An Open Letter To The Globe And Mail.


Today I nearly lost it but I had to think long and hard as to what to write to The Globe And Mail. The article in question is (unfortunately) hiding behind a paywall but you can see the article on https://www.pressreader.com/ if you search “To Compete, many alternative lending firms target less desirable borrowers” in google, - it’s the first hit (I can’t link it)

So, here’s what I wrote to the two authors of this story. Here goes:

David and Tim

Thank you for misinforming the public once again with your front-page ROB article about the New Rules and how they will challenge non-bank lenders.

You write:

“The banks, which account for 70 percent of the market, have the highest underwriting standards in the country”

Completely and utterly wrong. How do you define this versus what standards Street Capital, MCAP, CMLS, etc have? Please let me know. The truth from the street is, CIBC, RBC, TD etc., do not have higher underwriting standards they just take much longer to approve the same application. What they do have is much higher penalties if exiting the mortgage, much less information to pass to unsuspecting clients, and much less choice for consumer. Awesome!

You also write “To compete, many alternative lenders target less desirable borrowers”.

Again, totally and utterly wrong. As a matter of fact I would argue opposite; I know from experience many many times I have lost 65% financing deals ranging from foreign buyers to high-net worth buyers without incomes to jumbo loans to the big banks from the so-called “alt lenders” you mention. Why? Because these lenders have much stricter criteria for these off-the-map deals which I have placed myself with the big banks!

I also know that you are not differentiating from…


Monday October Third, Two Thousand And Sixteen.

Today may end up being one of those defining moments in our housing market, that’s why I called this post Monday October Third Two Thousand And Sixteen. It’s a very important date to consider when we look back in a few years’ time in assessing if this move was the right move in trying to normalize activity in our feverish Toronto housing market. Why in a few years? Frankly, I don’t think we’ll see a change overnight but I do think it’ll take some time to figure out what kind of impact this move had.

And what a move it is.

First let’s start with the basics. If you have less-than-20% down payment you’re going to have to qualify for a mortgage at a much higher criteria, called “the stress test”. Prior to today, anyone in the market could (easily) qualify at the discounted rates if they were okay with a 5-year fixed. The thinking was, hey, 5 years is a long-enough time to hold a loan, let’s let those terms qualify at 2.39, and anyone else (variable, for example) qualify at a higher rate, since variable rates may move with time (up or down).

Now, everyone is at the same qualifying rule: 4.64% (today). That’s not the rate you get, that’s the rate I use to qualify you. On average that’s about 20-25% less in borrowing ability than before. Wow, big change, right?

Now let’s discuss how we may have gotten here. You see, in Canada there are two places to get your mortgage from: A bank, or a lender. A bank is backed by deposits and branches. A lender is backed by CMHC and mortgage insurance, and securitizes all of their loans through the mortgage insurance market. A lot of people have opined that this move was brought…


Fall Market Predictions

Predictions are useless.

It’s time to enter the arena of making predictions that 9 times out of 10 fall flat on their face, but at least they start a discussion going (for better or for worse). I have been reading a lot of Realtor opinions lately on the direction of our housing market in the Fall 2017 (and beyond) and wanted to add my 2%, errr, 2 cents.

I know a lot of you like to read the newspaper, make comments on Facebook, watch your twitter feed by-the-minute, check out the evening news and generally talk housing in the dog park. How do I know this? Because I hear it, I get asked it, and I love it.  I am basically addicted to the topic.

My predictions for the next 3-6 months are as follows, then.

(And remember, I could be wrong, on all of them)

1. Contrary to what many people think, there will be some form of a foreign-buyer tax in Toronto implemented. Let’s face it – whether you voted for the Liberals or not, they are addicted to wasting money AND looking for new revenue sources. The BC Government did something really stupid. No, not implementing the tax, but doing so in such a reckless and self-serving manner. How so? They studied data for TWO MONTHS before telling everyone whether they are in a binding contract or not that they will now pay 15% extra. Oh and supposedly 90% of the BC citizens who were polled were in favour. I don’t know about you but if I polled 100 homeowners and asked:

“Would you be happy if the Government made changes to drop the value of your single-biggest asset”

I bet you $90 that 90% would not say YES. Polls suck, because they can be twisted like…


Why You Should STOP Reading The Newspaper Immediately If You Want To Buy A House.

This sort of thing makes me REALLY REALLY mad. Today morning I woke up and glanced over the Report on Business by the Globe and Mail. Not surprisingly, my arch-nemesis (just kidding, sort of) Rob Carrick writes another article about how hard it is for an average person to save a down payment in Toronto. He touts his new “down payment savings calculator” (which I won’t even link to because it’s rubbish) and shows everyone how the average person who makes $45,000 per year will take SIX YEARS to save for an average house in Toronto.

