Category Archives: foreclosures

CBC INVESTIGATES: Marco Kozlowski’s investor seminars use testimonials revoked by clients whose real estate deals collapsed

Marco Kozlowski’s free real estate seminars promise big profits using testimonials from past participants, some of which were filmed before any money was actually made.

Promotional testimonials from clients praising his methods are a key part of his marketing campaign, but CBC News has learned that at least four of the people featured in the testimonials have requested they no longer be used because they’re not accurate.

The Black Eyed Peas blast from the speakers. A charismatic tanned Californian says just $3,500 U.S. can change your life, at a November seminar hosted by Kozlowski’s company, At Will Events.

Participants are told they can get get rich with no money down and no credit by buying cheap houses from desperate Americans.

The free seminar at a Vancouver hotel is one of four CBC News attended where a charismatic speaker tries to recruit students for Marco Kozlowski’s three-day training course. Each time, video testimonials from clients who say they cashed in big time are played.

One video features Kirpal Bhogal.

Bhodal from youtube

A still image from Kirpal Bhohal’s video testimonial played at Kozlowski’s seminar. (MarcoKozlowski/youtube)

“On the second day of Marco’s training, we purchased a property for 5,000 and sold it for 62,000,” says the Toronto area man, attesting to the apparent profit he made with Kozlowski’s guidance.

The well-dressed man at the front of the room, Lance Robinson, stops the tape and asks who is ready to “invest” in the next step of the course.

“We’re gonna surround you with multi-millionaires at a three-day event,” he says.

Several people pay the tuition, having no idea that Bhogal’s success story wasn’t completely true.

Testimonial filmed before deal closed

A CBC news investigation has discovered that Kozlowski is using testimonials by Bhogal and at least three other students who say they are not accurate.

Testimonial brochure

This testimonial appears in brochure handed out at free seminars in Vancouver and Toronto in November 2015, despite Kirpal Bhogal’s request it not be used. (At Will Events Brochure)

Bhogal has confirmed to CBC that he more than once requested his testimonials not be used.

“This video was recorded just after signing the contract but before closing,” wrote Bhogal in a post on Kozlowski’s YouTube channel, which features one of two video testimonials Bhogal shot.

Lance and Marco

Marco Kozlowski, left, with Lance Robinson, who spoke on behalf of Kozloski at free seminars to recruit students for Kozlowski’s $3,500 US course, in Vancouver. (Ron Usher)

“The deals did not close; No profits were materialized.”

In a statement to CBC News Nov. 14, 2015, Kozlowski said he was not aware one of Bhogal’s deals had fallen through.

But an email suggests Kozlowski knew months ago that Bhogal was unhappy with his experience.

“Despite my verbal request and email earlier, my testimonial recorded at your office, is still being widely publicized,” wrote Bhogal to Kozlowski, May 15, 2015.

When CBC inquired why Bhogal’s testimonial was still being used, Kozlowski emailed this response.

“The testimonial is not entirely inaccurate. Mr. Bhogal made money on his first transaction,” wrote Kozlowski.

Bhogal questions whether he made any profit on that transaction, because Kozlowski applied the proceeds toward Bhogal’s tuition fees for advanced training.

“I have now instructed that his testimonial not be used in any form,” said Kozlowski.

Despite that assurance, a printed version of Bhogal’s testimonial was still being distributed at a seminar in Toronto two days later.

‘It’s not my testimonial’

Another former student who paid to attend Kozlowski’s weekend course in Toronto was shocked to see her face on one of Kozlowski’s ads in August of 2014.


A woman who never made an offer on a home was shocked to see her photo used in a testimonial, claiming a $132,000 profit. (Facebook)

“It was … saying that I made a $132,000 profit,” says Shauna Walker, furious her photo was shown beside a photo of a cheque.

“It’s not my testimonial and I never made a dollar,” she told CBC News.


Montage of advertisements showing what appears to be the same cheque for $150,329.92 used in three different testimonials. (Natalie Clancy)

“I emailed him and said this has to stop,” she said.

Kozlowski replied, “Seems an eager marketer put your head on someone else’s deal. That cheque and profit was from another Shauna.”

Three months later, her ad appeared again in a newspaper, prompting her to complain once more.

“I’ll break some heads. Sorry. Never happen again. Pinky promise,” wrote Kozlowski, Nov. 5, 2014.

An image of the same cheque appears beside other testimonials in ads published in Vancouver, Toronto and Montreal. Walker’s ad has not reappeared.

‘Many red alerts’

“I’ve attended the seminars,” says Ron Usher, a lawyer who has been tracking Kozlowski’s advertisements.

“There are many red alerts for people,” says Usher, who tried to warn Vancouver investors to stay away from a recent seminar before Kozlowski’s staff asked him to leave.

Ron Usher

Lawyer Ron Usher has been tracking what he calls misleading advertising and unrealistic promises made at seminars to recruit students. (cbc)

He says if Kozlowski has helped so many students, as he claims, why would he use a discredited testimonial?

“I just wonder why you would need to do that if there are so many successful stories?”

CBC News put that question to Marco Kozlowski, who responded, “We have many success stories … and there is no need to to use Mr. Bhogal’s testimonial.”

Kozlowski was asked to provide contact information for such students, but has not done so yet.

CBC News did speak to six Kozlowski seminar participants who said they had no complaints about their experience, including one who appeared in a testimonial.

