Category Archives: property tax arrears

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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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

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

DECODING THE MORTGAGE MARKET: Ottawa should clear up obscure mortgage rules

Special to The Globe and Mail

Most Canadian home owners don’t know how much it would cost them to break their mortgage before the maturity date. But with penalties potentially in the thousands of dollars, they should.

That’s why Ottawa is pushing lenders to disclose penalties in a way that’s “clear, simple and not misleading.” Last week, the Finance Department saidit’s expanding a voluntary mortgage disclosure program to all lenders in Canada, not just the banks. Kudos to that.

But despite regulators’ efforts and improved disclosures, it’s still difficult to compare lenders by their penalties. The banks’ answer is their online penalty estimators, but those are tedious at best and baffling at worst. What consumers really need is for lenders to lay out their penalties in a standard, easy-to-compare and easy-to-understand format. And it’s up to Ottawa to make that happen.

The problem with today’s breakage fee calculators is that lenders often ask for such vague or inconvenient information, that people just give up on using them. Take this question, found on the site of one of Canada’s big banks: “The discount I received to obtain my rate is ____?”

Few borrowers would remember that without digging through old paperwork, searching online or calling their bank. Lenders, by the way, want you to contact them about your penalty. That way, they can ask you why you want a penalty quote and talk you out of leaving.

The effort it currently takes to estimate mortgage break penalties discourages most people from comparing them at all. And that’s a disservice to consumers. Given how much money people are borrowing to buy homes these days, Canadians deserve more than lengthy disclosures and ambiguous calculators.

One possible solution

In order to better assess which lender is offering them the lowest total cost of borrowing, mortgage shoppers must grasp how big the penalty for breaking their contract early might be. One way to actually help shoppers get this information is for lenders to provide penalties in a standardized way that can easily be compared.

On its website, for example, each bank could display a simple table showing a range of potential penalties for a $100,000 mortgage. A round number mortgage like $100,000 lets you quickly multiply the penalty to correspond to your own mortgage amount.

These hypothetical penalty estimates could be displayed under different assumptions, including:

  • a mortgage that’s broken one, two or three years early (assuming a five-year fixed mortgage)
  • cases where the lender’s current rates rose 1 per cent, fell 1 per cent or stayed the same.

Here’s how it might look:

Penalty per $100,000 of mortgage

Years Until Renewal

1 yr

2 yrs

3 yrs

If rates rise 1 per cent

$750

$750

$750

If rates stay the same

$1,400

$1,650

$1,795

If rates drop 1 per cent

$1,875

$2,850

$4,125

Average for these scenarios

$1,772

This sort of table would let consumers instantly visualize potential prepayment charges. People could then quickly compare lenders to see which ones stick it to their customers the worst.

Of course, all lenders would need to use the same format. Otherwise it would be too hard to compare apples to apples. But that’s easily achievable once regulators settle on a suitable layout.

The government could go a step further by asking lenders to disclose what percentage of borrowers they charge with penalties. That could give people even more clues on how competitive a lender is.

Only Ottawa can make that happen

Asking mortgage shoppers to run complex hypothetical calculations on multiple lenders is unrealistic and makes today’s penalty disclosures largely irrelevant for comparison shopping. And that’s important because steering clear of high-penalty lenders can sometimes keep thousands of dollars in your pocket.

Canadians need a fast way to measure the penalty magnitude of different lenders without powering up their calculators. Mortgage brokers can be a good resource for these calculations, but not everyone uses brokers. And many lender representatives are less than helpful in estimating their own penalties, let alone another lender’s.

Most banks and “no frills” lenders will certainly not provide this of their own accord. Why would they? Their penalties are among the highest in the country.

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].”

THE HOME MORTGAGE ADVANTAGE (…mortgages made simple…)

THE HOME MORTGAGE ADVANTAGE

Home Mortgage Consultants is a mortgage broker agency. We deal with major banks, trust, life insurance, finance companies and private lenders. We are licensed to provide the most competitive mortgage rates and terms available for your real estate financing needs throughout Ontario.

OUR SERVICE INCLUDES:

 

  • First and second mortgages
  • Transfers
  • Condominium/Townhouse purchases
  • Home Improvement Loans
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  • Refinancing
  • Power of Sale
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  • Vacant land
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ARE THERE ANY COSTS INVOLVED?

When we arrange a prime residential first mortgage the lender pays us a finder’s fee.This does not affect the rate our terms of the mortgage in any way.

When we arrange any other type of mortgage that does not qualify as a prime residential mortgage then the lender does not pay us. We must then charge a brokerage fee*. The fee is based on the complexity involved to arrange the mortgage.

Need more information or advice on #mortgage_qualification, contact the The Ray McMillan Mortgage Team

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$500 US Detroit homes may be no bargain due to squatters and unpaid taxes

An abandoned house in Detroit, one of thousands of the city plans to foreclose this spring to auction off for $500 apiece. Just because it's boarded up, doesn't mean noone is living there.

