2010 CAAMP Survey

‎2010 Canadian Association of Accredited Mortgage Professionals (CAAMP) Survey found that 66% of Canadians have a 5 year fixed rate, 29% have a variable rate, and 4% a combination fixed/variable mortgage.

Rental Offset is Back!!

Looking for an Investment/Rental Property? If so, some lenders have just started offering "Rental Offset" again for calculating the clients' debt ratio. The Rental Offset calculation dramatically improves your ability to qualify.

Rental Offset went away for about 6 months due to changes in the CMHC Rental Property guideline. When these rules changed, most lenders started adding only 50% of the rental income to the clients employment income.

Rental Offset takes 80% of the rental income and deducts that figure from the mortgage payment. For example, say the rental income is $900 per month and the mortgage payment is $750 per month. 80% of the $900 rent is $720. If the mortgage payment is $750, you deduct the $720 rental offset and the net mortgage payment used in the debt ratio calculation os only $30.

Mortgage Fraud Seminar

Mortgage Managers hosted a Mortgage Fraud Seminar last night. The speakers included Fist Canadian Title and the RCMP.

The two-hour session covered a range of topics including Identity Theft, Title Fraud, Title Insurance, Debit & Credit Card Scams, Home Repair Scams, and more.

Some of the highlights of the seminar were:

1. Always cover your PIN when using your debit card
2. Do not carry your Social Insurance Card or Birth Certificate
3. Shred any documentation that has any personal information
4. Lock up your Identification, Credit Card Statements, & Income Tax Documents so they are not stolen
5. Identity Theft is happening frequently
6. Title Fraud in Canada cost lenders hundreds of millions of dollars each year.
7. It takes 600 hours of work to recover you Identity
8. Title Insurance is available to protect you financially if/when Mortgage Fraud and Title Fraud occurs

Many thanks to members of the RCMP Fraud Division and First Canadian Title for helping Mortgage Managers educate and protect the members of our community.

#1 - Low Credit Score

This is really THE #1 reason clients get declined. The good news is, as I have said before, that credit scores are a snapshot in time about a month ago. Scores can change significantly within a day, a week, or a month, you just have to know how to manage your credit in order to maximize your score.

There are really so many ways to improve your credit score, it will probably take another Top 10 list to explain all the different ways. And, each credit bureau is unique to each client, so it is often difficult to provide exact advice without knowing the specifics of an individuals' credit bureau.

The best solution is to sit down with a Mortgage Managers broker for a No Cost, No Obligation Credit Assessment. We can give you the specific advise you need to improve your credit score. We will work with you, regardless of how long it takes, to help walk you through the steps of improving your credit score sufficiently to qualify for a mortgage to purchase your new home.

#3 - Errors on the Credit Bureau (that you don't know about)

This one happens on a daily basis. We routinely see clients that have been turned down by their bank due to "something on their credit bureau". Since the loan officer at the bank branch never actually sees your credit bureau he/she cannot tell/show you what the problem is.

The first thing to keep in mind is that the credit report is a snapshot in time somewhere between 1-2 months ago.

A professional Mortgage Managers broker will sit down with you to review your credit bureau in detail and explain how credit scoring is calculated. The most common error is from loan and credit card balances that have not been updated for months. Often a credit card is reporting a high balance when, in reality, the client had paid the balance down.

Or perhaps there are late payments reporting in error, or collections are showing as unpaid, or maybe a loan or credit card is not reporting on the credit report at all.

The point is, unless you review your credit report with a professional mortgage broker, you will never know what is on your credit report and therefore will never get the issue resolved.

#2 - Not Enough Established Credit

Banks and the insurers (CMHC, Genworth) seem to have ever changing criteria for meeting their requirement for established credit. For example, right now we have clients that have owned their home for 5 years and have been paying a mortgage. They also have a car loan of $475 per month that they have been paying perfectly for the last 4 years. However, I cannot get an approval (from CMHC in this case) unless the clients get a qualified co-signor! I think that is crazy.

A few weeks ago, I had clients approved through CMHC with only a credit card that has been open for only one year.

Fortunately, we can still get them approved through a finance company at a higher interest rate.

#4 - Short Time on the Job - Still within Probationary Period

Often if you have just started a new job and have nor past your probationary period, banks don't want to take the risk of finaning you just incase things don't work out.