Testimonials altered for different markets

A review of several advertisements shows other discrepancies. Testimonials from three people list them as being from different cities.

For example, “Steeve R”  is listed as living in Markham in a Toronto paper. The same photo and testimonial appears in a Montreal paper listing him as from Montreal. In other ads, he’s listed as living in Surrey and Edmonton.

Where is Steeve from

Montage of ads with testimonials from Steeve R. who is listed with various home towns in several different newspapers. (cbc)

Mistakes blamed on marketing company

Kozlowski says the discrepancies were made by a firm that has since been fired.

“The ads were the responsibility of the marketing company and neither I, nor my staff reviewed their work,” said Kozlowski.

‘Suspicious’ ads could lead to penalties

Brenda Pritchard, a lawyer specializing in advertising, says any advertiser who uses false or misleading testimonials could be prosecuted criminally or civilly under the Canadian Competition Act and face fines up to $10 million.

“It does look extremely suspicious, if you have one person’s name and picture pretending to live in different jurisdictions,” Pritchard said.

Brenda Pritchard

Advertising lawyer Brenda Pritchard says the Canadian Competition Bureau can prosecute companies that use false testimonials. (cbc)

“It’s whether or not these people actually used the service, got their results that they are representing here … all of these things have to be true and currently true.”

When asked about whether his advertising could be in violation of Canadian laws, Kozlowski wrote, “I have every intention of complying with all federal, provincial and local laws and regulations.”


Source: Natalie Clancy, CBC News Posted: Nov 24, 2015 2:37 AM PT

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When foreign buyers abandon Canadian housing: Don Pittis

A housing development south of Vancouver, where anecdotal evidence indicates foreign investors have helped push property prices higher. But as Don Pittis says, poor data on how much of the investment in Canadian real estate is 'hot money' means we may be unprepared when foreign investment slows or stops.

There is little doubt that overseas money has had an impact on the high cost of Canadian real estate.

Even the Canada Mortgage and Housing Corporation appears to have conceded the fact. In a speech this week, CMHC president Evan Siddall said that despite having poor data on foreign ownership, it was likely pushing up the price of Canadian housing.

There are two things that are less clear that may be crucial to the value of your home. The first is the size and distribution of the effect. The second is what will happen when foreign ownership dries up or withdraws.

The fact that Canada does not have a good official estimate of how much foreign money is invested in Canadian housing is a scandal. Other countries assemble the information as a matter of course.

Anecdotal evidence

In Canada, even the head of the CMHC admits he is dependent on anecdotal information, partly because without making it a legal requirement, buyers may be unwilling to divulge their ownership status.

“Most of the available information is anecdotal. And the problem is that many foreign investors may prefer to hide their ownership,” Siddall said in his speech this week.

Without an official way of gathering the data, private studies can be based on uncertain methods. They may fail to distinguish between investment by foreigners and purchases by new Canadians.


Signs with larger Chinese script outside a mansion under construction in Vancouver are the kind of anecdotal information indicating foreign money is coming to Canada seeking a safe investment. But such evidence fails to indicate whether the buyers are speculative investors or new domestic residents making a long-term investment. (Reuters)

Whether based on anecdote or private research, the conclusions are often unreliable or controversial. Most recently, a study using non-Anglicised Chinese names as an indicator of foreign money in the market was pilloried as racist.

The impact of Chinese investment in Vancouver’s red hot market is what most people imagine when they think of non-Canadian investment in domestic housing. Certainly the effect is clear in countries where they do collect that kind of data.

But anecdotal tales of foreign buyers purchasing blocks of condosmeans that overseas investors, especially those with family members in the country, would not necessarily restrict themselves to luxury homes, nor to the biggest cities.

Taking a stake

In principle, there is absolutely nothing wrong with foreign money taking a stake in the Canadian real estate market. Domestic investors do the same thing. It helps support the construction sector. It provides homes for Canadians without investment capital and homes for those whose mobile lifestyle is better suited to renting.

But as Siddall said, the exact nature of that investment makes a big difference.

“While both domestic and foreign investment activity can be speculative, foreign investment may be more mobile and subject to capital flight,” Siddall said. “This would increase volatility in domestic housing markets.”

Even if the percentage of overseas investors is small, what economists call the “marginal effect” can be large.

As economist John Maynard Keynes said, “Everything happens at the margin.” A simplified way of thinking of the principle is that if people want just a little more of something, the price goes up; if they want just a little less, the price goes down.


There are anecdotal reports of foreign buyers scooping up Toronto condos as an investment. But there is no data to show whether that means condo prices will fall if overseas money stops coming. (Mark Blinch/Reuters)

As Siddall says, foreign speculative investment, sometimes called “hot money,” can definitely drive real estate prices up as it pushes its way into the market. And as author and portfolio manager Hilliard Macbeth told me earlier this week when I was interviewing him for another story, hot money can also have the opposite effect.

Macbeth says international hot money has the choice of any real estate market in the world. While Canada may have been the prime destination for that cash for the last several years, there is no guarantee the investment will continue.

Best to worst

“You could go from the best place to put your real estate money to the worse place, literally overnight,” Macbeth says. “They wouldn’t probably be able to sell, but they wouldn’t be putting any new money in.”

