Category Archives: power of sale properties

The national lust for home equity lines of credit: should we worry? Low interest rates. High credit limits. Lines of credit can turn your home into an ATM

Murad Ali, his wife, Arsheen Haji, and their daughter, Shanzé, in their custom kitchen paid for with a home equity line of credit.

Murad Ali and Arsheen Haji live large thanks to easy access to their home equity lines of credit, joining the many Canadians succumbing to the same temptation.

For the Toronto-area couple, it all started back in 2009 with a lavish $78,000 wedding.

Then came numerous overseas vacations. When touring Egypt, Ali bought four souvenir papyrus scrolls for $6,000. In Italy, Haji picked up a $7,000 Chanel bag.

Home equity lines of credit

Arsheen Haji and Murad Ali on vacation in Egypt in 2012. They paid for their trip with a home equity line of credit. (Murad Ali)

After the birth of their daughter, the couple moved into a newly built home and spent more than $100,000 on upgrades, including a custom kitchen, hardwood floors and a high-tech fireplace.

The wedding, trips and high-end purchases were made possible with cash from two home equity lines of credit secured against a couple of investment condos the family owns. The debt from those loans now totals $370,000. They also recently got an unsecured $30,000 line of credit to buy solar panels for their new house.

Line of credit addiction

‘It’s like turning your house into an ATM’  
– David Trahair, chartered accountant

“We are addicted for sure. Who wouldn’t be addicted to something so easy [to get]?” says 35-year-old Ali about the free-flowing lines of credit that have enabled him to splurge on the finer things in life.

“It’s easy, accessible cash at a very cheap price. The banks make it so easy for you to obtain it,” says the software engineer.

The couple is part of a national trend. Canadians love their lines of credit, which feature interest rates that are much lower than credit cards. Ali pays just 3.25 per cent interest on his home equity lines. Credit card rates typically hover around 20 per cent.

According to an RBC report last week, Canadians’ outstanding debt on personal lines of credit hit $266 billion as of April, a 3.2 per cent gain over last year.​

It should be noted that the rate of growth is slowing and sits well below historical highs. But one thing’s certain. The total debt keeps mounting.

Home equity credit lines allow Canadians to borrow big – up to 80 per cent of a property’s value when combined with a mortgage. According to the Canadian Association of Accredited Mortgage Professionals, 22 per cent of homeowners had a home equity line of credit in 2014. They owed an average of $57,000.

“It’s like turning your house into an ATM,” says chartered accountant David Trahair, who has written numerous books on personal finance. “If you’ve got a house, especially in Toronto with these insane values, you can borrow an incredible amount of money against the house.”

Will it ever end?

Trahair worries that with potentially high credit limits, those lacking self-control can easily get in over their heads. “For spenders, the low interest rate environment is almost like a drug. It’s almost impossible for them not to take advantage of these low interest rates and borrow.”

But the Canadian Bankers Association is not worried. It states that Canadians are responsible borrowers and that banks are prudent lenders. Before granting a home equity line of credit, “banks complete a thorough due diligence process,” said spokeswoman Kate Payne in an email.

Ali is now considering borrowing more money against the equity in his new home. He admits he’s antsy about adding to his debt when the family already has a substantial mortgage on their 5,000-square-foot house.

But the place is still largely unfurnished and he’s yearning to install a $40,000 glass railing for the staircase.

“Without the glass railing, the look of my stairs is not doing it justice,” he says.

Right now, the couple could probably afford the extra loan payment. Currently, both he and Haji, a business analyst, can cover the bills and still have money left over for savings.

BMO senior economist Benjamin Reitzes notes that current low interest rates mean high debt levels aren’t bankrupting Canadians.

Proceed with caution

But the big question is what happens if rates go up or the economy takes a tumble. “If we were to get a big increase in the jobless rate or a big increase in interest rates, then there might be a little bit of trouble but, for now, neither of those two things are forecast,” says Reitzes.

