Category Archives: default insurance

New program will help first-time homebuyers in BC, but is it a good idea?

first-time buyers bc

 

New program will help first-time homebuyers in BC, but is it a good idea?

It looks like Christmas has come early, at least for some BC house hunters. The BC government has revealed plans to launch a new program for first-time buyers, and it’s expected to help as many as 42,000 households in the province enter the market.

Announced December 15th, the BC Home Owner Mortgage and Equity Partnership program will see the BC government match the amount of money first-time buyers put toward their down payment, to a maximum of $37,500. Loans will be interest free for five years, and recipients won’t have to start paying the money back during that time. Once five years have passed, they will be expected to begin making monthly payments at current interest rates.

“We believe every British Columbian deserves a place to call home,” Premier Christy Clark said in a press release. “We’ve invested in affordable rental housing, we’ve invested in transitional and emergency housing, and now we’re partnering with first-time buyers to make the purchase of their first home more affordable.”

The news came the same day that the BC Real Estate Association released its latest data on residential real estate sales and prices. While it shows that in November the average MLS price for a home in the province fell 6.4 per cent year-over-year to reach $625,871, that’s still out of reach for many first-time buyers.

First-time buyers hoping to participate in the program will have to meet a number of requirements in order to be eligible. For starters, applicants must be planning to buy a home for $750,000 or less and have total annual household income of $150,000 or less; they must also be preapproved for a high-ratio insured mortgage. Other requirements include being a Canadian citizen or permanent resident for at least five years, and living in BC for at least one year.

Reactions to the program have been mixed. While some have taken to Twitterto voice optimism about it, many people, including several key BC housing market commentators, have expressed concerns.

Speaking to The Times Colonist, Tom Davidoff of UBC’s Sauder School of Economics said that making it easier for people to buy homes when the province’s ability to increase housing supply is limited may drive up home prices. “I just think it’s lousy economics,” he said. NDP housing critic David Eby also pointed out that if interest rates are higher in five years, those who participate in the program will be at an increased risk of defaulting on their mortgages.

The program will start accepting applications on January 16th, 2017, and the BC government plans to invest about $703 million in it over the next three years. As there is no cap on the initiative it could eventually be expanded.

Sources: BuzzBuzzHome 

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Maple Bank Siezed by OSFI and Cut Off by CMHC

Maple Bank

Maple Bank, a niche securitization player in Canada’s mortgage market, looks like it’s going down.

Banking regulator OSFI has taken control of the bank’s Canadian operations according to the Financial Post, which quotes OSFI Superintendent Jeremy Rudin as saying, “We are guided by our mandate, which is to protect the depositors and creditors of the Canadian branch and have taken this step to safeguard their interests.”

On top of that, CMHC has terminated Maple as an approved issuer of mortgage-backed securities (MBS). CMHC made this statement:

Effective immediately, Canada Mortgage and Housing Corporation (CMHC) has suspended Maple Bank GmbH – Toronto Branch as an Approved Issuer of National Housing Act Mortgage-Backed Securities (NHA MBS). The suspension is the result of restrictions placed on the operations of Maple Bank GmbH by Germany’s Federal Financial Supervisory Authority (BaFin) that affect its ability to fulfill its obligations as an Approved Issuer.

CMHC provides a timely payment guarantee of interest and principal to NHA MBS investors. CMHC’s guarantee of NHA MBS issued by Maple Bank GmbH – Toronto Branch are not impacted by the suspension.

Here is a good summary from Handelsblatt about what triggered Maple’s woes → Link.

 

maple bank chart

Maple Bank is probably not coming back. National Bank has already written off its 25% stake. That’s disappointing for the mortgage market because, while Maple was a small player in the MBS market, it was still a player. And in a market where MBS spreads have widened significantly in the last year, the market needs all the liquidity it can get. (MBS spreads refer to the extra yield that mortgage investors demand on top of safe government bonds.)

According to sources, Maple bought mortgages from a handful of non-bank lenders. It also provided warehouse facilities (i.e., short-term capital to fund mortgages until they’re sold to investors). Lenders would take funded mortgages, package them up, sell them to Maple and then Maple (as a former CMHC-approved issuer) would issue MBS and/or sell those mortgage pools into the Canada Mortgage Bond (CMB) program. This provided cheaper funding for lenders than simply selling their mortgage commitments to big institutional buyers.

Based on CMHC data, Maple was ranked 21st out of 82 MBS issuers in terms of market share, with $3.49 billion of MBS outstanding out of $441 billion industry-wide.