In the domestic real estate market, most of the buying and selling is among people trading one house for another, says Macbeth. Price rises, he says, happen at the margin, consisting of new Canadian (usually young) buyers entering the market and foreign investors bringing new money from overseas.

We seem to be in another one of those periods when everyone, including the CMHC, is worrying about overpriced Canadian real estate. Such worries have come and gone before without hurting the speculative value of Canadian houses.

It’s not yet clear what the trigger might be for a turn from rising prices to decline. It could be rising interest rates. It could be the effect of our aging population. It could be an anticipation of those things as potential investors think they see the writing on the wall.

But just as when markets were rising, the hot money effect of overseas investors will accentuate the fall. And without reliable statistics on how big that sector is, we have no idea how great the effect will be.

Source:  Don Pittis, CBC News Posted: Nov 12, 2015 5:00 AM ET

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Which Canadian cities are top for property investment?

Oshawa, Thunder Bay and Windsor have been the best performing markets for real estate investors over the last five years, according to a new report by SpendTree.

In particular, a home purchased for $100,000 in Windsor in 2010, rented for five years and sold in 2015 would earn returns of 27 per cent.

One investor in the hot market said the city is built for future growth. “The market is great right now and the houses are affordable,” said Tyler Souillere, founder of the TySoull Real Estate Group. “Prices are appreciating as well and the average investor, depending on property type, could see up to 20 per cent returns.”

SpendTree’s report comes as Canada’s biggest cities are increasingly more difficult for investors to cash flow. For instance, the above scenario in Toronto would yield returns of just 22 per cent, while Vancouver’s yields would be just 12 per cent.

Among the areas seeing high demand and interest from investors in Windsor is Walkerville and Riverside, according to Souillere.

After being hit hard by the recession in 2009, the city is starting to recover as one of Ontario’s premier spots for real estate, with prices elevating about $10,000 a year for the last five years.

And with two post-secondary schools and emerging office space improving the commercial sector, the future is looking bright and holding true to its worth as one of the top cities for investment.

According to the report, Thunder Bay ranked as the top city for real estate investment with a five-year capital gain total of $191,621 followed by Oshawa which tallied $168,858 in five-year capital gains.

Thunder Bay also led all Canadian cities in estimated home appreciation, as well as average annual net cash flow from renting over the five-year period.

Markets in Atlantic Canada generally offered strong income, but weak to no price appreciation.

The report assumed each investment carried a mortgage representing 80 per cent of the purchase price at an interest rate of 3.5 per cent and amortized over 25 years.

Source: Canadian Real Estate Wealth Jordan Maxwell 24 Jun 2015

Will you die with a mortgage? 10 reasons why more people will

Special to The Globe and Mail

Just hearing those words creates a visceral response among some who see it as a sinister product that drains fragile old people of their home equity.

Reverse mortgage let seniors pull cash out of their homes with almost no qualifications – up to 50 per cent of their property value. The downsidesinclude rates that are up to 2.5 percentage points higher than standard mortgages, fees and penalties for early repayment and smaller inheritances for the borrower’s heirs.

Whether reverse mortgages are good or bad depends on whom you ask. But either way, one thing seems clear: reverse mortgages are here to stay, and they’re becoming a go-to solution for a growing number of older Canadians.

In fact, the catalysts for growth are so evident that I’ll go out on a little limb and make a prediction. Within a decade, one in ten senior homeowners will sign up for a reverse mortgage, and yes, many will take them to the grave.

Here are ten reasons why:

1. Falling returns – Actuaries project that stocks, a staple in most retirement portfolios, could return roughly 1.45 per cent less than they have in the past, on an inflation-adjusted annual basis. And long-term bonds won’t return any better, especially if rising rates drag down bond prices and seniors have to liquidate their portfolios to fund retirement. With lower returns come smaller retirement nest eggs.

2. Sporadic saving – Returns aside, people simply aren’t saving consistently. Less than four in ten saved for retirement in 2014. Half of Canadians think they’ll run out of money within ten years of retiring and/oroutlive their savings. A stunning 47 per cent of 55– to 64-year-olds say they don’t have a penny saved for retirement.

3. Rates have fallen – You can now get a reverse mortgage for as low asprime + 1.25 per cent for a variable rate or 4.99 per cent for a five-year fixed. These rates could drop further if funding costs fall and/or HomEquity Bank – the leading provider – ever gets nationwide competition.

4. Industry acceptance – Mortgage brokers and financial advisers will increasingly push reverse mortgages for two reasons. For one, they may be paid more as HomEquity ramps up its adviser compensation program. And two, reverse mortgages are no longer a last-resort solution in some cases. Drawing on home equity instead of liquidating retirement investments can help certain seniors save taxes, preserve old-age benefits, maximize CPP benefits, and diversify and extend the life of their investment portfolio.

5. Under-employmentJob quality is deteriorating which could make retirement savings’ shortfalls more common. It’s no surprise that more people expect to work past retirement age. And it doesn’t help that senior unemployment has almost doubled since the mid-1980s.

6. Lots of equity – More homeowners than ever (24 per cent) are relying on their home(s) as their main source of retirement income. Fortunately for seniors, home values have surged 430 per cent in the last 30 years, knock on wood.

7. More homeowners – Canada’s home-ownership rate has leapt from 61 per cent in 1984 to over 70 per cent today. In turn, more people are qualifying for a reverse mortgage.