However, it has come to our attention recently that it really depends on what kind of job you have, who your employer is, and where you worked previously. If you have a "professional" job, like a lawyer, doctor, nurse, etc., some of our lenders see these jobs as "risk free" from an employability point of view. Whereas, if you deliver pizza, work in retail, or work in construction, they typically won't finance you. However, if you can prove you have been in the same line of work and can demonstrate your income via your last two years of Notice of Assessments, then you might have a way to go. And, if you happened to have recently graduated from university or college and have gotten a job with the federal or provincial government, some of our lenders will approve your mortgage even if you are not past you probationary period.

#5 - Self Employed and Can't Prove Your Income

In April, CMHC made some major changes to their programs for self-employed clients.

Prior to April, all self-employed clients could use "stated income", if your credit score was high enough, whereby you did not have to prove any of your income, you just had to prove you had been in business for at least two years. You could finance up to 95% of the value of the proeprty on a purchase.

Now the CMHC "stated income" program is really only available for clients that have been self-employed for more than 2 years, but less than 3 years.

If you are self-employed for 3+ years, you must use your average income from the last 2 years of your Line 150 on your Revenue Canada Notice Of Assessments.

However, if you are financing less than 60% of teh value of your property, we do have a couple of lenders that will provide mortgage financing without needing to prove your income.

#6 - Debt Ratios are Too High

There are two debt ratios the banks use to determine if they will approve your mortgage application, or not.

The first is your Gross Debt Service Ratio (GDS). This calculation is calculated by adding your monthly mortgage payment, monthly property Taxes, $100 per month for utilities, and any condo or lot rental fees. Take that figure and then divide it by your Gross Monthly Income. The maximum GDS is typically 32%.

The second is your Total Debt Service Ratio (TDS). Thic calculation is similar to the GDS calculation. You add the same items as in the GDS calculation + your monthly credit card and loan payments. Take that total and divide it by your Gross Monthly Income. The maximum TDS is typically 40%.

There are a number of ways to improve your GDS and TDS calculations. To lower both your GDS & TDS ratios, you can:
- buy a less expensive home
- stretch the amortization out longer
- get a better interest rate mortgage through a mortgage broker
- get a mortgage with a term of 5-years or longer to avoid needing to meet CMHC's requirement to qualify using teh Bank of Canada 5-year posted rate

To lower your TDS ratio you can also:
- pay off a loan or credit card
- refinance a loan with a small balance but a big payment
- get a $0 down payment mortgage and use your cash to pay off other debt
- if refinancing, consolidate some debts into the new mortgage

If you can improve your credit score sufficiently, most lenders will disregard the GDS ratio and allow your TDS ratio to go up to 44%.

A qualified mortgage broker can give you specific advise on your unique situation.

#7 Decline - No Down Payment

Until October 2008, Canadians could purchase a home with $0 Down payment. In order to qualify for that type of mortgage, you needed to have a credit score of 680 or greater. The $0 Down Payment program was eliminated by the Federal Government, via CMHC, due to the mortgage meltdown in the USA. CMHC no longer wanted to be involved in insuring these riskier mortgages.

As a result, many people take themselves out of the market because they do not have a down payment and think there is no possibility of purchasing a home. Other people go to their bank and are told that they do need a down payment.

However, if you were to talk to an independent mortgage broker, like Mortgage Managers, you would learn that you can still purchase a home without a down payment!

Some of our lenders understand that there are a number of Canadians that have good jobs and good credit, but just have not had the opportunity to save a 5% down payment. Therefore, they have created mortgage programs for these clients which are often called 5% Cash Back mortgages. Essentially the lender will finance 95% of the purchase and "give" you a separate cheque for the extra 5% to be used for your down payment. I say "give" because the lenders do charge a higher interest in order to recoup the 5% over the 5-year term of the mortgage.

Not all 5% Cash Back mortgages are the same. Many lenders actually require you to have 5% saved in you bank account before they will give you the additional 5% cash back.

#8 Decline - Property Value is Too High

A high property value can cause your application to be declined in a few different ways.

a.) This could mean that the property you are purchasing is simply too expensive for you and your debt ratios are too high.
b.) This could mean that the Purchase Price (in the case of a purchase)or the Estimated Market Value (in the case of a refinance)is too high compared to the Canadian Mortgage & Housing Corporation's (CMHC) property database or the appraised value.

In many cases, unless you are working with an experienced mortgage broker, you may never know that your application has been declined for these reasons. Often the loan officer at the bank doesn't even know as they are simply told if you are approved, or not without a full explanation of why. You might even get a letter from the bank confirming the decline and "blaming" information that appears on your credit report, when in fact the decline has nothing to do with your credit.