Trahair is less sanguine about the situation. He says any unexpected event, from an illness to a decline in the housing market, could wreak havoc for a highly indebted family. He calls the lust for lines of credit “a ballooning debt bubble that eventually is probably going to burst.”

While Ali and Haji like to spend, they believe they’re behaving responsibly and say they’re aware of potential pitfalls. That’s why they’re still undecided about another loan.

“If you get a line on this [house] and God forbid something happens to me or [my wife] and we are unable to sustain our lifestyle or stream of income that we have, then we would be in trouble and that may lead to us losing this house,” says Ali.

And that’s why some rooms in the family’s home remain empty. Ali shows CBC News his large, mostly barren master bedroom and talks about his grand plans to furnish it — sometime in the future.

“Without the credit line, it’s slow,” he laments.

But things could always change. The couple says just last week the bank called, inquiring if the family was interested in another loan.

Source: CBC.ca By Sophia Harris, CBC News Posted: Jun 10, 2015 5:00 AM ET

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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

Bad Credit 101: The Small Mistakes That Are Killing Your Score

  • <b>Credit</b> Card Application <b>Declined</b>: Why & How You Can Fix It

Source: SuccessMagazine

You just applied for a credit card, or maybe it was a new apartment or a loan, and you got denied. DENIED. Seriously? You were totally under the impression that your credit was solid—and it just sucker punched you in the face.

Did you know that lenders and landlords often consider an applicant’s credit score before approval? Well, being rejected due to bad credit is never fun—especially if you didn’t know it was less than stellar.

The good news is that the credit-scoring process is fairly transparent, and by correcting some bad habits, your score can improve.

Here’s what you’re probably doing wrong, and how you can fix it:

1. Late Payments

Paying bills late is by far the biggest drag on your credit. Payment history determines 35 percent of your FICO score, and for good reason. If someone has failed to pay his bills on time in the past, he will probably continue to do so.

You can make sure your bills are always paid on time by setting up payment alerts. If you know exactly when your bills are due, you’ll at least have the opportunity to pay them on time.

2. Using Too Much Credit

Credit utilization ratio is another major factor used to determine your FICO score and, therefore, your overall credit health. This number comes from two semi-independent figures:

1.    Total amount of credit in use divided by total amount of credit available
2.    Credit in use on individual cards divided by amount of credit available on each card

When lenders see you’re using a high percentage of your available credit, they assume you may have difficulty paying off more credit should you have access to it. This is why credit utilization ratio affects your overall credit and why maintaining a lower ratio is always better.

To prevent your credit utilization ratio from getting out of hand, consider setting up account alerts through your issuer. The reminder will let you know when the proportions are getting lopsided so you can adjust accordingly. Also, check your account manually once a week or so. Five minutes of time could save you years of headache trying to repair a bad credit score.

3. Lost Collection Account

If you pay your bills on time while keeping your card balances low and your credit is still bad, it’s time to pull your credit report. You may have forgotten about an old account in collection, but the credit bureaus haven’t. Whether it’s from a medical bill, an old credit line or perhaps from something you co-signed on years ago, unpaid debt that has gone to collections can be a major drag on your credit score, and fixing or managing this information is extremely important.

For starters, you’ll need to know specifics about outstanding debt before you can address it. All of the information used to determine your credit score can be accessed for free once a year on your credit reports at AnnualCreditReport.com. Here you’ll find credit card information, loans and, of course, any accounts in collection.

If you find any erroneous information on your report, you can:

1.    File a dispute directly with the credit bureau(s) reporting the error.
2.    File a dispute with whoever is holding the debt (bank, credit card company, collection agency, etc.).
3.    Offer supplementary supporting information to the Consumer Finance Protection Bureau.

It’s usually best to do all three to ensure all parties are not only aware of the error, but also have enough information to judge it accurately.

If the collections data is accurate, it’ll usually remain your credit report for seven years from the date of issue. During this period it’s important to make sure all credit payments are made on time, that you maintain a low overall credit utilization ratio and that you restrict opening new accounts that result in a hard credit pull.

