Toronto Mortgages

Edmonton Mortgages and CAAMP certification

2008-10-31T07:38:00.000-07:00

If you are an Edmonton resident looking to obtain an Edmonton mortgage, your first step should be to choose a reliable, ethical and resourceful mortgage broker. Easier said than done, right? Especially for first time, inexperienced home buyers.
So how exactly do you know that the mortgage broker you are looking at is qualified, educated, experienced, and resourceful?
Answering the above question may be easier than you think, thanks to the Canadian Association of Accredited Mortgage Brokers, better known as CAAMP. CAAMP is a national association dedicated to educating and representing the Canadian Mortgage industry. CAAMP membership has well over 10,000 members. Ask your prospective Edmonton mortgages broker if they are one of CAAMP’s members.
According to CAAMP, if your mortgage broker is CAAMP certified, that means that they:

1. Are a CAAMP member in good standing and abide by the CAAMP Code of Ethics.

2. Have a minimum level of experience in the mortgage industry, demonstrate proficiency
AND provide proof of experience using Option 1 or Option 2 below

Option 1 - Proficiency Course
• Provide proof of at least two years of experience in the mortgage industry AND
• Provide proof of successful completion of the CAAMP Challenge Exam OR a CAAMP approved proficiency course.

Option 2 - Five Year Rule
• Provide proof of five or more years of experience in the mortgage industry AND
• Provide letters or e-mails of reference from two AMP members in good standing. The
References must recommend that the applicant be granted the AMP and may be included as one of the documents used to provide proof of experience.

3. Complete CAAMP's mandatory pre-accreditation course, Ethics and Responsibilities for Mortgage Professionals, either online or in seminar format

The above information is an excerpt from this CAAMP PDF

Independent Mortgage Companies Offer Flexibility

2008-10-30T07:35:00.000-07:00

There is a common misconception among the general home purchasing public that traditional lenders, such as banks, are always the better way to go. This is not necessarily true. For people from all walks of life, independent mortgage brokers are often the better way to go.

Surprisingly, most people think they are out of options. Until, that is, they decide to see their mortgage broker. Reputable independent mortgage companies have a vast network of resources right at their fingertips. It is very unlikely that these resources would be available to the average homebuyer. This vast network usually means a better power to negotiate. In other words, mortgage brokers will negotiate a great deal and offer their clients very flexible terms.

On another note, an experienced independent mortgage broker can also provide assistance outside of the realm of first time mortgages. They will also people with financing, home equity loans, investment properties, and so much more.

Calgary Mortgages May Require Tough Negotiations

2008-10-29T07:30:00.000-07:00

If you are seeking a mortgage in Calgary, you are likely aware that there are a lot of options. Some of these options are cost effective and some are costly. Of course there is a grey area when searching for the mortgage option that is right for you. It is necessary to do your research and to be prepared to negotiate.

If you are like most Calgarians, you are busy. You have a life. You do not have time to spend hours researching your mortgage options and even if you did, are you prepared to negotiate and haggle? This is why you need someone in your corner. Someone who knows everything you need to know about Calgary Mortgages and has all possible resources at his or her fingertips.

An experienced independent Calgary mortgage broker will be able to help you immensely in the mortgage application processes because they can negotiate on your behalf with several, perhaps a hundred or more lenders.

Call a trusted Calgary mortgage broker to ensure you are getting the best possible deal available to you.

Vancouver Mortgages Are Not Out of Reach

2008-10-27T07:44:00.000-07:00

This particular entry is aimed at the population of Vancouver who, for whatever reason, may not fit into the desirable profile of a mortgage applicant at a “traditional” lender. Not sure if you fit into this category? Maybe you are:

· New to the country / lacking a credit history
· A commission based sales person / entrepreneur
· Stuck with a bad credit history
· Recovering from a bankruptcy

As the housing prices in Vancouver and surrounding areas seem to skyrocket and banks become more cautious, many “non-traditional” borrowers are finding that mortgages in the Vancouver area are a little out of reach. I feel, however, that if you do not fall into the “traditional” Vancouver mortgages applicant category, this does not mean that you are the problem. It simply means that a traditional lending scenario many not be in your best interest. My suggestion would be to call a resourceful and experienced mortgage broker in Vancouver. He or will likely have a vast amount of viable mortgage options available to you.

Shopping for Ottawa Mortgages Online

2008-10-24T08:27:00.000-07:00

Thanks to the power of the Internet and flexible mortgage brokers, shopping for Ottawa mortgages from your home could not be easier.