This type of decline might leave you scratching your head if you are confident your credit is perfect and your income should support the loan. An experienced mortgage broker will be able to tell you excatly why your application has been declined and can advise you on how to remedy the situation.

#9 Decline - They Don't Like You

Your personality or character does not appear on your credit report or get factored into your debt ratio, but you can be assured that the loan officer at your bank can sway the decision to decline your application if they just don't like you. Maybe it's a personality conflict, the way you dress, the way you speak, or whatever. We've helped clients that have been discriminated against based on their age, even though that is illegal.

The loan officer is the bank's first line of defence and if they don't like you, you're in trouble. The loan officer is going to get paid their regular salary, whether they help you or they don't. Therefore, they are not really motivated to help you.

Independent mortgage brokers only get paid when your mortgage closes. So, guess who's side they are on? Yours! Mortgage brokers work on your behalf to position your application in the best possible light and send it to the most appropriate lender(s)to increase the likelihood you get approved.

If you're not getting the answers you need at your bank, please give us a call at 902-820-3303 or 1-877-996-6677.

#10 Decline - Low Credit Score

I estimate that 80% of all Canadians have no idea what their credit score is. Some say ignorance is bliss. For the most part, that is probably true. But bliss often comes to a halt when you apply for a loan a mortgage and are declined by your bank. The loan officer can usually only tell you that the decline is due to "insufficient credit" or something similar. You might ask for details, but since teh loan officer doesn't actually see your credit report, they can't help you. It's a frustrating experience. Since banks have created such a high level of trust, you might just accept your fate and go home without an approval.

If you had applied with a mortgage broker instead, the broker could get a copy of your credit report and review it with you in detail. Often there are errors or old information still reporting on the bureau.

Here in Canada, Credit Scores range from 300 to 900. The higher the score, the better. Most Canadians have a score in the 625 to 700 range. Generally speaking, any score over 680 is considered "excellent". The score itself is calculated using proprietory credit scoring calculations. These calculations are based on different sections of the credit bureau.

These sections include your address history. The more frequently you move, the less stable you are, and that has a negative effect on your score. The next section is you credit inquiries. Each time you do a credit application a credit inquiry appears on your credit report. Each inquiry can drop your score by 5-10 points. The more you "shop around" the worse you credit score gets. One of teh benefits of dealing with a mortgage broker is that the broker can request one bureau and then send that one credit bureau to each lender electronically, so that each lender does not request an additional credit bureau.

The last section of the credit bureau report is your Trade Lines. Trade Lines are your credit cards and loans. The score is calculated based on how long the trade line has been open and how well it has been repaid. However, about 30% of the score is based on your Credit Utilization. That simply means, how much is the difference between your credit balance and your credit limit. The closer you are to your credit limit, the worse you score. Since Credit Bureaus and Credit Scores are a snapshot in time about 1-2 months ago, often it is just a matter of waiting for the credit bureau to report new credit balances. Or, if you have not paid down your debts, you could try make a large payment(s) and then wait for the credit bureau to get updated in 1-2 months.

If there are errors or incorrect information on your credit bureau you will never know unless you sit down with an experienced mortgage broker or get a copy of your credit report for yourself.

If you have been declined by your bank, please give us a call and we can review your credit repoert with you and give you the advice you need to get your credit report into a position where you will qualify for a mortgage.

Why do Banks Turndown Mortgage Applications?

There are probably 100 different reasons banks don't approve mortgage applications.

The Top 10 reasons include:
1. Low Credit Score
2. Not Enough Established Credit
3. Errors on the Credit Bureau (that you don't know about)
4. Short Time on the Job - Still within Probationary Period
5. Self-Employed and Unable to Prove Sufficient Income
6. Debt Ratios are Too High
7. No Down Payment
8. Property Value is Too High
9. They Don't Like You
10. Errors on your Credit Application

I will discuss each of these reasons in my next blogs.

Dangerous Home Equity Lines of Credit

Over the past few years we have heard about how most major banks were frequently offering their clients a combination of a Mortgage and a Home Equity Line of Credit. This trend seemed to only be happening in the big cities like Vancouver, Calgary, and Toronto where property values are larger and seemed to appreciate much quicker than properties in Atlantic Canada Many Canadians began relying on this extra available credit and before too long, found themselves with a Home Equity Line of Credit at its credit limit. As the Line of Credit's balance increases, so do the payments, and many Canadians found themselves making the minimal, interest only, payments. Therefore, the Principal Balance never decreases! When property values in those major cities decreased over the last couple of years, many Canadians found themselves owing 100%, or more, of the value of their property. As a result, some Canadians were unable to sell their homes because they did not even have enough equity left to pay any Realtor's real estate fees.