“Losing any funder is never good,” said one lender executive who preferred not to be quoted. “All of their mortgages were originated in the broker space.” That leaves big securities firms like TD Securities, RBC Dominion Securities, National Bank Financial and Merrill Lynch as the main buyers of broker-originated mortgages. “If it’s just big players left, it’s not positive for consumers,” he added, noting that less competition raises funding costs for bank challengers.

Side story: On an unrelated positive note, we hear that Laurentian Bank is now going to be a player in the securitization space. That is very welcome news for broker lenders. More from Bloomberg.

None of this should cause investors in Canada’s MBS market to lose confidence. What sunk Maple Bank was unrelated to Canada’s housing or securitization markets. CMHC is now managing its MBS to ensure investors get paid as expected. The housing agency sent CMT this statement today:

Canada Mortgage and Housing Corporation’s (CMHC) guarantee of NHA MBS issued by Maple Bank GmbH – Toronto Branch is not impacted by the suspension, therefore there is no impact on MBS investors.  Furthermore, this suspension will have no impact on homeowners or mortgage holders.

CMHC has taken control of the NHA MBS and related mortgage cash flows and provides a timely payment guarantee of interest and principal to NHA MBS investors.

CMHC has previously had four issuer defaults in the early 1990s. No MBS payments to investors were ever missed and CMHC did not incur any losses on these previous issuer defaults.

We’re told by other sources that CMHC has never lost money by guaranteeing NHA MBS, even when issuers default. That’s thanks in part to the excess spread that’s earned between the mortgage interest (paid by borrowers) and the MBS interest (paid to investors). 

“The [MBS] trades themselves are fine; but with Maple now essentially closed for business…whoever was using them will have to find alternative funding…” said one capital markets pro we spoke with. Fortunately, all lenders who relied on Maple have backup funders, we’re told.

As for small Canadian depositors, the fallout is limited. Maple’s latest annual report notes: “The Toronto branch specializes in lending businesses, in particular the acquisition of mortgage loans for securitization, and deposit taking.” According to OSFI, however, Maple Bank is a foreign bank “authorized under the Bank Act to establish branches in Canada to carry on banking business in Canada.” Foreign banks cannot generally “accept deposits of less than $150,000” in Canada.

Maple’s last report noted that its “securitization business grew significantly” through 2014. And now it’s gone; just like that.

Source: Canadian Mortgage Trends  February 10, 2016  Robert McLister  

Maple Bank

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CBC FORUM House keys sent to the bank? Your thoughts on mortgage defaults

The federal government is worried about Albertans making strategic defaults on their mortgages.

 

Some Albertans are walking away from their mortgages by putting their keys in the mail and sending them back to the bank.

It’s a phenomenon known as jingle mail — sparked by a combination of high debt and lost jobs — and was a big problem in Alberta back in the 1980s.

As a result, the federal government is watching the Alberta market closely. Jingle mail, or strategic defaults, weaken the housing market and increase loan losses among Canada’s banks, say experts.

We asked what this means to you: Does your mortgage keep you awake at night? What would make you send your house keys to the bank? Any personal mortgage anecdotes you want to share?

You weighed in via CBC Forum, our new experiment to encourage a different kind of discussion on our website. Here are some of the best comments made during the discussion.

Please note that user names are not necessarily the names of commenters. Some comments have been altered to correct spelling and to conform to CBC style. Click on the user name to see the comment in the blog format.

Many chimed in with their own mortgage advice.

  • “Sending house keys back to the bank seems very irresponsible. The banks are not going to absorb the costs — customers will be on the hook in the end.” — EOttawa​
  • “People who buy the McMansions in the hopes that someday they will become part of the upper class are the ones who should worry. Big risks have serious consequences. Good luck with it.” —Chris K
  • “No, it doesn’t keep me awake for the simple reason that we bought a home well within our means with a mortgage way lower than what the banks said we could borrow … It’s a question of common sense and priorities.” — docp

There was some discussion on who should be blamed.

  • “Lots of blame and finger pointing to go round. Bottom line, as many others have said, it falls on personal responsibility to make good decisions and sometimes circumstances outside our control force us to make tough decisions to survive — like using ‘jingle mail’ in Alberta.” — Don Watson

Several commenters even had their own jingle mail stories.

  • “My ex-husband and I returned the keys to the bank when it became clear that he was unable to maintain the mortgage payments on the home he had bought before we were married. This happened in the first year of marriage and it was a terrible blow to him. Later he declared bankruptcy.” — LinneaEldred
  • “We purchased our home within our means and have been able to keep up with the payments. We lived in Fort McMurray for four years, after they went through the downturn of the economy in the early 80s. Folks were turning in their keys then and walking away. People still don’t learn from past mistakes.” — Leslie Riley​

There were even some thoughts on the future … or lack of it.