An experienced and resourceful Ottawa Mortgage broker should now be able to help bring a abundance of tools and options right to your home office or favourite arm chair. They should also be able to answer whatever questions you may encounter during the home purchasing process. Are you wondering if your mortgage should go through a bank, a private company, or an investment trust? Simply ask your trusted Ottawa mortgages broker. While you are at it, ask about home equity loans for renovating your new home or investment property. You may be surprised to find that you might qualify for a home equity loan with as much as 100% financing!
If you are looking for a convenient, flexible mortgage and / or home equity loan, contact your online Ottawa mortgage broker!

Toronto Mortgages are Still Affordable

2008-10-22T18:05:00.000-07:00

I am constantly hearing people opine about the Toronto housing market. There are a lot of misconceptions floating around and these misconceptions seem to be growing with every dinner party I attend.
One of the most common misconceptions I am hearing is regarding the affordability of mortgages. The truth is Toronto Mortgages are still very affordable. The same goes for home equity loans. If they weren’t, why would so many people you know be choosing now as the time to downsize, upsize, move to a nicer neighbourhood or closer to a school? Among my close friends, I can think of two who just moved (one downsized and one upsized) and one other person who is in the process of finding a new place closer to the downtown Toronto core.
Many Torontonians who have no plans of moving in the near future are still taking advantage of low mortgage rates in Toronto. They are purchasing investment properties and second residences.
So, while dinner party conversation may be interesting and entertaining, it is important to make your real estate and investment decisions based upon something a little more substantial. Contact your trusted Toronto Mortgage expert today.

Toronto Mortgage and Real Estate Markets Remain Steady

2008-10-20T13:17:00.000-07:00

According to the Globe and Mail, prices of resale homes in the Greater Toronto area have been steady through to August (the last month for which data is available).
The average price stood at $376,236 in 2007, and has gone up 2.2 per cent to $384,605 for the

January-to-August period in 2008, according to the Toronto Real Estate Board. For new detached houses, the average price for January-to-August stood at $536,404 throughout Greater Toronto, up 4.9 per cent from the same period in 2007 from $511,322, according to CMHC.

An important indicator of local housing prices is the arrears rate:

The percentage of residential mortgages that are behind current payments by 90 days or more stands at 0.27 per cent, according to data compiled by the chartered banks and reported by the Canadian Association of Accredited Mortgage Professionals. This accounts for about 20,000 to 25,000 of residential mortgages in Canada.

To put things in perspective, during the last major recession in 1992 the arrears rate was 0.6 per cent.

Ask a Mortgage Broker About Deferred Mortgages: Short-term Gain for Long-term Pain

2008-10-17T05:07:00.000-07:00

Jonathan Kesselman, an Economics professor at the University of British Columbia, proposes deferred mortgages where a government body would guarantee the mortgages against default for an insurance fee paid by the buyer. Prof. Kesselman’s idea is to soften the impact of high interest rates and inflation on young people presently shut out of the housing market. Presumably, the government body would be Canada Mortgage & Housing Corporation. Let’s examine Prof. Kesselman’s argument in theory and practice:

Theory: A young person’s income is low at the start of his/her career, but earnings are expected to increase over time if the person is a professional.In the first few years of the deferred mortgage, the buyer does not pay all of the interest to the lender. Postponed interest is added to the total outstanding mortgage capital. The interest increases as the mortgage ages, but the mature buyer is better able to handle the increase because he/she has an established career and earns more. The lender cannot lose on this deferment, because the Canadian government insures repayment.

Practice case study: Young Simon’s family gives him a $20,000 deposit for graduation. He purchases a small, 100-year-old house worth $120,000 in Hamilton, which he thinks is a viable commuting distance to Toronto. He is delighted that his initial monthly mortgage payment of $763.22 is less than rent on a Toronto apartment. However, he soon finds out the charming old property requires extensive modernization and maintenance. A $100,000 mortgage at 8% interest today rolls up to $147,000 by 2013, and $216,000 by 2018 through the magic of compound interest. Simple Simon has negative equity. He decides he no longer can stand the commute to and from Toronto, which eats four hours from his day in traffic snarls. He moves back to Toronto and rents out his Hamilton property. He can only charge the going rate of $800 per month, and continues to lose money on his rental property. Simon cannot sell his property for a profit.

While this scenario is not the debacle of an American subprime mortgage with balloon payments, a deferred mortgage is still not a worthwhile solution for young Canadian buyers. Talk to your mortgage broker about safer options.