The other negative impact of having a maxxed out Line of Credit is that it will cause credit bureau credit scores to drop substantially. This makes it even more difficult for the homeowner to refinance and/or consolidate thier Line(s) of Credit into a new mortgage. Lines of Credit do appear on the credit bureau, whereas mortgages do not.

We have started to see a significant increase in this predicament here in Atlantic Canada with many clients finding themslves as risk of loosing their home, or at the very least living from paycheck to paycheck just to keep up with the payments. This makes it nearly impossible to reduce the Line of Credit's balance and improve/increase the credit scores sufficiently to qualify for a new mortgage.

If you are offered a Home Equity Line of Credit, I would recommend you politely say "No Thanks!" If you find yourself with a Home Equity Line of Credit that has a balance that is creeping up to the credit limit, please give us a call as soon as possible, before your credit scores drop too far. We have some really great interest rates that can help keep your new mortgage payment low, while enabling you to pay down the principal balance.

More Bad news for Self-Employed Clients

The Canadian Mortgage and Housing Corporation (CHMC) has just announced that they are basically eliminating their "stated income" programs for self-employed clients in April. Today, self-employed clients can qualify for a mortgage by "stating" their income and not have to prove their income with Income Tax Statements, Notice of Assessments, etc. Self-Employed people can typically write of much of their gross income, thereby reducing their taxable income. This is great for income tax purposes, but makes proving income very difficult.

In April, Self-Employed clients' Debt Ratios will be calculated using provable income. They will need to prove their income via Line 150 on their T1 General income tax forms and Revenue Canada Notice of Assessments. They will also have to prove they have been self-employed for at least three years.

As more and more Canadians become self-employed, Revenue Canada's tax base is being erroded. Since CMHC is also a department of the Federal Government, I believe this is Revenue Canada's way of getting self-employed Canadians to report higher income taxes and thereby pay larger income taxes.

Is it time to Lock-In your Variable Rate Mortgage?

I get this question fairly often. Fixed Interest Rates are expected to start going back up starting today, but there's no need to panic. Variable Rates are not changing and are not expected to change for another 4-10 months.

What should you do? You should make sure you are taking full advantage of your Variable Rate mortgage "prepayment privledges" by contacting your mortgage company and asking them to simply increase your payment by 10% to 20%.

Why should you increase your payment? Since your Variable Rate is currently in the 1.35% to 2.25% range, most of your payment is paying down your Principal and very little is paying interest charges. By increasing your payment, you will pay substantially more toward your Principal and your mortgage balance will drop quickly.

If you locked in your mortgage rate by converting to a fixed rate mortgage, your payment would increase, but you would be paying substantially more towards interest and your mortgage balance would be reduced very slowly.

By increasing your payment on your Variable Rate mortgage, you will be mortgage free quicker and therefore own your home that much sooner.

Investment Property Purchases Become More Difficult

On February 16th, Federal Finance Minister Jim Flaherty announced changes to mortgage insurance rules that will come into force on April 19, 2010. These changes are as follows:
1. All borrowers must meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term;
2. The maximum amount one can withdraw in refinancing their mortgage will be reduced to 90% from the current 95% of the value of one's home;
3. Non-owner occupied properties (up to 4-units) will require a minimum down payment of 20%.

There were no changes to down payment requirements or length of amortizations for owner-occupied residences.

Most of the Finance Department’s changes were minor, with one noted exception – that being the rule changes for Canadians wishing to purchase investment, or rental, properties. Mr. Flaherty said he was not targeting real estate investors but rather the “speculators”. Regardless, the new rules will have a negative impact on all investors, especially Canadians that have large real estate portfolios trying to get a conventional mortgage with a lender who uses the Canadian Mortgage & Housing Corporation (CMHC) guidelines. The main reason is not because Canadians will need to have a 20% down payment, but because CMHC will use a 50% add-back instead of an 80% offset. [This refers to different methods of using rental income when calculating debt service ratios.]

Real Estate investors only represent about 4% of the overall mortgage market and those who use high ratio CMHC mortgages for investment properties represent less than half of that. Therefore it will not have a significant impact the broader market. But it will certainly have the appearance of doing so, which was probably the real objective of the government.