8. Longer lifespans – In 15 years, seniors will make up 23 per cent of the population, versus 15.6 per cent today. Not only that, but we’re living longer (to age 81.7 on average, and counting). Unfortunately, costly health problems become more frequent around age 77, on average, a problem since retirement savings aren’t keeping up. Moreover, 91 per cent of Canadian boomers want to stay in their own home as long as possible. But home careisn’t cheap and it’s getting costlier every year.

Total and share of population 65 and over by decade, 1971–2080

Source: Statistics Canada (19712010) and Office of the Superintendent of Financial Institutions (20202080)

9. Bigger mortgages – Mortgage and credit line debt surged 62 per cent and 132 per cent, respectively from 1999 to 2012. If you haven’t experienced it, mortgage payments on a fixed income can be, shall we say, stressful.

10. Financial hot water – More older Canadians are having to bail out theirsinking financial ship. As just one example, 21 per cent of Credit Counselling Society clients are now age 55 or older. That compares to just 5 per cent 19 years ago. As of 2010, seniors were 17 times more prone to insolvency than they were just two decades ago.

Assuming that most of these trends won’t reverse anytime soon, reverse mortgages will become a vital fallback for hundreds of thousands of Canadians in decades to come. And after 29 years in existence, they may even become a mainstream financial-planning tool.

Canada’s only national provider, HomEquity, sold 23 per cent more reverse mortgages in 2014, and that growth is just a hint of what’s around the corner. In the U.S., reverse mortgage sales have been up to 100 times greater than in Canada (mind you, interest deductibility and reverse mortgage insurance play a role down south).

There are usually better alternatives than reverse mortgages, like proper planning, downsizing, landing a renter, getting a home equity line of credit and so on. But needs cannot always be planned. A Monitor Deloitte survey last year found 845,000 – or 17.6 per cent – of Canada’s 4.8 million homeowners age 55 plus had a serious financial need and were looking for options. The above options won’t work for many of those folks.

That’s why one in ten senior homeowners may rely on a reverse mortgage within a decade.


Quick Reverse-Mortgage Facts

  • Who can get one: Almost any homeowner age 55+, with no credit or income check
  • How much can you get: 20 to 50 per cent of your property value, tax-free with no payments required
  • What determines how much you get: Your age, type of home, location and existing secured debt
  • When is it paid back: When both spouses die or sell the home, or sooner if one prefers (a penalty and fees may apply if you pay off a reverse mortgage in the first ten years)

Robert McLister is a mortgage planner at intelliMortgage Inc. and founder You can follow him on Twitter at @RateSpy

Low rates, high risk: Behind debt’s record climb

Toronto and Ottawa — The Globe and Mail

This is part of a Globe series that explores our growing dependence on credit – from the average household to massive institutions – and the looming risks for a nation addicted to cheap money. Join the conversation on Twitter with the hashtag #DebtBinge

Bank of Canada Governor David Dodge was getting nervous.

The year was 2006 and the mortgage market was heating up. Canada Mortgage and Housing Corp. appeared to be adding fuel to the fire by agreeing to back risky interest-only mortgages – mortgages with 35-year amortizations and home equity lines of credit.

In a letter to Karen Kinsley, then president of the Crown mortgage-insurance agency, Mr. Dodge called the moves “very unhelpful.”

“We were increasingly relying on household borrowing for both purchases of housing and other consumption, as opposed to household income growth,” recalled Mr. Dodge, who left the bank in 2008. “We were very worried that by loosening up the rules about mortgage insurance we were putting additional pressure on Canadians to borrow for housing, and that was leading to house price inflation and increased indebtedness.

“We argued that the right thing to do at that point in time was to be tightening conditions, rather than loosening.”

Nearly a decade and a lot of debt later, Mr. Dodge’s fears have come home to roost. Years of easy borrowing conditions have helped push household debt burdens to unprecedented heights.

As of the end of March, Canadian households’ combined debts totalled more than $1.8-trillion – equivalent to more than $50,000 for every man, woman and child in the country. The total is more than five times the amount in 1990, and is up more than 50 per cent since the end of 2007. The ratio of household credit-market debt to disposable income – the most common benchmark for consumers’ capacity for shouldering their debts – stands at a record-high 163.3 per cent, nearly double the rate of 1990 and up nearly 20 percentage points from the 2008 onset of the financial crisis. And we’ve reached these heights at a time when Canada’s economy is wobbling, its housing market is significantly overvalued and the Bank of Canada has cut already-low interest rates even further. Since the central bank’s January rate cut, the pace of mortgage debt has re-accelerated to its fastest growth in more than two years.

Mr. Dodge’s recollections are a reminder that our national household-debt dilemma didn’t happen overnight; its foundations began years ago, even before the global financial crisis and Great Recession created the conditions that have brought the issue to a head. A combination of relaxed public policy, cheap borrowing costs, an explosion of new credit offerings and an extended boom in real estate prices put Canadians on a slippery slope to record debts. Government agencies, banks, businesses and consumers themselves have all played a role in creating Canada’s biggest economic dilemma – abetted by a technological revolution that has made accumulating debt easier, faster and more deceptively painless than ever before.

For years, a string of policy makers in Ottawa – from the scolding of overstretched consumers by former Bank of Canada governor Mark Carney, to the finger-wagging at mortgage-rate-cutting banks by the late finance minister Jim Flaherty, to the low-level fretting by current Bank of Canada boss Stephen Poloz – have been warning that the debt predicament poses a potential risk both to Canadian households and to the stability of the country’s economy and financial system.