Sunlife Financial and Manulife Take a Loss on WaMu

2008-09-30T05:32:00.000-07:00

Toronto-based insurance companies Sun Life Financial and Manulife took a loss this week on Washington Mutual (WaMu) stocks when the U.S. bank was taken under control by federal regulators on Thursday. Sun Life stands to lose $919 million in the American mortgage crisis, but that is only 1% of its total investments. Manulife stands to lose $790 million in American mortgages, but that is less than 1% of its assets. WaMu will be sold to JP Morgan Chase & Co. When the business quarter closes on September 30, the two Canadian mortgage lenders will find out if they can recover any money.

It’s encouraging to see U.S. bankers are taking the initiative to save their jobs. Wachovia is meeting with Wells Fargo, Citigroup and Banco Santander about a merger. Perhaps if there are fewer American mortgage lenders, it will be easier to regulate them, and avoid another mortgage crisis in future.

The Democratic representative for Massachusetts, Barney Frank, is confident that Congress will have a mortgage bail-out deal ready for public consumption on Sunday. The main contentions now are that the Democrats want the crisis resolved with less tax burden to average Americans, and less sweeping government power to regulate mortgage lenders than Henry Paulson, Secretary of the Treasury, asked for in the existing bill. It’s only been eight days since the crisis came to a head, so the alacrity of the American response is quite impressive.

Correction in Canadian Market will be Good for Home Buyers

2008-09-24T19:52:00.000-07:00

We keep hammering away at this point, but we think it bears repeating in order to be heard over the steady drone of bad financial news these days: Canadian banks and mortgage lenders are holding strong, and the real estate market is stable and healthy.

As reported in the Regina Leader-Post, Eugene Levy, the executive VP of Custom House Foreign Exchange, told the audience of a commercial real estate conference yesterday that Canada is due for a correction in the real estate market, but it will be nothing like the one in the U.S.

Expressing confidence in the Canadian banking sector, Levy noted that “[w]e have the safest banking system in the world.” He also noted that our country is considered a safe haven for investors around the globe.

Speaking specifically about housing, he admits that the Canadian real estate market is overvalued and that in markets like this, a correction is inevitable. But, as Levy and others have observed, lower prices and less inventory are not necessarily a bad thing. With other economic fundamentals strong, people are still ready, willing and able to invest in the real estate market – lower prices just make these investments even more attractive.

Low Mortgage Rates, Other Factors Helping Toronto Condo Market Stay Strong

2008-09-23T05:19:00.001-07:00

This weekend we had yet another report to dispel the black clouds that some people claim are hanging over the Toronto mortgage and real estate market.

At a recent meeting of the Building Industry and Land Development Association the overall message was one of optimism. As reported in the Toronto Star, Jason Mercer, senior market analyst for CMHC, foresees positive job growth in the GTA (with the possible exception of the manufacturing sector), low unemployment and a tight labour market that will support “a healthy housing market”, all underpinned by continuing low mortgage rates.

Barry Lyon spoke at the same meeting and noted that the condo market is returning to “normal” levels from the record highs seen last year. His conclusion, based on condo sales and supply/demand ratios, is that the market is sustainable and on a sure footing.

Stable Toronto Real Estate Market is Good News

2008-09-18T04:30:00.000-07:00

Despite all the economic turmoil in the news, the Toronto real estate market is showing itself to be remarkably resilient as the fall season starts.

In a press release issued today, the Toronto Real Estate Board (TREB) released sales figures for the first half of September. While sales activity in the GTA has declined 16% from the same time in 2007 (a record-breaking year), figures show the decline between this year and 2006 is only 6%. The number of sales may be down, but prices have experienced marginal increases in both the city of Toronto and the wider GTA.

TREB’s president, Maureen O’Neill noted that: “Although housing activity in the GTA remains moderate, we're continuing to see a consistent pattern, and this stability is certainly positive news compared to markets in other sectors and in other world cities.” She added that the increase in prices indicates that people still see real estate as a sound investment.

Good news all around for the real estate and mortgage industries.

Toronto Home Purchase Prices Fair and Balanced

2008-09-11T05:34:00.000-07:00

We’ve all heard that real estate markets are due for a correction and that home purchase prices are set to drop. A new study from the University of British Columbia (UBC) states that housing in most Canadian markets is grossly overvalued, except for Toronto and Edmonton.