It is hard to believe that Canadians could purchase non-owner occupied investment properties with $0 down payment as recently as 18 months ago. Therefore, it is a little baffling for the Federal government to make such a major shift to requiring a 20% down payment. Instead, the government could have tightened up on other conditions such as increasing net worth requirements, increasing credit score minimums, tightening debt servicing guidelines, or limiting the number of insured rental mortgages any one person can qualify for.

Investing in Real Estate, if done wisely, has nearly always been an excellent way for Canadians to improve their Net Worth and Cash Flow. Requiring a 20% down payment will take that opportunity away for many first time investors. The good news is that these new rules will likely be short lived and will be reversed as our economy improves.

James Shinners
President
Mortgage Managers

The Goverment Mandated Mortgage Changes

Tuesday morning, Federal Finance Minister Jim Flaherty announced prudent changes to mortgage insurance rules intended to come into force on April 19, 2010. These changes are as follows:


All borrowers must meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term;

The maximum amount one can withdraw in refinancing their mortgage will be reduced to 90% from the current 95% of the value of one's home;

Non-owner occupied properties will require a minimum down payment of 20%.

There were no changes to down payment requirements or length of amortizations for owner-occupied residences.

If you have any questions, please e-mail me or give me a call at 820-3303 or 1-877-996-6677.

Government Threatens to Make Home Buying More Difficult

Our "conservative" federal government is considering raising the down payment requirement from 5% to 10%.

For many buyers, coming up with $10,000 on a $200,000 purchase is difficult enough, imagine trying to raise $20,000 cash? This may not be a problem for clients in other parts of the country where the incomes are higher, but I can tell you that it is a fairly rare occasion for home buyers here in Nova Scotia to have more than 5% available for a down payment.

If this happens, it will create an opportunity for Finance Companies, that are not backed by the Canadian Mortgage & Housing Corporation (CMHC), to offer a 5% down program at higher interest rates. Therefore, at the end of the day, I can't say our government's decision actually helps Canadians. But since when does the government put their constituents first?

Little Mortgages Need Respect Too!

We had a client call today after getting frustrated with her bank. She wants to buy a small home near Wentworth for $55,000. She has 25% down and only needs a mortgage of $41,250.

Her bank kept stalling and not returning her phone calls. After three frustrating weeks and the purchase supposed to close tomorrow, she called us. We met her about an hour later, took a credit application, reviewed her credit report, calculated her debt ratio and by the end of our 45 minuite meeting we were able to tell her we could put the mortgage togther easily. We will have to delay the closing for 5-10 days, but at least our client can rest assured she will be able to buy her county retreat.

The Difference between a Broker and your Bank.

I really couldn't have scripted a recent discussion I had with a gentleman any better. I was getting into my van which was parked in the parking lot at the mall. My van has lettering on the window that says "Save thousands of dollars by having your mortgage professionally managed, at no cost to you!"

The gentleman came up to me and asked "Is that really true? How does that work?" I explained that we can help him find the best mortgage to meet his needs at teh lowest possible rate. Then we monitor that mortgage for interest saving opportunities during teh term of teh mortgage.

He then said he wished he had met me a few weeks earlier. He explained that he had gone to his bank to ask about refinaning the mortgage he had with them at today's lower interest rates. The loan officer said to him "You should have come in to see us a few weeks ago when the interest rates were lower". He then asked the loan officer "Why didn't you call me?" and she said that the bank doesn't do that. He then asked who she worked for, her clients or the bank. She said she worked for the bank. He said "exactly!"

I thought that clearly demonstrated the difference between using a broker and just going to your bank

Not all mortgage brokers are created equal.

Yesterday I got involved in a mortgage transaction gone bad. The client's original broker took the application and got a conditional approval back in early December. Since that time the client's employment changed slightly and she started working full time at her previously part time job, and part time at her previously full time job. The problem was that she gets paid cash at her now full time job. When she originally applied she did not really need her part time income to budget for the mortgage, so it didn't matter that she was getting paid cash. However, now that she gets paid cash for her Full Time job, the lender originally indicated that they could not do the mortgage without a traditional paystub. She hadn't worked at either job for more than 1 year, so she did not have any income tax documentation that she could use to verify her income.

This poor lady had just finalized her separation and then lost most of her posessions in the apartment fire in the apartment buildings on South Street in mid-January. She has been living in the Weight Room in a building her employer owns since then. And now her dream of home ownership was going down the drain and her broker wasn't helping her.