  • “I have a mortgage and I also have a full-time job, yet I still worry about the future of my mortgage. I don’t believe that we need to point out the fact that even if you were or are smart about your money, you cannot predict your future.” — Samantha R.

You can read the full CBC Forum live blog discussion on mortgages below.

Can’t see the forum? Click here

Source: By Haydn Watters, CBC News Posted: Feb 09, 2016 12:26 PM ET

 

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Self-employed? Prepare for a long conversation with your mortgage broker

Getting financing isn’t as easy as it used to be, say mortgage brokers — and for the 15% of Canadians who earn money for themselves without a steady employer’s salary, it’s harder still.

If you’re self-employed and about to apply for a mortgage, be prepared for some serious form-filling. Getting financing isn’t as easy as it used to be, say mortgage brokers — and for the 15% of Canadians who earn money for themselves without a steady employer’s salary, it’s harder still.

“Back in the day, five years ago you could hold up three fingers and say ‘I promise I earn $100,000, and many lenders would take your word for it,” says Claire Drage, a senior mortgage agent with Mortgage Alliance in Greater Toronto. But things have changed, she warns. “It will take more paperwork, more documentation, more justification from the borrower on why they should be approved.”

Since 2008, the government has lowered the maximum amortization period from 40 to 25 years, and reduced the maximum gross and total debt service ratios to 39% and 44% respectively. Then, last October, the Office of the Superintendent of Financial Institutions’ B-20 rules put the underwriting practices of federally regulated financial institutions under scrutiny.

“Generally these changes have made for more rigorous review of documentation which does impact the self-employed borrower programs to a greater extent than salaried borrowers,” says Gary Siegle, Alberta-based VP of the Prairies for mortgage services firm Invis.

The self-employed often hinder themselves with creative accounting to lower their income. “They may have a different way of reporting all their income, reducing all their taxes as much as possible. Those are the ones that are more challenging,” says Daryl Harris, a broker at Verico One Link Mortgage & Financial in Winnipeg, and chair of the Canadian Association of Accredited Mortgage Professionals. Those not reporting cash jobs also reduce their provable income, making it harder to get a mortgage.

 

“Even though you’re self-employed and you benefit from amazing tax breaks, and your personal income tax return is incredibly low, you still have to prove to the lender that you can afford to pay this mortgage back,” adds Ms. Drage.

For those that find it hard to prove their income, stated income programs are an option. Designed for those with less than three years’ business operation, it requires at least a 10% downpayment, and not all lenders support it. TD Canada Trust, for example, looks instead at documented income such as T1 financials, business financials, and notices of assessments.

Changing attitudes among lenders makes it more difficult for the self-employed to deal with top-tier banks, says Don Barr, president of Verico Select Mortgage in Victoria. “It is forcing a lot of stuff out of the ‘A’ business and into the alternative business,” he says. Alternative lenders, some of which are not federally regulated, may take a less rigid approach when assessing self-employed applicants. However, the trade-off is often a higher interest rate.

There are several things to remember when applying for financing:

• Loan-to-value matters. Offering a 10% downpayment will make the process far more difficult. They care more than ever about up-front equity.
• Keep up with your payments. Make sure that you are up to date with the CRA before applying to a lender.
• Be organized. Ensure that all your accounting and tax documentation is up to date, and that you are reporting
• Pay off your credit. Get those outstanding cards and lines of credit paid down before you let your lender score you.
• Be prepared to adjust your expectations. You may have to adjust your target price after talking to a lender.
• See if your lender will ‘gross up’ your income. Some lenders may add a percentage when assessing your taxable and/or non-taxable income to allow for business expenses you incur.

And above all, start early in the process, preferably with a pre-approval before you look for a home, because one thing’s for sure: you’ll be doing more hoop-jumping than you think.