UBC professor Tsur Somerville authored the study. He analyzed the markets in Canada’s largest cities by comparing current prices to a “balanced market price”, determined by studying “the relationship between house prices, rents and the cost of investing in housing in each market.” Using these criteria, Somerville warns that homeowners in overheated housing markets should be ready for a rapid and steep decline or a long period of no growth.

Unlike other large cities, the Toronto real estate and mortgage markets have house prices in balance with rents. What this means is that the sudden plunge predicted elsewhere is far less likely to occur here. Translation – the Toronto market is stable and is a great place to invest.

Canadian Real Estate Market Still Healthy

2008-09-09T15:47:00.000-07:00

August is traditionally a slow month for real estate sales, according to a recent article in the Globe & Mail entitled A Change in the Wind, but the August slump may be exacerbated by a growing discord between the expectations of Canadian sellers and Canadian buyers. This concern is brought home by near 15 % drop in existing GTA home sales this period in comparison to the less than 10% drop in the same time period last year.

As the American housing market continues to suffer and shows only slight hints of improvement on the horizon, Canadian buyers expect to benefit from a domino effect on their own turf. Sellers in the mean time are still expecting to be the ones holding the bargaining power. The result is dashed expectations, increased negotiations and a change in the way real estate agents do business. As an example, an experienced real estate agent in Toronto has begun advising his clients to sell their homes before purchasing a new one, according to the Globe & Mail. In times past, he did not offer this advice because of the favourable positions home sellers typically found themselves in.

The general consensus is that the Canadian real estate market is still healthy and thriving. Due to some changing trends, however, it is more important than ever to seek out expert home purchasing advice and to take advantage of increasingly flexible mortgage terms and conditions.

Mortgages - Consumer Confidence Slightly Improving

2008-09-09T15:41:00.000-07:00

An article in the Globe & Mail today reported that consumer confidence in the US may be slightly improving. These findings are surprising to many economists and forecasters.

Slightly falling gas prices can be partially attributed to the slight boost in consumer expectations and causing a (very) cautious optimism among potential home buyers and mortgage applicants.

Thanks to record breaking low prices in the housing markets, frugal investors are venturing out of their shells to take advantage of “discount pricing”, leading to an unexpected surge in home sales this past July. Of course this has not led to a rise in home prices as of yet but many investors see hope. This is because, while housing prices continue to decline, the rate of the decrease appears to be slowing down. These findings are especially true in the single family sector. This particular market experienced a growth in sales of nearly 2.5%, according to Standard & Poor's/Case-Shiller U.S. National Home Price Index.

According to the Globe & Mail, Lynn Franco, director of The Conference Board Consumer Research Centre, believes this rise in expectations can be a sign of a healthier outlook on mortgages but “overall readings are still quite low by historical standards and it is still too early to tell if the worst is behind us.”

Toronto Real Estate - Time to Get Concerned?

2008-09-08T06:38:00.000-07:00

The business section in last Friday’s Toronto Star included an alarming headline that likely struck fear into the hearts of prospective home buyers and current homeowners (and mortgage holders): “Toronto housing prices drop 1%”. The article goes on to say how the Toronto Real Estate Board (TREB) has not reported a decline in year over year prices “in a dozen years”. Readers could be left with only one conclusion - we’re all doomed.

Not so fast. If you can get past the negative news at the start of the article, you can see a few bright spots. For one, TREB is now tracking Toronto and the wider GTA separately. Prices in Toronto itself declined by 1%, but they increased by 2% in the 905. Put it all together to get the total for the whole GTA and we see an average price increase of 1%.

Speaking to the National Post about the report, TREB president Maureen O’Neill noted that prices in the City of Toronto remain 10% higher than in August, 2006,and that forecasts from the CMHC and the Bank of Montreal predict gains in 2009. She also stated that “…the facts right now indicate the sky is not falling in.’

The drive to the 905 and the popularity of lower-priced condos (discussed in a previous post) also go a long way toward explaining the drop in prices – people are not abandoning the real estate market; they are just seeking more affordable dwellings and lower mortgage carrying costs.

Small Rental Unit, Small Budget, BIG Impact

2008-08-29T06:45:00.000-07:00

A properly furnished space can usually be rented out for more money per square foot than a similar unfurnished dwelling. An improperly furnished space, however, can make your rental unit less appealing and more difficult to rent out. We all know how much of a financial crunch an empty rental unit can cause, especially if we are relying on that rental income to help pay the mortgage. Luckily, it is not that difficult or expensive to furnish a small unit.

Here are 10 easy decorating tips to maximize your investment property ROI.