Foreclosed homes may need extensive upgrades and come with hidden costs

The Associated Press Posted: Mar 11, 2015 2:47 PM ET Last Updated: Mar 11, 2015 5:09 PM ET

An abandoned house in Detroit, one of thousands of the city plans to foreclose this spring to auction off for $500 apiece. Just because it’s boarded up, doesn’t mean noone is living there. (Beth J. Harpaz/ Associated Press)

Sixty-two thousand properties have faced foreclosure in Detroit this year over unpaid taxes. About half will likely be auctioned for $500 apiece this fall.

Buying homes or vacant lots for $500 might sound inviting, even in a city as troubled as Detroit. After all, look at New York: Decades of crime and decay gave way to a real estate boom that has gentrified even outlying working-class neighbourhoods. Properties that sold for thousands in the bad old days are now worth millions.

But there are no guarantees. “The opportunities are there but there are huge challenges,” said Dang Duong, a law and business student at the University of Michigan who has bought and renovated several dilapidated homes in Detroit. “If you’re under the impression you can buy a property for $500 and wait a few years until Detroit has recovered, that’s going to be difficult.”

Here are five things to consider before buying property in Detroit.

1. The house may be occupied

Are you prepared to evict former owners, longtime tenants or even squatters? Loveland Technologies, a mapping company that has surveyed every property in Detroit, estimates that half the properties facing foreclosure are occupied, housing about 100,000 Detroiters.

Critics question the morality of buying occupied homes and fear the program may increase Detroit’s homeless population. They say many owners stopped paying taxes because they weren’t getting city services in return.

Detroit has the highest property taxes of any U.S. city and the market value that sets the level of taxes is based on a years-outdated assessment. For long-time Detroit homeowners, many of them marginally employed or jobless, that can mean they face years of back taxes they can’t hope to pay.

Darin McLeskey, who moved from an engineering career to buy, sell and develop real estate in Detroit, says sometimes “people want out. They can’t afford the home or are tired of the city. Mentally they may have moved on, and sometimes physically they have moved on.” In one case, he made a “cash for keys” deal with a squatter in an uninhabitable home: “I gave him $300, he signed a document. It was cheaper, easier and more amicable than an eviction.”

2. The hidden costs of updates and back taxes

Demolishing dilapidated properties and building from the ground up can be cheaper than rehabbing. But some buyers choose renovation to save historic architectural details found in much of Detroit’s early 20th century housing stock: turrets, gingerbread trim, pillars and antique woodwork amid broken windows and sagging rooftops.

Dilemma Over Squatters Detroit

Demolition crews found a middle-aged woman living on the second floor when called to tear down this house in southwest Detroit. (Carlos Osorio/Associated Press)

​Duong bought a house in Detroit for $1,100 and spent $100,000 on roofing, wiring, plumbing, appliances, drywall, flooring, and new bathrooms and kitchens. He speaks reverently of preserving the 100-year-old maple floors, and wanted a quality renovation to attract good tenants. It’s located in a privately patrolled neighbourhood near a hospital, so he sees it as a good investment.

But beware of hidden costs and scams. Properties may come with liens, water bills and back taxes totalling thousands of dollars, in addition to renovation costs. It’s also not unusual to hear of homes sold to buyers in other states and countries, with purchase prices rising with every flip.

3. No absentee landlords

If you buy a home through the Detroit Land Bank, you have six months to bring it up to code — nine months for historic properties. The policy discourages speculators from buying and leaving property unattended.

Duong got a call before one of his projects was complete, but he said “if you are a legitimate landowner, they are easy to work with. They want people to either renovate or sell to someone else who can do it. That goes a long way to removing blight.”

Looting and vandalism are also major problems. Homes under renovation risk having fixtures ripped out and tools stolen if the property is not lived in and secured. McLeskey moved tools into a townhouse and returned the next morning to find the door knocked down with a battering ram.

It helps to buy in populated areas. The more neighbours you have, the more secure it is.

Combatting blight also means maintaining vacant lots. McLeskey mows nearly all of his 40 vacant lots in the summer.

4. City services not quite up to standard

Garbage pickup, snow removal, water service, and police and fire department responses have improved in the last 18 months, but may still be less reliable than what you’d expect elsewhere.

5. Detroit’s uncertain future

Are you willing to wade into controversy?

Supporters say foreclosure sales help the city recover by forcing homeowners to pay up or move on. Auction buyers then decide what’s salvageable.

Detroit sprawls over 140 square miles, and officials would like to concentrate the population of 690,000 (down from 1.85 million in 1950) into a sustainable area by demolishing abandoned buildings in far-flung neighbourhoods. Theoretically, new property owners will pay taxes, the revenue will support city services, and property values will recover.

But critics say foreclosures may increase blight. Repossessed properties often don’t sell at auction and they deteriorate faster once occupants leave.

Need more information or advice on #mortgage_qualification, contact the The Ray McMillan Mortgage Team

#mortgagesmadesimple