Source: Danny Bradbury, Special to Financial Post |September 19, 2013 

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We don’t charge you mortgage insurance: CMHC – You could still pay a premium even with a 20% down-payment

CMHC and Genworth don't charge mortgage insurance fees. You're bank does (Getty Images / Oxford)

Source: Money Sense, by by May 25th, 2015

We recently got an email from a reader who was quite perturbed. He had saved his money was diligent about his budgeting, and was set to purchase a modestly priced home near Ottawa. But when he went to use the Canada Mortgage and Housing Corporation’s mortgage calculator to figure out his final costs, he was surprised to see an additional $2,500 tacked on to his mortgage. Here’s why:

Q: Every resource I’ve consulted says that a down-payment of 20% or more on a home waives any mortgage insurance premium that I would be required to pay if I were putting down less of a down-payment. However, when I use the CMHC mortgage affordability calculator, and enter a purchase price of $250,000 with a down-payment of $50,000 (20% of the home’s value), it gives me a mortgage insurance premium of $2,500 not $0. My question is why are home buyers told that a 20% or more down-payment is sufficient to avoid mortgage insurance fees, if that’s not the case? —Peeved with Premiums

Dear, Peeved with Premiums: You have a right to be concerned. Home buying is a stressful process and every dollar counts, so it would certainly come as a surprise to learn that despite saving up a 20% down-payment you’re still expected to pay a mortgage insurance premium.

But there’s good news: You won’t have to pay.

Any property purchased in Canada that has less than a 20% down-payment is required, by law, to have mortgage insurance. This insurance is to protect the lender, not you, and the fees drop as your down payment gets larger. In Canada there are currently two entities that provide lenders this insurance:Genworth and Canada Mortgage and Housing Corporation (CMHC).

But don’t be confused. The laws to purchase this insurance don’t actually impact you—they impact your lender. In other words, federal laws demand that lenders purchase this insurance from Genworth and CMHC. Federal laws don’t stipulate whether or not lenders have to pass on this cost to Canadian home buyers. That decision is up to the lender.

But before you get out the placards and set up a protest, let’s put this in perspective. A conventional mortgage is where you put 20% of your own money (or more) as collateral towards owning a home. But it’s a large purchase and 20% can be tough to save up (particularly in a hot real estate market where prices keep going up). That’s why the federal government came to an agreement with CMHC and Genworth to offer mortgage default loan insurance (the official name) to lenders who were willing to accept a less than 20% down payment when it came to a home purchase. When a borrower qualifies to purchase a home using a non-conventional or high loan-to-value mortgage, the federal law requires mortgage loan insurance and this cost is passed on to the borrower.

Simply put: It’s a fee passed on to you for the benefit of owning a home with less than 20% down.

BANKS PASS ON THE COST TO BUYERS

Still, it’s pretty much an industry standard for lenders to pass on the cost of mortgage insurance to their borrowers who put down less than a 20% down-payment.

What’s not typical is to pass on this cost if a home buyer puts down 20% or more as a down-payment on a property. But that doesn’t mean it doesn’t happen. Fact is even when you purchase a home with more than 20%, many lenders will still opt to purchase the insurance. Why? It helps defray the downside risk of mortgaging a more expensive property. Think: Toronto and Vancouver where average prices for detached urban homes reach or surpass $1 million.

But in only a few cases, will a lender decide to pass on the cost of this mortgage insurance when a borrower puts down a 20% or more as a down-payment. “It’s not typical,” says one mortgage broker, “but it can happen.”

It will only really happen if the borrower moves from the A-list (of high quality borrowers) to the B-list (riskier borrowers) and red flags for getting on the B-list include: bad credit rating, you’re self-employed or have a spotty employment history, you carry a large debt load that’s close to the threshold (to understand mortgage ratios, read my blog on the basics of debt ratios and qualifying for mortgages.)

THE MORTGAGE CALCULATOR IS NOT WRONG

Of course, none of this applies to Jon our reader. He’s been steadily employed for decades, he doesn’t carry an exceptional debt loan and the size of the mortgage on the property is not only manageable, but conservative given the current real estate market.

For that reason, I reached out to the CMHC to ask, specifically, why their calculator would include this fee. Karine LeBlanc, media relations officer with CMHC, responded:

“It is important to note that CMHC’s mortgage affordability calculator is for general illustrative purposes only. The amounts it projects are based upon assumptions and estimates made according to generally accepted principles for mortgages in Canada. CMHC cannot guarantee the projections. Actual payment amount must be obtained from a person’s lender.”

In other words: Don’t take any mortgage calculator at face value.  Talk to your lender. And if you find that your bank feels it necessary to pass on the fee, I would suggest shopping around. The mortgage business is hyper-competitive these days and finding a lender with a great rate that doesn’t pass on extraneous fees should be easy as 1-2-3.

Read more from Romana King at Home Owner on Facebook »

(Just a heads up: Mortgage insurance premium rates recently went up both at CMHC and Genworth and investors, those with vacation homes or second mortgages will want to pay attention to the different rates that Genworth applies to these types of properties.) Here’s the standard rate charts for both Genworth and CMHC.