Yet their policies have sent consumers a different message. The central bank has kept interest rates persistently low – aided by the federal government’s zeal to eliminate its budget deficit, which has starved the economy of government contributions to economic growth and thus strengthened the case for low rates to stimulate the economy. The low-rate environment continues to act as a flashing green light for consumers to borrow.

“We have the wrong mix of policies,” Mr. Dodge said. “We have very distorted financial markets at the moment, and one of the consequences of these very low interest rates is that there has been additional incentive for households to take on debt. Why not take on debt when you can borrow mortgage money for 3 per cent?

“You can’t go and criticize households for doing what is sensible, given the incentives they face.”

A history of borrowing

The early groundwork for the unprecedented build-up of consumer debt was laid more than two decades ago, when the Canadian government and the Bank of Canada committed to inflation targeting, the key to breaking the back of the dual threat of bloated inflation and high interest rates. The enduring benefit was an extended era of low, stable inflation that continues to today, bringing with it low borrowing costs. The new low-rate environment helped unleash a wave of pent-up consumer demand in the 1990s after years of prohibitive rates, recession and tepid recovery, and ushered in an unprecedented stretch of economic expansion through the 2000s, not just in Canada but throughout much of the Western world that had pursued similar policies to contain inflation. But the downside, to which the world was rudely awakened in 2008, was a teetering tower of excessive debt and risky lending that eventually toppled on a global level, sending the world’s financial system into major crisis and triggering the worst economic downturn since the Great Depression. In the height of that crisis, the actions taken by policy makers, not just in Canada but throughout advanced economies, almost certainly rescued the world from a second Great Depression – but they also poured gasoline on Canada’s household debt fire.

To keep the suddenly credit-squeezed global financial system from freezing up, central banks around the world aggressively slashed interest rates. In Canada, where the banking system was remarkably healthy but the economy was slipping into the global quicksand, the Bank of Canada’s rate cuts were designed to fuel household consumption, carry the country’s economy and avert a potentially long, painful recession at a time when export markets had flamed out and manufacturing output was slumping badly.

“We knew back in 2008 that stimulative monetary policies would encourage people to borrow more to buy more homes and cars. That is why we do it – to buffer the downturn in the economy,” said Mr. Poloz in a speech last fall. “This happens in every business cycle, not just this one.”

But the difference in this recovery, Mr. Poloz acknowledged, is how extraordinarily long it has taken – five years and counting. The continuing need to prop up the teetering economy with stimulative monetary policy has meant consumers have been exposed to rock-bottom borrowing rates for an unusually long time, keeping the door wide open for cheap borrowing that has helped stretch household debts to new extremes.

“There are trade-offs, lots of them,” he said in a late-2013 speech. “Today, the most obvious is that prolonged low interest rates can result in the development of imbalances in the household sector.”

Real estate: an asset or liability?

The biggest element, by far, in Canada’s ballooning household debt numbers has been residential real estate. The country’s mortgage debt has more than doubled in the past decade, to nearly $1.3-trillion.

The new era of cheap interest rates dramatically lowered mortgage costs, fuelling a corresponding surge in home prices. The Canadian government responded to the housing boom by softening mortgage regulations to make it easier for Canadians to buy homes – even Canadians who couldn’t afford to under traditional mortgage structures.

Despite Mr. Dodge’s 2006 misgivings, by the end of that year CMHC had followed the lead of private insurers, such as Genworth MI Canada Inc., and bumped up mortgage amortizations to 40 years. The move added more fuel to an already hot housing market, and made home-buyers out of a new class of higher-risk borrowers and speculative investors. In doing so, Canada was following the lead of the United States, where high-risk mortgage products had become all the rage in the financial industry – and would provide the toxic fuel for that country’s mortgage meltdown.

Canada’s high-risk mortgage party didn’t last long. Starting in 2008, the federal government did an about-face, taking a series of measures to try to cool the housing market and discourage excessive borrowing. It cut amortization periods to 35 years, then 30 years and finally 25 years in 2012, while progressively ratcheting up minimum down payments to 20 per cent from zero on government-insured mortgages, and capping the volume of CMHC mortgage insurance and stopping the practice of backing second-home mortgages.

What spared Canada the mortgage meltdowns experienced in the United States and elsewhere in the financial crisis was that the government opened the spigot relatively late in the game, Mr. Dodge said, curbing the use of riskier mortgage products. Still, critics aren’t convinced that Ottawa ever quite managed to put the genie back in the bottle. With persistently low borrowing costs still fuelling an uncomfortably hot housing market, many observers, including the International Monetary Fund, argue that Canada needs tighter mortgage regulations – its “macroprudential” measures – to apply some brakes on the housing boom and slow the growth in mortgage debt.

Quenching Canadians’ debt thirst

While cheap interest rates led Canadians to the credit trough, they don’t entirely explain why consumers have been so eager to drink. Current consumers’ taste for debt has increased from previous generations.

“A 30-year-old today has a higher propensity to borrow, and a lower propensity to save, than a 30-year-old person 10, 15, 30 years ago,” said Benjamin Tal, deputy chief economist at CIBC World Markets. “There’s a change in behaviour.”

