ottawa’s political class in the shadows, sources said“.  How juicy, how Entertainment Tonight.  I can see how Minister Flaherty might have been a little perturbed.  The Minister is an elected official whom the voters can turn on if things don’t go according to plan.  On the other hand the head of the Bank of Canada takes no political risk and benefits from a bigger payday in another country.

Another thing I will be watching for is the treatment of CMHC in the press. When and why did it become fashionable to treat CMHC like a Pinnate?  I get it, when you get big enough you take your blows deserved or not.  When you’re big enough you become a lightning rod (for illustration look to the dominant technology provider in the broker space, as well as the National Association).  But CMHC has been around since 1946, dedicated to home ownership in Canada, and yet now the scope of their responsibility is being questioned in the press.  By appearance this looks to be a case of fixing something that isn’t broken.   Or it could simply be a case of CMHC running up against powerful enemies who whisper sweet nothings into the ears of the press?

Of course we’ll all be watching for signs that economies, be it ours or around the world, are starting start to garner some momentum. Then again that’s old news, that watch began in 2008.  I have no doubt that 2013 will be another interesting year for all of us.  The only thing that is constant is change.

Until next time,

Cheers.

 

Raymond Lee | Director of Business Development
C: 416 540 7364  TF: 1 877 210 4498

Email: Raymond.lee@merixfinancial.com

Website : www.merixfinancial.com

4 Jan

News Release Fraser Valley Real Estate Board January 2013

General

Posted by: Kimberly Walker

News Release: January 3, 2013

FRASER VALLEY REAL ESTATE SALES AT LOWER LEVELS IN 2012

(Surrey, BC) – Fraser Valley’s real estate market in 2012 will be remembered as the year buyers and sellers took a breather reflecting quieter sales, an average number of new listings and prices overall remaining flat.

The president of Fraser Valley’s Real Estate Board, Scott Olson, says, “The last half of 2012 was like a Mexican stand-off. Buyers kept hoping for greater price drops while sellers who didn’t have to sell just took their home off the market rather than lower their price.

“With the economy so stable, we’re not in a situation where people have to sell their home, so they’re not. It’s a very different market than in 2008 when listings were at an all-time high and sales were at historical lows.”

The Board’s Multiple Listing Service® processed 13,878 sales in 2012 compared to 15,529 the previous year, a decrease of 11 per cent, while the number of new listings remained about the same – 31,009 in 2012 compared to 31,592 in 2011. Over the year, the number of active listings for buyers to choose from dropped by 3 per cent going from 7,399 properties in December 2011 to 7,187 in December 2012.

Although 2012 ranks the second slowest year for sales in Fraser Valley since 2003, the volume of new listings finished in the middle of the pack. Scott Olson, says, “Inventory levels are down, which is a sign of a healthy market where insufficient demand leads to reduced supply. This is also keeping prices in most areas either flat or down only slightly.”

In December, the benchmark price of a detached home in the Fraser Valley was $539,000, an increase of 1.2 per cent compared to $532,700 in December 2011 and a decrease of 1.0 per cent compared to November.

For townhouses, the benchmark price in December was $296,400, a decrease of 2.2 per cent compared to the same month last year when it was $303,000 and down 0.8 per cent compared to November. The benchmark price of apartments in December was $200,100, an increase of 1.6 per cent compared to December 2011 when it was $196,900 and a decrease of 1.3 per cent compared to November.

Average prices year over year show detached homes down 3 per cent – $576,709 in 2012 compared to $594,402 in 2011. The average price of townhomes increased by 3.7 per cent, going from $316,259 in 2011 to $327,935 in 2012 and the average price of apartments decreased by 0.2 per cent going from $218,235 in 2011 to $217,843 in 2012.

4 Jan

CMHC Mortgage Insurance Jan. 2013

General

Posted by: Kimberly Walker

The Canada Mortgage and Housing Corporation (CMHC) complex in Ottawa. About 70 per cent of mortgages in Canada are insured and the government provides a 100 per cent guarantee of mortgages insured by CMHC.

Globe and Mail

Private sector should take on CMHC’s role

Published Thursday, Jan. 03, 2013 06:55PM EST

Last updated Thursday, Jan. 03, 2013 06:56PM EST

When the forerunner of the Canada Mortgage and Housing Corporation opened shop in 1946, its job was to help war veterans find housing. From those humble beginnings, CMHC has emerged as a financial market giant. As this baby-boom behemoth contemplates life after 65, it, like many of us, should consider a more modest public role.

By the 1950s, CMHC was in the affordable (public) housing business; Toronto’s Regent Park was one of its first projects. The agency’s social policy portfolio expanded, with assisted housing and assisted home-ownership programs, on-reserve housing, and green energy and conservation programs.

What has also grown is CMHC’s mortgage loan insurance program. Federal law requires successful mortgage applicants to buy mortgage insurance if their down payments are less than a legal minimum (currently 20 per cent of the home purchase value).

This insurance guarantees lenders are repaid in full, even if borrowers default on their mortgages; this, for good or ill, lifts from financial institutions most of the risks associated with mortgage lending. Those risks are big: Through mortgage insurance, CMHC’s gross loan exposure is now scraping its $600-billion legislated limit. Taxpayers are shielded in part by CMHC’s $13-billion equity buffer, but nonetheless are exposed to the liabilities that will follow on an extended housing market downturn.