Avoid oversized, overdone furniture. Instead choose smaller pieces that can serve more than one purpose.
Properly placing mirrors and mirror finishes will reflect light, add dimension, and help the space to appear larger.
Do not use dark paints for the walls and avoid dark furnishings.
Open up as much floor space as possible by utilizing hanging shelves and, if budget allows, hanging a flat screen TV on the wall, and equipping the unit with a fold down desk or eating space.
Maximize your use of vertical space by hanging shelving over door frames.
Avoid flotsam and knick knacks which can be construed as clutter and may not be to your renters taste.
Try to make your rental unit as unified as possible. Breaking up your condo into visual sections can make your unit appear smaller.
Free up counter space in the kitchen and utilize kitchen specific organizers and storage items. Hooks, cupboard shelves, magnetic spice jars on the refrigerator are all great ideas that are quite inexpensive.
Proper lighting can go a long way. If natural lighting is scarce, compensate with plenty of electric lighting.
Lightly colored walls and furnishings do not necessarily translate to boring. Try choose bright accents or light wall colors that go outside the beige and cream palettes.

With these ten tips for decorating for small spaces, you should have no problem maximizing the return on your small decorating budget and your small investment property.or more small home decorating tips, visit our source for this article, Globe & Mail, Tricks to Make Small Spaces Seem Bigger

Moving Up? Keep Your Existing Unit as an Investment Opportunity

2008-08-28T19:29:00.000-07:00

It is that time again. University and college students are frantically searching for convenient and stylishly small units that they can temporarily call home. This past week we had two colleagues in our office take time off to help their young adult children hunt for apartments near their chosen school. I am sure our office is not the only one to experience a flux in excited parents that are helping prepare their brilliant children for higher education.

So why is this news pertinent to a website that focuses on Canadian mortgage refinancing? This time of year presents the perfect opportunity for those of us who are considering moving up to a larger condo and keeping our smaller units as a real estate investment property, especially if the existing property is close to or easily accessible to a university or college. Due to the high amount of student renters, the transition from dweller to landlord can be almost seamless.

Bachelors and one bedroom condo units represent a great opportunity to earn a rental income. Many investment property owners believe that we can get the most “bang for our buck” with smaller units because they can inexpensively be “fixed up” with some new flooring and a fresh coat of paint. When compared to larger units, it can also be much less expensive to furnish a bachelor or one bedroom.

Tiny budgets can make a big impact when working with a small space, as long as your budget is spent carefully on items that are sure to attract tenants. To learn more about making a big impact with a small unit and budget make sure to read tomorrow’s post Small Rental Unit, Small Budget, BIG Impact.

Real Estate and Mortgage Comparison Made Easy? Not by Stats . . .

2008-08-08T05:58:00.000-07:00

Real estate and mortgage comparison can be a tricky proposition - especially between markets and over time. Statistics do not necessarily make an objective analysis easy. Yesterday's housing sales and price numbers released by the Toronto Real Estate Board (TREB) are a case in point. When comparing markets over time, or between geographic markets, the same numbers can tell two very different stories.

"Prices remained stable throughout the GTA in July," according to the latest sales numbers from the TREB. "At $371,427 the average price increased slightly more than one per cent from $366,012 recorded in July 2007 and nine per cent from the $342,034 figure of two years ago." So is the market relatively flat with a very modest 1% year-over-year gain over last year's record setting levels, or is it relatively healthy with an annualized 4.5% annual growth rate over the past two years?

The housing sales stats released yesterday by the TREB show a number of such often-contradictory indicators:

In the City of Toronto, the average house price increased less than one per cent from July 2007, a record-setting month, but was up10 per cent from July 2006.

In the 905 Region there was a 3% price increase from July 2007 and an 8% increase from July 2006.

Overall sales declined 12 per cent from July 2007 record of 8,912 but increased 10 per cent from 2006.

The interpretation of such disparate statistics - what they mean, and what the driving forces behind the numbers are - is, of course, left up to the analyst doing the spin. The National Post's analysis is that the numbers for Toronto reflect the effect of the introduction of a new municipal land-transfer tax that encouraged buyers into the market before it took effect, and what we are seeing reflects the first-time buyers who would otherwise have postponed their purchases. Contrarian doom-saying political analyst and M.P., Garth Turner chastises the federal government and continues to predict that a 12% drop in sales levels from record-setting numbers a year ago is his long-heralded beginning of a U.S. -style housing meltdown.