CMHC mortgage insurance premiums

Genworth's mortgage insurance rates

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Are you helping or hurting your client?

Are you helping or hurting your client?

Mortgage loans for clients with bruised credit happen every day – but the industry as a whole needs to ensure those loans are improving fiscal responsibility, and not sinking the client deeper in debt, says one alt lender.

“One of the things we try to say when talking to brokers is, ‘How are we helping the client in providing this funding?’” says Jason Provencher, the manager of business to business solutions with Bridgewater Bank. “We want to say, ‘Is this client likely to take the advice of the lender and the broker and correct this situation, or are they just trying to get money to buy a new truck?’”

It is a vital role that brokers can play in concert with lenders, Provencher told MBN, advising clients to improve their financial situation and find fiscal restraint, instead of falling prey to wanting everything right now.

“Provide the advice to the client, show them everything they need to do to correct the situation and how it will benefit them, and continue to follow up with them as part of the relationship,” he says. “It is important that these talks include future financial planning, because it isn’t just about how this money is going to help you today, but how is it going to set you up for success tomorrow.”

Provencher says that Bridgewater Bank sells the mortgage product with an eye to how it will help the client down the line, to move them into better things.

“Yes, we want to prevent bankruptcies and foreclosures; but what we hope we’re doing in the market is helping the client improve their situation,” he says.

As for the future of lending, Provencher sees a three-tier lending market where people with bruised credit may start in the private space, later moving to the alternative space, and eventually moving into the prime space.

“It is very competitive on the alt side,” he says, “and the rates really aren’t that bad – we’re talking four to five per cent for those with bruised credit or who may have been in bankruptcy before.”

Looking to the future, Provencher reflects on how much has changed since he applied for his own first mortgage.

Source: MortgageBrokerNews.ca by Donald Horne | 16 Jul 2015

Rate hike could leave mortgage holders stretched, survey finds

Many mortgage holders in Canada have very little financial cushion and could be in trouble if rates rose or they lost a job, according to a new survey.

About 15 per cent of respondents to a survey done for Manulife Bank of Canada said they would have difficulty making payments if their mortgage payments went up. That means they might face tightened circumstances if rates have risen by the next time they renegotiate their mortgage, a likely circumstance as most analysts believe interest rates will rise this year.

Nearly half said they couldn’t manage a 10 per cent increase in their mortgage payment.

“Having your payments go up 10 per cent sounds like a lot, but if you have a $200,000 mortgage and interest rates go up one per cent, that’s a 10 per cent increase in your mortgage payments,” said Manulife Bank CEO Rick Lunny said. “So there’s not much room here for those people.”

It is likely the Fed will raise rates by one quarter of a point only this fall and the Bank of Canada may not follow immediately, but mortgage rates also could be affected by movements in the bond markets.

Oliver Roundtable 20141127

As housing costs rise, Canadians find themselves with little wiggle room after they pay the mortgage. Losing a job or seeing rates rise could leave some people in trouble. (Darren Calabrese/Canadian Press)

Faced with loss of employment by the major breadwinner, most respondents to the survey said they had a very limited financial cushion.

About 16 per cent said they’d be in trouble within a month and a total of 43 per cent said they’d have difficulty within three months if someone in the household lost a job.

The online survey was done for Manulife by Research House between Feb. 10 and 27. The survey polled 2,372 Canadians in every province, all of them homeowners between the ages of 20 and 59 with a minimum household income of $50,000.

The rate of mortgage default in Canada is very low, but as housing costs rise, many observers have warned about the amount of debt Canadians have taken on.

Manulife found the average amount these homeowners had outstanding on a mortgage was $190,000.

Albertans were carrying the heaviest debt load — an average of $242,400 on the mortgage. That’s followed by $217,600 in British Columbia, $197,100 in Manitoba and Saskatchewan and $193,000 in Ontario.

But 78 per cent of respondents to a survey said paying down debt was a priority for their household and 40 per cent had either increased the amount they pay towards the mortgage or made a lump sum payment within the past year.

Source: CBC News Posted: Jun 16, 2015 12:49 PM ET

RBC threatens ‘fast foreclosure’ to seize Port Coquitlam home

Port Coquitlam condo owner Ron Philbrook's 'bad luck streak' continued when the Royal Bank threatened fast foreclosure.

If it weren’t for bad luck, Ron Philbrook wouldn’t have any luck at all.

And the Port Coquitlam, B.C., man believes his plight should serve as a cautionary tale for Canadians carrying record levels of household debt.