Having bad credit will likely present certain temporary borrowing limits, but it can be overcome. If you’re smart about promoting habits that result in credit improvement, this period can be shortened dramatically, making bad credit a thing of the past.

– See more at: http://success.com/article/bad-credit-101-the-small-mistakes-that-are-killing-your-score#sthash.YE9bBuMV.dpuf

Analyst: CMHC to blame for pending 40-50 per cent price correction

by MBN | 18 Mar 2015

A leading financial advisor is projecting a 40-50 per cent housing price correction and is laying the blame on the CMHC.

Puffed up by years of ultra-low borrowing rates, home values have bloated to levels so far out of sync with the underlying incomes needed to support them, it’s only a matter of time before one headwind or another blows over the house of cards.

According to Global News, a new book, When the Bubble Bursts, was released this month across the country, and is one of the most fulsome looks yet at the current state of Canada’s much-fretted over real estate market. Author Hilliard MacBeth says the Canadian real estate market is poised for a painful 40 to 50 per cent drop in value when the bubble pops.

“The availability of financing. Canada is unique in the world in the availability of government insurance through CMHC [Canada Mortgage and House Corp.], that’s allowed the lenders to lend a phenomenal amount of money. [Household] debt levels have gone from one trillion dollars to $1.8 trillion, just in 15 years,” the report says.

“I think the government has genuinely tried to encourage the housing market and home ownership, which started after the Second World War. But in the last 15 years it’s kind of taken on a life of its own. It’s this monster that nobody can really tame. The reality is, lenders don’t really take any risk, so they keep on providing more and more [loans].”

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Labrador West’s housing bubble is deflating rapidly

The closure of a mine, and the slumping price of iron ore, mean the real estate bubble in western Labrador has started to deflate.

Real estate market weakening following mine closures in Wabush and Bloom Lake, and layoffs at IOC

The closure of a mine, and the slumping price of iron ore, mean the real estate bubble in western Labrador has started to deflate. (CBC)

Photo of Terry Roberts

Available now for rent: a five-bedroom house in a quiet neighbourhood, near all amenities.

Monthly rental rate? $1,500.

Too big?

How about a two-bedroom unit located in a recently renovated, three-storey apartment complex?

Your first month’s rent is free, and the security deposit is reduced.

Monthly rental rate? $1,275.

If you look hard enough, you’ll find better deals than that.

Where can you find lodgings at such reasonable prices?

How about Labrador West.

Yes, the same place where some senior citizens — most of whom were longtime residents — were forced to leave just a few years ago because the rents were too high and they couldn’t afford to live there any longer.

‘Now they’re in a position where they can’t sell these assets and it’s probably going to cause them trouble for the rest of their lives.’– Jason Penney, president of United Steelworkers Local 6285

The same place the owners of that five-bedroom house were pocketing upwards of $5,000 per month just two years ago, and some homeowners were renting out their couches for $100 per night to workers flooding into the area.

And that two-bedroom apartment?

Renters could expect to pay $2,000-plus not long ago.

To put it bluntly, the real estate bubble that created such a frenzy in recent years in Labrador West, an area known as the iron ore capital of Canada, has officially burst.

Tammy Elliott, the owner of Big Land Realty, estimates the housing market has crashed by about 25 per cent in just the past few months.

“It’s at an all-time low,” she said, adding there are currently about 145 properties on the market in Labrador West.

Serious trouble with iron ore

It’s not entirely surprising.

The news coming out of Labrador West in recent months has not been great.

The worldwide market for iron ore, much like oil, has been in freefall, plummeting more than 60 per cent in three years.

The Wabush mine, the cornerstone of the community for many years, closed in 2014, throwing more than 500 people out of work.

The Bloom Lake mine in neighbouring Quebec was also closed, delivering a crippling double-blow to the region.

Jason Penney

Jason Penney, with the United Steelworkers Union, says the housing market in western Labrador has taken an abrupt turn in recent months. (CBC)

And the Iron Ore Company of Canada mine in Labrador City, which employs some 2,000 employees, also let go several dozen employees last year.