Perhaps the best real estate and mortgage comparison analysis came from Canadian Real Estate Association president, Calvin Lindberg, in his comments last month on June's national real estate sales numbers. "In essence" says the CREA president, "Canada's housing market has pulled back from the record-setting pace set in 2007, but in most provinces it continues at or near sales levels set in the years before that. The increase in housing prices is also pulling back from the record-setting pace of last year, but we have yet to see any of the price contractions that have impacted the housing market in the United States."

If anything, the interpretation of the TREB's most recent sales numbers shows that real estate and mortgage comparison between markets and over time is a dubious and subjective interpretation. Purchasers are best served by doing the the research in their market at the time they are considering buying, and making decisions based on a long-term investment strategy, rather than speculating on the shorter term movement of markets.

Price First Mortgages and Avoid 'Bidding Wars' when Buying First Home

2008-08-05T07:44:00.000-07:00

When pricing out first mortgages and looking at the homes those mortgages will be able to finance in the Toronto real estate market, first time buyers should not be fooled by house listings that are strategically under-valued - an all-too-common practice according to a recent article in the Toronto Star.

"Listing properties below the market value has become a common practice in the Toronto area over the past five years – creating a bidding-war mentality for buyers," according to the Star. "Even with sales down, the market cooling dramatically and active listings up by 22 per cent compared with last year, multiple offers continue in some highly sought-after areas."

"While houses sit on the market longer with more inventory available in the Greater Toronto Area, most of the multiple offers are taking place in pockets of the central city still coveted by buyers," reports the Toronto Star's Tony Wong. "But under-listing properties has created a backlash, not just among frustrated consumers, but also from some agents who say the practice is undermining the profession."

A recommended strategy that will save the time - and expense - of getting into opportunistic bidding wars triggered by the strategic undervaluation of a property for listing purposes is to first consult a mortgage broker to determine from a range of lenders the precise mortgage amount that fits your budget and with which you will be comfortable. With your bottom line firmly established, a reputable and well-resourced mortgage broker will likely be able to point you in the direction of a realtor who is savvy to both the market and to the market-ploys of real estate agents who seek to falsely inflate a home's value through an under-valued listing designed to promote a bidding contest.

Market research is perhaps the key when entering the real estate market for the first time. Researching the terms and rates for first mortgages from a wide number of lenders (with or without the help of an experienced and well-resourced mortgage broker), and working with an experienced realtor can help you avoid falling into common traps that can all too easily snare the first time home buyer - including getting caught up in the frenzy of a falsely-induced bidding war to get that "must-have" apartment or condo that other, less-wary buyers are feverishly bidding up the price on.

Home Financing Market in Canada 'Boring but Beautiful'

2008-07-30T05:56:00.000-07:00

Anyone trying to figure out the difference between the disastrous housing slump in the United States and Canada's still-healthy housing sector, where house prices have kept their value and settled into what the Canadian Real Estate Association recently characterized as a "considerably more balanced" market, need look no further than the differences in our two home financing markets. The differences between Canadian mortgage and U.S. mortgage markets were clearly summarized in a recent analysis in the Financial Times, the U.K.'s leading financial paper.

Characterizing the Canadian mortgage market as "boring but beautiful", the FT listed the key differences between the U.S. and Canadian home financing practices that have translated into vastly different results for the banks, financial institutions and homeowners that have stakes in the market. Key differences are:

"Delinquency and foreclosure rates have scarcely risen."
"Risky subprime mortgages, the scourge of the US housing market, make up less than 5 per cent of Canadian housing finance."
"In contrast to the uncertainty surrounding Fannie (Mae) and Freddie (Mac), the US government-sponsored mortgage agencies, demand for mortgage-backed bonds issued by the Canada Mortgage and Housing Corporation is at record levels."
"Adjustable-rate mortgages, which have crippled many US homebuyers, are virtually unheard of in Canada." (Adjustable rate mortgages come with low interest rates for the first year or two, but with rates that rise steeply thereafter.)
"The ratio of loans to home values is lower in Canada than the US."
"(L)enders are required by law to take out insurance on all mortgages where the downpayment is less than 20 per cent of the value of the house. Insurance is provided by CMHC and by private insurers."

The Financial Times attributes these key differences to a deeply-rooted financial and investment culture that is, in contrast to other cultural values, much more conservative than the wide-open financial practices in the U.S. which triggered their current housing and home financing malaise.

"While Canadians may be more liberal than Americans in most walks of life," according to the FT, this does not translate into our core fiscal outlook. Witness the recurring federal government surplus in Canada versus the recently announced record setting half-a-trillion dollar deficit run by the U.S. government. "Canadian mortgage underwriting standards have tended to be more conservative," Dominion Bond Rating Service analyst, Andrew Fitzpatrick told the Financial Times. "I think it comes down to culture."