Now, while high loan-to-value-ratio borrowers must buy mortgage insurance, they need not buy it from CMHC. Smaller, private sector providers supply about 30 per cent of the market. They offer products and prices similar to CMHC’s, and are similarly on the hook when mortgages go bust. There is no direct taxpayer exposure to those bad loans. However, if the insurer itself were to go bust, taxpayers are responsible for 90 per cent of the residual exposure.

The reason for the private sector’s federal backstop is to lower financial institutions’ capital costs. If an insurance provider with a federal backstop insures banks’ mortgage lending, under international agreements and domestic regulation, lenders need to reserve little or no capital against their mortgage books. Insured mortgage lending is almost riskless and costless to lenders.

Many questions flow from this situation. Why does the Crown corporation do all of the things it does? Why aren’t social housing and related social programs part of a division of Human Resources and Skills Development Canada, where similar social programs reside? Why aren’t housing market data functions handled and financed by Statistics Canada? Why aren’t green energy programs part of Natural Resources Canada? Why aren’t mortgage bond and securitization programs run by Treasury or Finance?

And that leaves mortgage insurance. This usually is a profitable business – people must buy the product, and to do so at the price CMHC sets. But why does the federal government hustle mortgage insurance, and not auto insurance?

Given such questions, the obvious next step would be to split up CMHC.

Few outside government would notice if Statscan took over housing market data, or if energy-conservation programs migrated to other federal departments. CMHC’s financial market functions are already overseen by Finance and the Office of the Superintendent of Financial Institutions, which also inspects private insurers. And the Canada Mortgage Bond program could be run by Treasury.

The mortgage insurance program, meanwhile, would be an attractive investment for a well-capitalized domestic financial institution, such as a pension fund (the Ontario Teachers’ Pension Plan already owns half of one of the private insurers). In private hands, the current insurance book could be grandfathered, and new contracts underwritten by a reconfigured agency called, say, the CMHC.

Again, few would notice the shift; the key difference would be the new layer of taxpayer protection afforded by a 90-per-cent (or lower) guarantee of residual housing market liabilities, rather than the 100-per-cent exposure within the current CMHC. In a market occupied by private competitors, a broader range of portable insurance products and prices seems a likely outcome.

Mortgages and mortgage insurance would still be regulated by federal and provincial rules, exactly as now. Regulation of conduct and oversight with respect to financial stability would still be federal responsibilities. Consumers and most market participants would be unaffected by the change.

CMHC, as it exists, has outlived its mandate.

 http://www.theglobeandmail.com/report-on-business/economy/housing/private-sector-should-take-on-cmhcs-role/article6922279/?service=print

3 Jan

Self-Employed Borrowers – Mortgage Qualification 2013

General

Posted by: Kimberly Walker

Psst. Here’s the ugly truthBy            CMP            |            02/01/2013 8:00:00 AM            |                 0                comments

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Shall CMP break it to your BFS clients or should you? The ugly truth about B20 is that self-employed borrowers may actually have to report their full income.

The new OSFI lending guidelines, demanding an unprecedented level of scrutiny with regards to BFS borrowers. have caught many self-employeds flatfooted and scrambling to meet the document requirements.

The constraints have negative repercussions for many brokers who deal primarily with self-employed clients, says Rachele Raia, broker/partner at Your Mortgage Connection in Vaughan, Ontario.

“BFS borrowers make up 30 per cent of our client list,” according to Raia, representing the concerns of hundreds of brokers in the same boat. “More document requirements mean more back and forth and longer wait times.”

The focus at the moment is the identification and verification of a borrower’s source of income in order to assess that person’s ability to pay the mortgage.

“Several months ago, a stated income was enough,” Raia says. “Now lenders want to see a person’s stated income, T1, notice of assessment and bank statements.”

Prior to the mortgage rule changes, BFS borrowers could easily apply for mortgages with A lenders.

However, banks and A lenders have adopted stricter qualifying controls following the mortgage rule revamp and lately some B lenders appear to have “lost their appetite” for BFS borrowers as well, she tells CMP.

Under this new level of scrutiny, according to another seasoned broker, document preparation is not the only strategy.

“Brokers also need to coach BFS clients on issues such as when to file income taxes and  document authentication,” says Dustan Woodhouse, broker with Dominion Lending Centres Canadian Mortgage Experts on B.C.’s Lower Mainland.

For instance, borrowers should opt to pay more personal income tax this year, he says. The goal is to bump up a borrower’s income to a level that will qualify that individual for the mortgage he or she is hoping for.

“Advise your clients against starting a dividend income program this year,” he says. “It may be a good tax strategy, but not a good mortgage strategy.”

Brokers should also make sure of their clients have a 2012 business license.

“The number one reason I hear from various tradespeople is: ‘I work all over town,” says Woodhouse. “My answer is: Get one from the municipality in which you reside.”

BFS borrowers also need to have an accredited accountant prepare their business financials and file their tax returns.

“I think brokers should connect with their client’s accountant at tax time and make sure they are working on the same page regarding the borrower’s mortgage plans,” he adds.

Brokers can also advise their clients to incorporate their business, says Woodhouse. Apart from the liability and tax advantages, in the new lending regime, limited corporations will have an easier time compared to sole proprietors.

BFS borrowers also need to be reminded to report all rental income in the T1 General forms or via Hold CO Financials and made sure those financials are up to date and filed.

“Remember, your clients need to keep an impeccable record of their financial status,” Woodhouse says.