“The real estate market has taken a 180,” said Jason Penney, president of United Steelworkers Local 6285, which represented the workers at Wabush mines.

“Two years ago it was a very difficult time to even find a house to purchase. Today, everywhere you look there seems to be a For Sale sign.”

The region is being buffeted by what appears to a perfect storm, just two years after an economic boom that was the talk of the country, let alone the province of Newfoundland and Labrador.

Unemployed workers stuck with big mortgages

At the centre of the storm are the dozens of young workers who flocked to Labrador West over the past four years, eager to fill good paying jobs opening up as many older workers started retiring.

But there was a problem.

Many of those retiring workers decided to stay in Labrador West, close to their adult children and, in many cases, grandchildren.

This occurred at a time when Bloom Lake was coming online, an expansion was underway at IOC, and Wabush mines was in full swing.

The population swelled, and the housing market spun out of control.

Homes that may have fetched $50,000 a decade ago were selling for up to $400,000, and many new workers had little choice but to buy.

Wabush Mines

Cliffs Natural Resources shut down activity at the mines last February, and recently announced they were permanently shutting down operations. (CBC)

Few could have predicted the the iron ore industry would stumble the way it has, and many newly unemployed mine workers in Labrador West are now stuck with mortgages that are far greater than the value of their homes, and dwindling job prospects.

“A lot of people got themselves in a bad way,” said Jason Penney.

“It’s one of the downfalls of living in a mining town. It’s boom or bust. Right now we’re in a bust.”

Hopes for a brighter future in doubt

Long-term residents of Labrador West who purchased their homes many years ago can still walk away with a profit, but it’s not the exit strategy that many had planned for, said Elliott.

“If they have to take a lot less, they are still winning,” she said.

It’s a different scenario for those who mortgaged a home in recent years.

“It’s sad to see local residents struggle to pay their mortgages when their houses are worth less than what their mortgages owing is,” she said.

Penney said many people came to Labrador West in recent years, hoping for a brighter future.

“There’s a lot of people here who went and educated themselves, got trades, did whatever, came here to Lab West for a good job in the mining industry, trying to be responsible parents and family people. Now they’re in a position where they can’t sell these assets and it’s probably going to cause them trouble for the rest of their lives.”

With files from Jay Legere

Is it too late to get into Hamilton’s hot housing market?

Hamilton is poised to be one of the strongest housing markets in the country in 2015 — but is it too late for investors to catch the train?

Far from it, said Cam McCarroll, an investor and sales person at Harbour Properties.

“The hot market in Hamilton means that increased demand makes finding discounts on price more challenging, that paying close to full price is the norm, and often multiple offers are creating sales over asking price,” he added. “But this is just the cost of admission for accessing a hot appreciating market like Hamilton.”

Analysis published this week by TD Economics showed that, across Canada’s largest 14 cities, Hamilton is the only one expected to see house prices grow over the next two years.

Diana Petramala, TD’s real estate economist, said: “Unlike other markets, where we see prices decline, we do see prices growing by about two or three per cent per year in Hamilton. The sharp gains we’ve seen are probably behind us, but it’s still going to be one of very few markets where home prices will continue to grow.”

Housing prices in Hamilton rose an average of six per cent in 2014, reminiscent of the kinds of sales and price activity more typical of Toronto, Vancouver and Calgary.

The Canadian Real Estate Association’s figures for November 2014 showed a year-over-year percentage change of eight per cent, from an average price of $368,947 in November 2013 to an average price of $398,590 one year later.

Only two or three years ago, McCarroll said, investors were wondering whether Hamilton was the best choice for investment. Much has changed in the ensuing years.

Hamilton has a wide spread of housing stock from $140,000 to $400,000,” he added. “Identifying transition areas is the key to long-term success when investing in hot markets like Hamilton. These key transition areas are where new and experienced investors can take advantage of greater appreciation and good rents.

“A report like TD’s deals with averages across the city, but a smart investor would be buying in areas that are in a specific neighbourhood that will transition upwards in value and is going to perform better than the average.”