“I think they’re going to be thinking about, ‘Wow, if this can happen to this fellow, it could very well happen to us,'” warns Philbrook.

‘Fast foreclosure’

The 58-year-old is facing a “fast foreclosure” by the Royal Bank of Canada on his home of 36 years, after he fell on hard times. This is a procedure in which a bank requests authorization to foreclose in 24 hours rather than several months.

The bank’s move is taking place even though Philbrook now has a stable job and has made various offers to start paying off his debt.

“I made several repayment proposals to take care of the arrears, and the bank is basically playing hardball, and said, ‘Sorry, we’re carefully declining your offer.'”

After CBC asked questions, the bank initially agreed to delay its foreclosure application until later this month. The bank is now delaying it indefinitely, pending a resolution with Philbrook.

If the foreclosure happens, it will be the latest blow for Philbrook after being pounded by bad luck.

58 year old Ron Philbrook could soon lose his modest Port Coquitlam condo to foreclosure

Philbrook, 58, has lived in his modest Port Coquitlam condo for 36 years. (CBC News)

Bad luck begins

By the 1990s, Philbrook had paid off his Port Coquitlam condo and was planning for his retirement.

He decided to remortgage to buy a recreational property with relatives on Pavilion Lake, between Lillooet and Cache Creek, 300 kilometres northeast of Vancouver.

But in 2011, Philbrook was laid off from his job of 23 years. He burned through $40,000 from his RRSP to keep paying his condo mortgage, but then fell behind and into debt.

That’s when disaster struck.

Last August, Ron Philbrook's vacation home on Pavilion Lake was hit by a mudslide

Last August, Philbrook’s vacation property on Pavilion Lake, 300 kilometres northeast of Vancouver, was hit by a devastating mudslide. (Courtesy: Ron Philbrook)

Dream ‘wiped out’

Last August, torrential rains sparked massive mudslides around Pavilion Lake.

One buried his recreational property beneath tonnes of rock — and filled his cabin with debris.

The property value went from an assessed $156,000 to just $26,000.

His insurance company refused to pay out, declaring the mudslide an act of God — and the province wouldn’t pay disaster relief because it was a recreational property, not a primary residence.

“I was absolutely shocked,” recounted Philbrook. “I was saying, ‘Oh brother, this is another blow to the gut I definitely don’t need.”

“I was going to sell my place, for whatever money I could get, and I was going to move up and live [there].”

Royal Bank foreclosure

Philbrook owes $114,000 on his Port Coquitlam condo that’s valued at just $95,000.

The Royal Bank has decided to foreclose on his home of 36 years.

hi-rbc-royal-bank

Royal Bank of Canada has given Philbrook a two-week reprieve, delaying a foreclosure application that had been scheduled for June 4.

Normally, the bank would give a homeowner six months to find funds before foreclosing.

RBC has instead applied to B.C. Supreme Court to request Philbrook be given just 24 hours to pay up before the condo can be listed by a real estate agent. Philbrook would be kicked out upon sale of the home.

The bank took this action even though Philbrook found a stable, full-time job last November and has pledged to pay back approximately $500 a month.

“Devastated, I feel devastated,” he says. “I’ve been a very, very loyal customer with them for over three decades. And this is the way they’re treating me.”

Philbrook’s lawyer agrees.

‘Hard-nosed approach”

Priyan Samarakoone, a lawyer with the Access Pro-Bono Society BC, says Philbrook is “a hard-working, everyday Joe Canadian,” who “deserves a break.”

Priyan Samarakoone, lawyer with Access Pro Bono BC, is fighting on behalf of Philbrook

Priyan Samarakoone, lawyer with Access Pro Bono BC, is fighting on behalf of Philbrook. (CBC News)

“I’d like a little wiggle room, I’d like a little flexibility” he says, calling the bank’s 24-hour redemption period “a hard-nosed approach.”

“What I would like to see is in circumstances when we have an opportunity to save the home, that they work with us … and not just kind of roll over that person if it’s just dollars and cents,” he said. “It’s that human approach.”

Temporary reprieve

After being contacted by CBC News, the Royal Bank of Canada initially agreed to soften its position, but still demanded Philbrook come up with a lump sum payment of $11,000.

It gave him a two-week reprieve, delaying a court application that had been scheduled for June 4.

In an email to CBC, bank spokesman Ian Colvin wrote:

“We are working closely with the client to find a resolution and have taken steps to provide both parties with more time and to review carefully the options available.‎”

The statement did not say whether RBC would stick to its 24-hour foreclosure application when the case returns to court.