Real Estate and Mortgages Markets Adjust to New Conditions

2008-07-21T10:41:00.000-07:00

Recent developments confirm that the markets for mortgages and real estate in Toronto (and for Canada, as a whole) have entered a new phase of the business cycle. Fortunately, Canada's markets seem to have settled into a fairly soft (if flat) landing, unlike those in the United States where boom went to bust as the collapse of the U.S. sub-prime mortgage market burst the bubble on a hyper-speculative U.S. real estate market, triggering a housing crisis and wider financial credit and banking mess that is only now coming to a head.

"Canada's housing boom appears officially over, as average resale home prices in June fell marginally below year-earlier levels for the first time in a decade" writes Adrienne Warren, Senior Economist at Scotiabank in July 18th's Weekly Trends. However, news of a first-in-a-decade housing price drop was tempered, Ms. Warren notes by exaggerated price weakness "in a handful of previous hot spots, most notably Calgary and Edmonton" where prices had climbed to unsustainable levels. "In most other major centres, prices are still rising," she notes, "albeit at a much slower pace than in recent years."

The slowdown to a more sustainable level of price growth is welcome relief for home purchasers, and ultimately existing homeowners, wary of a runaway speculative fever that has brought the U.S. mortgages and real estate sectors virtually to their knees. If additional measures were necessary to take the excess starch out of Canadian markets, this was added by recently announced rule changes to federally-backed mortgage insurance. These rule changes, which come into effect October 15th, have virtually wiped out the market for extended, 40-year amortizations and zero-down payment mortgages in Canada.

"Ottawa's recently announced mortgage market regulatory changes," Ms. Warren notes, "including the elimination of 40-year amortization and no-downpayment options, are expected to add an extra constraint on demand, as is recent evidence of a softening in domestic labour market conditions." Coupled with rising resale listings, as well as continuing and sustained new home construction, this appears to have tipped the real estate market in Toronto and most other major centres across Canada from a seller's to a buyer's market.

The economists at Scotiabank, like those at the Bank of Canada, are optimistic (albeit guardedly so) that Canada is well positioned to weather the economic downturn in the U.S. that has spilled across global markets. In their latest Forecast Update, released July 21st, the Scotiabank's economics team, notes that unlike parts of Europe and Japan, "Canada's fortuitous position as a major commodity producer, its strategic advantage in government finance and its legacy of household caution with respect to leverage have helped to shelter domestic activity from the gathering U.S. storm."

Market forces it seems, together with proactive government regulatory and central bank monetary policy with respect to liquidity and interest rates, are working to keep our markets on track as here in Toronto, and across the country, we adjust to a new phase in the mortgages and real estate cycle.

Life for Zero-Down Payment Mortgages in Canada?

2008-07-16T14:52:00.000-07:00

New rules for federally-guaranteed mortgage insurance appeared to be the end of the line for zero-down payment mortgages in Canada once the new rules come into effect October 15th. Already reports are surfacing that some of Canada's largest mortgage lenders (ING, BMO and CIBC) are moving to stop writing the 40-year mortgages and zero-down payments that will no longer be eligible for federally-guaranteed mortgage insurance from the Canadian Mortgage and Housing Corporation after October 15th.

Now reports are that the handful of private mortgage insurers that offer federally-guaranteed mortgage insurance are working to develop mortgage products that will allow lenders to continue to offer zero-down and 40-year mortgages after the new mortgage insurance rules kick in. (A handful of private mortgage insurance companies - Genworth Financial, AIG United Guaranty and PMI Canada - offer mortgage insurance that is guaranteed up to 90% by the federal government if lenders default while the CMHC, a federal Crown corporation, offers mortgage insurance that is 100% backstopped.)

"An industry source," according to today's National Post, reports "that the private mortgage insurers are looking into creating a product in which the first 95% of a mortgage is backed by the government with the last 5% securitized independently by the private mortgage insurers." PMI Canada is reportedly set to meet with federal Finance Department officials at the end of the month to further investigate how the new mortgage insurance rules will impact their ability to offer extended amortization and zero-down mortgages.