The extended period of low interest rates has, indeed, gotten consumers comfortable with cheap borrowing. But Mr. Tal said another key factor has been the slow pace of income growth over the past decade.

“We are a generation that was unable to duplicate the income growth of our parents,” he said. “The income is insufficient to finance what you need and what you want.” As a result, “We use credit to supplement our income,” he argued.

Queen’s University business professor Nicole Robitaille, who specializes in consumer behaviour, isn’t convinced the modern consumer is any more debt-happy than his or her parents or grandparents. But this generation has much more, and faster, access to the temptations than any generation before it.

“Credit is just so accessible to us now. It’s very, very easy for us to get lines of credit, to get mortgages, to get credit cards,” she said. “I don’t think it used to be as prevalent, how much people could take on. I think if our parents’ generation would have had the same access, they probably would have made the same mistakes.”

Statistics show, too, that as the world of consumer commerce becomes increasingly cashless, customers are more likely to whip out their credit cards than ever before. A recent study by the Bank of Canada shows Canadians used credit cards for 31 per cent of all store transactions in 2013, up from just 19 per cent in 2009. Meanwhile, the use of cash has fallen to 44 per cent of all transactions from 54 per cent.

(Canadians are also willing to pull out the credit card for increasingly small purchases; the average price per credit-card transaction fell by 15 per cent from 2009 to 2013, to $34.)

Experts in consumer psychology say the use of credit cards and, increasingly, other forms of online and electronic payments has weakened the negative emotional response that people get from spending money, since they no longer see their pile of cash shrink as they acquire goods. That has made overspending more painless.

“It’s an emotional experience, when you’re paying with cash. That provides some checks and balances,” said financial psychologist Brad Klontz, a professor at Kansas State University. “We’re not even using money any more, we’re swiping cards – it becomes unconscious.

“The more distant you can be from what you’re doing, the less likely you are to think of the consequences.”

Still, Canadians are not the credit-happy spendthrifts we are often made out to be. Bank of Canada data show that the pace of growth of “consumer credit” – credit cards, lines of credit and non-mortgage loans – has generally been in decline for most of the past decade, and is hovering near two-decade lows. Total national credit-card debts grew by just 20 per cent in the seven years from 2005 to 2012, according to Statistics Canada – an average of less than 3 per cent a year. And since 2012, total credit-card debt among Canadians has been essentially flat. But the big boom in consumer debt has been the banks’ great consumer lending leap of our generation: Consumer lines of credit. In 1999, they accounted for less than 6 per cent of all household debts. By 2012, real credit-line debts had more than quadrupled in value, and made up 11 per cent of household debts. The median outstanding line-of-credit balance is nearly triple what it was in 1999.

“I don’t think we’re dumber, I don’t think we have less self-control. But I think we have more ways to make bad decisions now,” Prof. Robitaille said. “I don’t think we’re sophisticated enough to take on all of what is available to us.”

The Big Six aren’t too worried

Lenders have played a large role in Canada’s household debt expansion – making consumers a much bigger focus of their lending strategies.

Twenty years ago, Canadian banks’ outstanding loans to households (both consumer and mortgage lending) were roughly double the size of their business loan portfolios. Today, those household loans are three and a half times the size of the banks’ business loans. Household loans have increased nearly sixfold in value, to more than $1.4-trillion.

In 1970, household credit accounted for just one-third of all lending in Canada, according to Statistics Canada data. By the 1980s, it had crept over 40 per cent. Today, household credit makes up more than half of all lending in this country.

Canadian banks have been happy to cater to consumers’ insatiable appetite for debt. The reason is simple: Consumer loans are highly profitable and default rates are minuscule.

In 2014, the big six Canadian banks made a collective $33-billion in net earnings from a variety of business lines that include wealth management, insurance and capital markets. Their personal and commercial banking lines, which include mortgages, credit-card debt and personal loans, drove about half of those earnings – underscoring the importance of consumer debt to the banks’ bottom lines.

At Royal Bank of Canada, the portfolio in residential mortgages has grown to $194-billion, or about double the size since 2006, the year before the start of the financial crisis. Toronto-Dominion Bank’s residential mortgages have grown to more than $175-billion, more than tripling since 2006. Over the same period, TD’s credit-card loans have risen nearly sixfold.

But bank chief executives don’t see any looming crisis in consumer debt – or, more to the point, their banks’ financial exposure to it. CEOs have expressed little concern about the housing market in particular. Royal Bank of Canada’s Dave McKay and Toronto-Dominion Bank’s Bharat Masrani said this year that the housing market looks relatively healthy, with prices rising because of a shortage in single-family homes and a growing population.

“For TD, we are very happy with our mortgage business. With our underwriting standards and all the stuff we do, we are quite comfortable with how this impacts the bank,” Mr. Masrani said after the bank’s annual general meeting in March.

And why wouldn’t bank chiefs feel comfortable? For all the worries about record-high consumer debt burdens, the number of Canadians falling behind on debt payments isn’t raising any alarms.

The Canadian delinquency rate on Visa and MasterCard credit cards fell as low as 0.75 per cent last year, tied for the lowest rate for data going back to 2004.

Mortgage holders look even better. According to the Canadian Bankers Association, only 0.29 per cent of residential mortgages were in arrears at the start of 2015 – meaning that just one in every 345 mortgages are going unpaid for three months or more. The rate has fallen for six straight years, and is now close to the lowest rate seen in the past decade.