However, Colvin later told the CBC in another statement the bank is having “ongoing and productive discussions” with Philbrook, in hopes of coming up with a settlement.

He said the bank’s application to B.C. Supreme Court to foreclose on Philbrook within a 24-hour period is being put on hold indefinitely, “pending some resolution” with Philbrook.

Philbrook said he’s thankful for how things have turned out.

“I’m touched, very, very touched and … I’m very happy with how the situation is progressing with RBC.

“I hope we can reach a resolution soon, and that pretty well says it all, right there.”

Source: By Eric Rankin, CBC News Posted: Jun 04, 2015 6:34 AM PT

Broker: Insurers are now tighter than lenders

It’s hard enough getting certain clients approved by lenders, and now brokers are having to deal with more conservative mortgage insurers as well.

“I did a number of files [last] week where the lenders wanted them approved but the insurers wouldn’t insure them,” Morris Briglio of Verico The Mortgage Advantage told MortgageBrokerNews.ca. “The insurers aren’t listening to the lenders.”

According to Briglio, he has noticed this sort of pushback from the mortgage default insurers since 2011, but that they have become stricter recently. He believes the B-20 rules are partly to blame.

“CMHC and the private insurers are the ones dictating policies to lenders which shouldn’t be the case because the lenders know how to [underwrite],” he said. “We might as well send applications straight to the insurers; it’s no longer the lenders who have the power.”

According to one broker, this is becoming increasingly common in specific areas.

“It’s a moving target at all times,” Jeff Attwooll of Verico K-W Mortgage Inc. told MortgageBrokerNews.ca. “Insurers in Alberta are looking at deals in a Microscope.”

Indeed, at least one mortgage default insurer has already admitted it has tightened its underwriting in the oil-rich province.

“We haven’t pulled out of the market by any means,” Levings told an investor conference hosted by National Bank in late March. “What we’re doing is we’re looking at the stacked risk factors a lot closer — so people that have higher debt service ratios, that are employed in the oil and gas sector, that may be dependent on one income versus two, that are buying a home with five per cent down — we’re going to take a lot closer look at that deal.”

Still, Briglio – a B.C.-based broker – is noticing the trend outside Alberta.

And even Attwooll, whose business is in Ontario, is encountering similar problems.

“I’m hearing from lenders that insurers are being a lot pickier,” he said.

Source: MortgageBrokerNews.ca
by Justin da Rosa | 02 Jun 2015

CMHC goes from insuring 90% of new mortgages to only 50% — and that’s as low as it plans to go

CMHC insured 175,169 new home loans last year worth $41.7 billion, which comprised 54 per cent of the market and that’s dropped to about 50 per cent so far this year.

CMHC insured 175,169 new home loans last year worth $41.7 billion, which comprised 54 per cent of the market and that’s dropped to about 50 per cent so far this year.

Source: Financial Post

Katia Dmitrieva, Bloomberg News | May 28, 2015 3:02 PM ET

Canada’s national housing agency says it’s now insuring a record low 50 per cent of new residential mortgages, and it doesn’t intend to let it drop any further.

Canada Mortgage & Housing Corp. Chief Executive Officer Evan Siddall said that after years of cutting its share to reduce taxpayer risk to the $1.2 trillion mortgage market, the agency plans to hold firm. CMHC’s stake of the new mortgage-insurance business has dropped from about 90 per cent during the 2008 financial crisis, and a pre-crisis low of 57 per cent.

“We’re very comfortable with our market share around 50 per cent,” Siddall said at Bloomberg’s Toronto office May 22. “It’s important for us to have a substantial presence in the marketplace so that we can give access and information to Canadians, we can give good policy advice to government” and can act as a shock absorber in case of a financial crisis.

The agency insured 175,169 new home loans last year worth $41.7 billion, which comprised 54 per cent of the market and that’s dropped to about 50 per cent so far this year.

The vow to retain half the market may limit growth of private rivals such as Genworth MI Canada Inc. and Canada Guaranty Mortgage Insurance Co. Shares of Genworth MI, part-owned by Richmond, Virginia-based Genworth Financial Inc., have risen 36 per cent in the past two years as its market-share rose, compared with a 19 per cent gain in the broader Standard & Poor’s/TSX Composite Index.

Legal Cap

CMHC had $543 billion of mortgage insurance in-force, or total mortgages it insures, at the end of 2014, according to the agency’s annual report. That’s just below its legal cap of $600 billion and down 4.1 per cent from 2012.