The new mortgage insurance rules were introduced by the Finance Department to ensure that Canadian lenders did not weaken their lending standards and qualify individuals with mortgages they could not readily afford. Ultra-lax lending standards in the United States and the proliferation of sub-prime mortgages and mortgages for individuals who were not required to show proof of income, employment or assets (so-called "Ninja mortgages', a now-naorious U.S.-industry acronym for mortgages written for individuals with "no income, no job or asets") are widely blamed for the collapse of a speculative housing bubble in the U.S.

Banks and other institutional lenders were able to write such high-risk mortgages by moving these risky loans off their balance sheets by leveraged securitizations. Individual high-risk mortgages were bundled together and shares in these securitized investments were sold as asset-backed commercial paper. When investors caught on to the risky nature of the loans underlying these securitizations last fall, the U.S. sup-prime mortgage market collapsed sparking the U.S. housing crisis and a global liquidity crunch that markets are only now recovering from.

Canada's financial markets and mortgage lending standards have and continue to be much more conservative thanthose in the U.S. The Finance Department's move to tighten Canadian mortgage insurance rules have only reinforced those standards. If the handful of private mortgage insurers are able to move to continue zero-down payment mortgages after October 15th by securitizing the remaining 5% of an insured mortgage that will not be federally backed, it is certain that the standards to qualify for such mortgage will be very high indeed. Without the highest standards for an extended amortization or zero-down mortgage there will not be a market for the securitizations necessary to float the mortgage products these private insurers are contemplating. In the wake of the biggest U.S. housing crisis since the Great Depression, investors who were burned by the sup-prime mortgage crisis in the U.S. are unlikely to risk being burned once again in Canada.

Toronto Mortgages Demand Will Push Markets In Run-Up to Oct. 15th Rule Changes

2008-07-11T11:29:00.000-07:00

There is likely be a push to secure Toronto mortgages before newly introduced mortgages rules severely restricting the ability of home purchasers to secure zero-money-down and 4o year mortgages take effect October 15th. Changes to Canada's mortgages rules also include heightened credit score requirements that buyers will have to meet to qualify for high-ratio mortgages.

On July 9th, the federal Department of Finance announced that after October 15th it would stop guaranteeing mortgages with amortization periods longer than 35 years and would require purchasers to come up with a minimum 5% down payment in order to qualify for federally guaranteed mortgage insurance. The new rules will effectively eliminate the ability of a home purchaser to qualify for a zero-down payment mortgages and mortgages amortized over a 40 year period.

(Under the Bank Act, banks and other federally-regulated lenders must require borrowers to purchase mortgage insurance for high-ratio mortgages where the value of the mortgage is 80% or more of the value of the property being purchased. Mortgage insurance policies written by the Canadian Mortgage and Housing Corporation, a federal Crown corporation, are 100% guaranteed by the federal government, while mortgage insurance policies written by Genworth Financial Canada and a handful of other private mortgage insurers are 90% guaranteed.)

The move to tighten mortgage lending standards "has set off speculation that a surge of buyers, particularly those in pricier regions who have little money saved, could try to push into the market before the new rules takes effect," writes Lori McLeod, real estate reporter for The Globe and Mail. The impetus for prospective buyers with less than the 5% down payment that will be required post-October 15th will likely be greatest in markets like Toronto and Calgary where house prices have risen significantly.

Analysts and economist now expect home purchasing activity will spike in the run-up to the October 15th rule change, giving some additional impetus to sluggish real estate markets in Toronto and in other centers, but that demand is likely to taper off as mortgages become more difficult to secure after the new rules come into effect.

Affordable Ontario Mortgages Support Toronto’s Real Estate Market

2008-07-07T11:57:00.000-07:00

Affordable Ontario mortgages are keeping Toronto-area real estate sales at a near-record level, despite a surge in listings, as the overall real estate market moderates.

The Toronto Real Estate Board released its June, 2008 numbers on July 5th. The TREB reports that the average price increase year-over-year has moderated to 4%, and that home sales had slowed and the number of listings had substantially increased, Yet, sales level were still at near-record levels when compared to other years “Sales were down 18 per cent from the 2007 total of 10,451, which was the best performance ever for that month,” noted TREB president, Maureen O’Neill. “Nevertheless, the 8,600 figure is the fifth best June on record, and indicative of an active, healthy market.”

“One reason for prices appreciating is that sales, while falling, are still comparatively high due in part to still historically low interest rates, says the Toronto Star. “Sales last month were on par with the 8,730 transactions in June, 2006, the previous record.”

The Star cites BMO Nesbitt Burns’ deputy chief economist, Douglas Porter, as forecasting “a soft landing for the area’s real estate market, with prices flat ‘or barely registering into positive territory’ in the short term.”