Why does this make me so mad?


Rob forgets to tell his readers that he failed at basic mortgage math 101. Here’s why.

On average the property price in Toronto is $623,000. Note I said property, not house. Property means house, condo, townhouse, etc., so to get a key to your own dwelling of any kind you need to find $623K. Hard to do, so let’s save.

A $623K house means your minimum down payment is $46 645 including closing costs. At $500 savings per month (Rob uses .08% savings rate, I’m going to use 0.00) it will take you 7.7 years to save for an average house in Toronto.

So, what’s the problem? That’s pretty awful, right?

Yes. It is. However what the article fails to mention is that someone who makes $45,000 per year can’t qualify for a house that expensive. No! The maximum they could is $225,000. Using $225,000 as our house price, we need $14 625 down payment and closing costs, which means we need not 7.7 years but 2.43 years. A little more feasible wouldn’t you agree?

Hopefully the users of the calculator are able to figure out first what house they can afford, then to see…


It Is About To Get Even Harder To Finance

Why? How?

The body that oversees mortgage financing, OSFI, isn’t happy with what is going on and wants to ensure that lenders are following the rules as set out in their guidelines released in the last 2 years called B20 and B21. Those sound like world-war 2 bombers but they are not - they were the framework for mortgage underwriting and what each bank & lender is supposed to do when processing a loan request.

Note I said, “supposed to do”.

Most of us heard about the “student” who bought a $24M mansion in Van-city and took out a $9M+ CIBC mortgage, here on a student visa, right? Well that’s not what the intention of the B20 and B21 rules was, and now it appears that it’s causing OSFI to cast a wider net and look at five major underwriting components:

Income verification - OSFI is concerned too much fraud is going on, and not enough check and balance is happening with income verification. My take: Although I hear of it, I don’t see it. The lenders could certainly do a much better job and standardize the process or ask for CRA authorization, but they never will.

Non-conforming loans - should be limited to 65% of the value of the home when the typical income/credit/down payment rules don’t apply. My take: I see this being pushed to 80% all the time and the credit unions who don’t act under OSFI can still easily qualify at this level.

Debt Service Ratios - our rates are way too low now and it is too easy to get a mortgage. TRUE. For example, someone with a $75,000 income at 2.39% (a good 5 - year fixed rate) can qualify for $475,000 in mortgage lending. If you bump that rate up to…


Going To The Bank Was My Biggest Mistake

So, my mortgage was up for renewal and I knew I wanted to open a new account at one of our big five banks (for various reasons including that my RRSP loan was there, I wanted to have everything under one umbrella). I’m a completely new customer to this bank except for the one RRSP loan and thought it would be a great process to go through the mortgage process from a customer’s point of view.

What a mistake.


I’m not trumping going through a mortgage broker because believe me, I understand there are times where going to the bank may make the most sense. If my experience is anything like what other people are going through, though, then I have no idea how people actually do this without pulling their hair out.

It has been eight business days counting today that my approval hasn’t materialized. Eight. Business. Days. For those in the know, waiting 8 days for an approval is like waiting 22 weeks for Canadian Tire to put your winter tires. Ok maybe I’m exaggerating but just a little bit - not more than that.

Where does this delay come from? Here’s where it gets sort of embarrassing: Since I applied for an RRSP loan 3 years ago, this certain bank “pre-fills” my application without going over the details, submits 3-year old information and is asked by credit about properties that came off the books since then. Instead of the underwriter reviewing my application thoroughly and making sure what’s on there is accurate, they use an old application with old information and “fine-tune” this.

At this point I’ve told my existing lender I’ll continue working with them because this bank has left me high-and-dry but I wonder: if it’s this bad for me (someone who knows…


Process Versus Service In The Mortgage Industry

My mentor, tutor, and broker John Bargis from Mortgage Edge brought to light today a differentiator that is clearly emerging in the mortgage industry.

Do you process or service your client?

Are you, as a client, looking to be serviced or just to be processed?

Here’s what I mean exactly illustrated by a real-life example.

I have these great clients who have been engaging with me on every facet since January. We have developed all sorts of different scenarios for them: Keep condo, sell condo, refi condo, buy a house, max down payment, minimum down payment, amortization scenarios, everything under the sun. This is where I present to my clients the true value of working with someone who participates in the service-type of mortgage brokering. I not only love what I do but I know what I do very well and come up with every possible angle, down-fall, or crack in the deal to come up with an answer to make these people feel confident in what we have going on because a lot is at stake: Deposit money, emotions, relationships even.