In the United States, the rate of mortgages in arrears is nearly eight times higher than Canada’s, at 2.3 per cent, according to the Mortgage Bankers Association, and that figure doesn’t include foreclosures. In Britain, the value of mortgage payments in arrears for more than three months, while falling, is 1.33 per cent of total payments, according to the Council of Mortgage Lenders.

CIBC’s Mr. Tal said Canada’s big increases in mortgage debt don’t look like a problem because the real estate assets backing those mortgages have soared, too. (Indeed, household debts as a percentage of total assets has declined since the financial crisis, although it is still modestly elevated compared with precrisis levels.) But the problem, he said, is what would happen if those property values – estimated by the Bank of Canada at as much as 30-per-cent overpriced – were to suffer a sizable fall to earth.

“Asset prices can go down,” he said.

Canadian banks haven’t forgotten that conditions can change, but they believe the potential downside, for them at least, is limited. In conference calls with analysts after their quarterly earnings in February and March, the banks said that they had conducted stress tests on their lending portfolios – in some cases looking at the impact of a 20-per-cent decline in home prices and a surge in the unemployment rate by five percentage points. Even these dire scenarios failed to tip them into a hypothetical crisis.

“All kinds of different things can happen in this world, but when we run our various stress tests, we fall within our risk appetite,” said Laura Dottori-Attanasio, chief risk officer at Canadian Imperial Bank of Commerce, during a call with analysts.

Reducing sensitivity a necessity

As for consumers, it has long been assumed that the inevitable slow rise of interest rates, back to more historically normal levels, would put the desired chill on borrowing. But that long-awaited rate upturn remains elusive, now years after it had first been predicted, as a sluggish global economy still demands that central banks, including Canada’s, keep the rate-stimulus tap wide open. The most recent Bank of Canada rate cut was just four months ago. The yield on five-year Canadian government bonds, despite recent modest gains, is barely above a historically puny 1 per cent. Mortgage rates are at historic lows.

The Bank of Canada won’t find it easy to get interest rates back up to more normal levels because easy credit has shifted future consumption to the present, according to Mr. Dodge, the former governor of the central bank. Canadians are buying on credit today what they wouldn’t normally have been able to afford if rates weren’t so low.

“The problem is that the last movement in rates was down, rather than up, and we know that over time [the bank is] going to have to get those rates up,” Mr. Dodge explained. “That’s where the real risk comes. This adjustment period is going to be very tricky because we’ve brought forward a fair bit of consumption in time and there will be a gap as households adjust to higher rates, which are going to come eventually.” That “gap” implies that a lengthy stall-out of consumer spending could be on the way when borrowing costs begin to climb. And given the sheer size of the consumer debt out there, rates wouldn’t have to rise by much for the broader economy to feel a serious pinch.

“When it starts going up, even 50 basis points [i.e. one-half of a percentage point] would be huge,” warned CIBC’s Mr. Tal. “Never before have we been so sensitive to higher interest rates.”

Shifting priorities


CMHC insures interest-only mortgages and mortgages with 30- and 35-year amortization, up from 25 years.

Later bumped up to 40-year amortizations, on 100-per-cent interest loans.

CMHC insures home equity lines of credit for first time.


Amortization period reduced to 35 from 40 years.

Minimum down payment of 5 per cent for new government-backed mortgages.

Limit for total debt service ratio at 45 per cent.

620 minimum credit score requirement.

New loan documentation standards.


Must meet standards for five-year fixed-rate mortgage.

Minimum down payment of 20 per cent.

Maximum refinancing limited to 90 per cent of home value from 95 per cent.


Amortization period reduced to 30 from 35 years.

Maximum amount Canadians can borrow in refinancing their mortgages lowered to 85 per cent of the value of their homes from 90 per cent.

CMHC stops insuring home equity lines of credit.

Financial institutions assume risk for defaults, and eligibility requirements tightened up.

CMHC stops insuring lines of credit secured by homes, including home-equity lines of credit.


Amortization period cut to 25 years from 30 years.

Maximum Canadians can borrow when refinancing their homes cut to 80 per cent from 85 per cent of home’s value.

Government-backed insured mortgages no longer offered on homes worth more than $1-million.


Banks, credit unions and other mortgage lenders restricted to a maximum of $350-million of new guarantees.


CMHC discontinues mortgage products for second homes and the self-employed, without third-party income validation.

‘Serial’ tenants wreak havoc

How to spot a bad tenant

Source: Canadian  Real Estate Wealth
by Jennifer Paterson14 May 2015

The litany of sins committed by so-called “serial” tenants continue to hurt landlords and still those offenders get away with it.

“The ‘serial’ abusers – tenants who knowingly victimize one landlord and then go on to another and another – are of particular concern,” said David Hutniak of LandlordBC.

These types of tenants are pointed to as yet another example of the “ineffectiveness” of the administrative penalties introduced by the Residential Tenancy Branch last week. They were quickly criticized by West Vancouver MLA Spencer Chandra Herbert.

“I’ve had small landlords say to me that they have had tenants who know they can get away with it, because they’ve been getting away with it for so long and haven’t had to pay,” he added.

“The cost of going to the courts, getting an order and finding the tenants is prohibitive compared to the amount of money they’ve lost, so landlords think they might as well give up.”