Residential mortgage credit at banks and non-banks totalled $1.2 trillion as of March, according to figures from the Bank of Canada.

Genworth MI had $365 billion in insured loans as of March 31, according to financial documents. Canada Guarantee, co-owned by the Ontario Teachers’ Pension Plan, is closely held and doesn’t disclose insurance in-force.

Brian Hurley, executive chairman of Genworth MI, said last year he expected CMHC to command only a third of the market in the future.

CMHC is “still going to have a third of the market and two-thirds of the market can go to the private sector,” Hurley, then CEO of Genworth MI, said at a Sept. 4 financial summit. “How are they going to get there? That’s a good question. One easy path could be the limiting they’ve done over the last few years.”

‘We’re Comfortable’

Current Genworth MI CEO Stuart Levings said the company offers value above the government-backed insurance agency.

“We believe we are the mortgage insurer of choice — when a lender has a choice they pick Genworth,” Levings said at Bloomberg’s Toronto office. “It’s admirable for a competitor to say ‘I’m going to maintain a certain share level.’ I respect that. We as a competitor will continue to fight for market share in a responsible prudent, manner.”

“Canada Guaranty has experienced significant growth over the last several years by increasing our customer base and deepening current lender relationships,” Mary Putnam, spokeswoman from Canada Guaranty said in an e-mail statement. “We are well positioned for increased market share.”

CMHC would boost marketing, customer-service efforts, and perhaps lower premiums, if CMHC’s share of the market slid much below 50 per cent, Siddall said.

Gains Tougher

“We’re comfortable for two reasons at our all-time low market share: we have vigorous, healthy competitors,” Siddall said. “And because we’ve adjusted to having that market share and managing it.”

Siddall, previously an adviser to former Bank of Canada Governor Mark Carney, spent more than a decade in the financial sector at firms including Goldman Sachs Group Inc. and Bank of Montreal.

CMHC can hold onto its 50 per cent stake “pretty easily,” Paul Holden, a Toronto-based analyst at Canadian Imperial Bank of Commerce who covers Genworth MI, said by phone Tuesday. “The implication on Genworth is probably that future market-share gains are going to be a lot tougher to come by.”

Three of the eight analysts who track Genworth MI rate it a buy and five say hold. The average 12-month stock price target is $39.50, 18 per cent above its closing price of $33.60 on Wednesday.

The company reported profit rose 13 per cent to $107 million in the first quarter from a year earlier as premiums grew 55 per cent to $130 million.

Shorter Amortization

CMHC is 100 per cent backstopped by the government so as arrears arose during the 2008 financial crisis, lenders including Royal Bank of Canada and Toronto-Dominion Bank, turned to the agency to insure more mortgages. Genworth MI is 90 per cent guaranteed by the government in cases of default.

The federal government has actively sought to limit CMHC’s role as home prices have surged in Canada. Toronto home prices jumped 48 per cent to an average $545,400 in April from the same month in 2008. In Vancouver, they rallied 19 per cent to $673,000 over the same period.

The department of finance made CMHC insurance unavailable to homes above $1 million, lowered the maximum amount homeowners can borrow against the value of their homes to 80 per cent and cut maximum mortgage amortization periods several times to 25 years. A mortgage with less than a 20 per cent downpayment must be insured in Canada.

Risk Sharing

CMHC itself increased mortgage-insurance premiums by 15 per cent last year and this year raised premiums on mortgages with less than 10 per cent down, with the change coming into force June 1. Oakville, Ontario-based Genworth MI followed suit with its own premium increase. CMHC also no longer insures second homes or condominium construction financing.

CMHC is speaking with the government on a new risk-sharing model, Siddall said. The department of finance is leading talks with banks, and the housing agency and other federal departments are supporting with policy and research, Siddall said.

“I’ve talked about risk sharing with lenders as a sound idea and so has the Minister of Finance, and that work’s still going on,” Siddall said, referring to Joe Oliver. “It could have different design features.” Two possible options are a deductible structure where lenders take the first hit if a loan goes sour or one where the loss is shared, Siddall said.

CMHC doesn’t expect Canada’s hot housing market to suffer a sharp correction, Siddall said.

That’s because CMHC regularly conducts stress tests that include catastrophic events such as global economic deflation and a U.S.-style housing crash, modelling the impact of a 5 per cent rise in unemployment and a 30 per cent drop in home prices. Even in those worst-case scenarios, the agency would have enough capital to weather them, Siddall said.

“Markets go up and markets go down and we’re in a period right now where markets are a little up,” Siddall said. “We don’t see the conditions that could cause it to have a sharp correction.”