Compare this to a process-type of broker. “Hey there! I’ll offer you the best rate, but the worst service”. Of course they don’t say this explicitly but it’s really the case when you read their google reviews. Do they care to compare different terms and the break-even effects of going shorter-term vs long-term? no. Do they discuss penalties, portability, and other clauses? Maybe, but rarely. They just want to get you in the cheapest car on the lot so you can get to and from work every single day knowing you got the cheapest car on the lot. Sometimes it’s a good used car, sometimes it isn’t. They don’t care. Their game is volume.

Then what happens?


Blending Vs. Blending-And-Extending: What The Diff?

Today’s post focuses on a little-known mortgage feature that some lenders do not have, but that can bite you in the rear at the most inopportune time: When it’s time to move your mortgage. We’re talking about blending vs blending-and-extending your mortgage when you’re moving up, across or even down the property ladder. What do I mean by this exactly? Easy:

When you sell your property and buy another one, and if the math makes sense to stay with your bank or lender, you have the option to transfer your mortgage over. Hidden deep deep down in the disclosure documents you received when you first bought your house and took out a loan was the option to blend OR blend-and-extend. Not every lender has both options and here’s why it can get rather messy:

If you’re breaking in the middle of a term (let’s say a 5 year), and moving, some banks or lenders will force you to “ride out” the existing number of months you have left and blend your rate. However where this becomes complicated is, these lenders force you to use the much harder qualifying rule, therefore, even though you’ve gone firm on your purchase & sale, and you went to the bank to make sure you qualify, the bank forgot to apply the harder qualifying rule and voila: you’re now left with having to pay a penalty to leave.

Some numbers to back this up please you ask? Here you go:

Sonya and Billy bought a house in 2013 and just had triplets. Their 2 storey townhouse had only 2 bedrooms and they are running out of room. They have a 5 year fixed mortgage at 3.19% from 2013 December, and now, they bought a new 5 bedroom home and are increasing their mortgage by $150,000…


Got Married? Congrats! Now Merge Your Credit!

Today’s post will discuss what to do if you get married and/or have a different legal name vs your “home country” name. This is crucial for maintaining your good credit rating because, borrowing is all based on your beacon score. No beacon? No loan! This is also an example how I #createvalue for my borrowers, by going the extra step required to make their borrowing roadmap without any detours.

Gary and Angela called me to get pre-approved for a mortgage. We discussed things in detail from a high-level point of view prior to pulling their credit. Once they were satisfied with the potential numbers, we did a credit inquiry. Lo and behold, Angela’s credit showed up as the dreaded BEACON REJECT - which is credit-report-slang for “Hey! You have no active/actual credit!”. This was a surprise to everyone since Angela showed me three credit cards she had in her possession which must result in a credit score being active. When we looked at her ID, though, we had two names: Married name on her ID but maiden name on her credit cards. A-ha!

A quick call to Equifax yielded the recommendation to merge the two credit reports together, and combine one credit score, report, and history that had all relevant information including her mortgage details, great repayment history of her credit score, as well as all previous and current employment information. Although not a simple process, we managed to simplify it for her by having the right relationship with the credit reporting agency including a business-only call centre that helps very promptly.

This type of transaction can be for people who have been recently married OR people who have two names:  Example, if you moved to Canada and had your “original” name on your citizenship and Government paperwork, but…


#assignmentgate in BC!

The Globe and Mail has been selling a lot of newspapers lately with their deep-down investigative journalism about the Vancouver housing market lately. Included in that is this weekend’s piece about The Real Estate Technique Fuelling Vancouver’s Housing Market which, to me, read a lot like sour grapes by sellers of already-vastly-overpriced-homes. A bit of greed, too. Let me not suggest that what is happening in Vancouver right now in light of these findings (and previous ones) is fair or equitable to the average Vancouver-ite. However, reading the reaction of some of the homeowners, I can’t help but think they should only look in the mirror and “blame” themselves for making “only” $4.843M in tax-free money on their home in 29 years.  Broken down, that’s like making $151, 172 PER YEAR of tax-free money. So, where’s the beef?

The beef is simply that Realtors are doing a lot of door-knocking, offering very rich prices for these homes, sellers are selling, and then that contract gets flipped once, twice, or more, for a higher price. Eventually the buyer that was originally on the paperwork has gone and left, and the new, actual buyer, has ended up paying hundreds of thousands more for that home (in this one case, $1M more). Is that fair? Absolutely not. However what kind of person agrees to an offer brought to them by a single Realtor who happened to be door-knocking, accepts the offer, doesn’t read the assignment clause, doesn’t ask their lawyer to review the offer, and then feels slighted that they were ripped off?

The moral to the story here is simple: As much as the public may loathe the work of a Realtor lately, a good Realtor is still someone that can (and does)…

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