A CREW reader and investor, Karyn wrote in the CREW Forum that she has lost at least three months’ rent due to negligent tenants writing bad cheques, another calling card of the “serial” tenant.

“There absolutely needs to be an avenue to [hold money] in garnsihee at the tenants’ cost and prevent them from renting again until all previous rent has been paid,” she added.

Tenants in Joe Rich, near Kelowna, B.C., recently trashed their rental house before moving onto the next one, and also left behind some dynamite. “It’s just so scary and hard to get them out once they’re in,” the landlord told Global News. “It’s a huge warning for anybody who is renting their property.”

The worst offender for Kathy Berner, owner of Regency Management & Real Estate in Regina, was a tenant who punched holes in every room, ripped off the cupboard doors and stealing the washer/dryer after he was evicted for failing to pay rent.

The same tenant is now set up in another rental after providing fake references to his new landlord. “He got away with theft, damages and stealing rent, and the police did nothing,” added Berner. “It’s very disappointing and frustrating that landlords get no support.”

Join the discussion in the CREW Forum to share your “serial” tenant stories as well as suggestions on how these tenants can be identified and stopped.

A house-poor couple confronts a looming cash crunch


Vicky and Sandhya Bhardwaj are expecting their first child in August. Once their son arrives, the couple will be living dangerously close to their financial edge.

Mr. Bhardwaj’s entire paycheque – he earns $73,000 a year – goes toward the mortgage payments on the four-bedroom, five-and-a-half bathroom Mississauga house they bought in 2011 for $747,000. Mrs. Bhardwaj’s salary of $55,000 covers everything else, from utilities, groceries, and gas and insurance on their cars, to the interest on their two lines of credit and credit card.

“I’ve made a spreadsheet of our expenses … and right now, we are $1,000 a month short for what we will need to live on, once my wife is on mat leave,” says Mr. Bhardwaj, 39.

The couple, both of whom work in the financial services industry, tried to make up for the looming cash crunch by applying for another line of credit, but their already large debt load disqualified them. “We knew we could not get any more money from the house, other than through our existing line of credit,” he says. Other options – another credit card or borrowing from family – are their last resort.

Instead, Mrs. Bhardwaj, 33, is trying to sell some additional insurance policies. If everything goes according to plan, she could earn between $10,000 and $15,000 in commissions. Her retired father has offered to contribute up to $500 a month from his pension.

Is the couple worried? Although Mr. Bhardwaj acknowledges that the uncertainty of having a baby they had not planned for, combined with the temporary loss of his wife’s salary, is “stressful,” he believes their financial situation is manageable and will improve in the years ahead. “It is risky business, but somehow things work out.”

In many ways the Bhardwajs fit the description of the Bank of Canada’s most “highly indebted,” the 12 per cent of people who are shouldering about 43 per cent of this country’s overall household debt. They are in their 30s, reside in Ontario and are homeowners with a hefty mortgage. What concerns central bankers is how little financial wriggle room they would have to deal with an unforeseen event such as a jump in interest rates, the loss of a job or a sudden illness.

Living paycheque to paycheque, deep in debt, does not faze Mr. Bhardwaj. He came to Canada from India 11 years ago with no savings and has steadily worked his way from a door-to-door sales job into a managerial position with a good company. Like many other couples, he and his wife are chasing the increasingly elusive North American dream: two cars, good jobs, a spacious home with a big backyard. His wife’s family was already living in the Toronto area and since he planned to bring his own parents here as well, the couple looked for a place that would fit all of them.

What to do when your mortgage rules you

The Globe’s personal finance columnist Rob Carrick speaks with a financial planner about the Bhardwajs’ situation.

The “forever” house they eventually bought – a 3,500-square-foot newish build with a two-car garage – fits that bill. “No more fighting over the washroom,” Mr. Bhardwaj jokes of their current home, which has four bedrooms each with an ensuite bathroom. There is a kitchen with granite countertops, and a family, living and dining room, each with hardwood floors.

When it came time to buy, there was a slight problem in that the Bhardwajs could not afford their dream home. Because they had borrowed money for a second car and incurred other debts, the bank would only give them a mortgage of $650,000, despite their already having purchased their place for roughly $100,000 more.

In order to meet the bank’s requirements, the Bhardwajs borrowed $80,000 from family to pay down debt, and added her father – who has a pension – to the house title. If that doesn’t sound stressful enough, they also had yet to sell their starter townhouse. “We were really nervous,” Mr. Bhardwaj said. He mapped out their expenses, crunched the numbers and they decided they could afford it, barely. “We knew that with the income we had we would basically just survive.”

Despite a mountain of debt, they don’t regret buying their home. “You do think about it – maybe it would have been easier if we had gotten a smaller house,” he said. “But my wife says it was the best decision for us, and I agree.”

Mrs. Bhardwaj describes them as “house rich but home poor,” which she says means they have a large lovely home full of shabby old furniture. “We can’t afford to buy any nice new things for in there right now.”

Their house sits on an 11,000-square-foot lot and in addition to repaying some debt, the couple had wanted to put in a pool, as well as landscape and complete the unfinished basement. That was before the baby.

“Until five months ago, reducing debt was the biggest thing we talked about,” Mr. Bhardwaj said. “Now our goal is try to plan for the kid. We have bought a stroller and we need to buy a crib, while we still have money coming in.”

“This is really happening,” he said, “so we are starting to enjoy it.”