I put my thinking cap on and after a few conversations with the client, we got the last 6 months of her bank statements showing she deposited her income into her bank account along with updated employment letters from her employers. The lender recalled the employers to re-confirm her income. After numerous conversations and e-mails with the lender, a lot of begging, sweet talking, and some good luck, the lender accepted the new documentation. It also helped that 100% of our clients with that lender are excellent clients. The mortgage will be closing as originally scheduled on Monday.

I had a hard time sleeping last night worrying about this client, but I will be sleeping well tonight.

Why do Self-Employed Clients get screwed?

We see it time and time again. Clients that have been in business for a number of years and have good credit often find themselves paying a very high interest rate just because they cannot prove thier income like employed people via a paystub and employment letter.

Imagine always paying you loans and credit cards on time and are running a successful business, yet when you try to arrange a mortgage your bank demands a mountain of paperwork including 2-3 years of T1 Generals, Revenue Canada Notice of Assessments, and so on to verify your income. Or, you turn to a finance company where they don't require so much paperwork, yet you end up paying 18% to 19%! At these rates you'll never pay off your mortgage.

Fortunately, we have a couple of lenders that realize that clients who are self-employed, and have managed their credit wisely, deserve to get low rates just like everone else with good credit. By demonstrating a good credit record clients do not need to provide any income documentation, they only need to prove they have been in business for at least 2 years via a business license or Registry of Joint Stocks.

We have a client that we just refinanced his high interest finance company mortgage and consolidated some of his high interest credit cards and have reduced his monthly payments by over $1500 per month!!

A mortgage I am working on today - Mr. X

I have a client, I'll call him Mr. X, that through a series of unfortunate events, finds himself with horrible credit and Revenue Canada judgements just as his mortgage is coming up for renewal. If we cannot find a mortgage lender to finance him he will either have to sell his home, or face foreclosure!

The good news he has built up some substantial equity in his home. This is his only bright spot. I may be able to find a Private Lender that will help him keep his home, financing up to 75% of the appraised value. The interest rate will be high, but it beats forclosure or having to pay real estate fees and then have to pay rent.

I hope my friend, Ken Wood, at Promediate Debt Solutions will be able to help him negotiate down the $30,000 he owes Revenue Canada.

I will update you as things progress.

US Tightens Mortgage Requirements

I don't claim to be an expert on US based mortgage programs, but I was watching the news yesterday and the News on TV had a story about how the US is tightening up their mortgage requirements. The Federal Housing Administration (FHA) announced that the new guidelines would require home buyers to have at least a 580 credit score and at least a 3.5% down payment. I had a good laugh thinking "these are stricter requirements?" I wonder what the requirements were before?

In Canada, to qualify for a mortgage, you will need at least 5% down. In order to qualify for only 5% down, Canadians have to have at least a 600 credit score.

Interestingly, the FHA was created in 1934, just after the Great Depression. The FHA was established to help more people become homeowners by providing insurance programs for purchases and refinances. The Canadian equivalent for the FHA would be the Canada Mortgage & Housing Corporation (CMHC). CMHC was not established until January 1, 1946, after the war to help returning veterans purchase a home.

Bank of Canada Scheduled Rate Announcement

Today, the Bank of Canada announced that it would keep Canada's key interest rate at the record low of 0.25% in order to achieve its inflation target of two per cent.

While the Bank said economic growth in Canada resumed in the third quarter of 2009 and there has been a slightly higher than expected rate of inflation in recent months, it reiterated that the economy is still lagging, particularly due to factors like a strong Canadian dollar and low levels of U.S. demand.

Repeating many of the same projections as its October monetary policy report, the Bank predicted the economy to return to full capacity and reach a two per cent inflation rate in the third quarter of 2011. it forecast the economy to grow by 2.9 per cent in 2010 and 3.5 per cent in 2011.

The next rate announcement will be made on March 2.

Nova Scotia Association of Realtors Bulletin

Hi John

I just read your most recent bulletin regarding referring business to outside sources; http://nsar-ca.informz.net/nsar-ca/archives/archive_694563.html . I would have to say your comments are one-sided and short sighted.

I have been an independent mortgage broker for nearly 6 years now and have never had any sort of insurance claim or lawsuit threatened by any client. That is because I choose to do things the right way. You would not believe the number of times I have had a real estate agent yell and argue with me to send them a financing letter immediately. I never send a real estate agent a financing letter until the clients have signed their approval/commitment from the lender. For some reason many real estate agents don’t understand why they have to wait. Therefore, I would say NSAR has not trained these real estate agents properly.

Given the business that they are in, it should not be difficult for them to understand that I need signatures on documents to confirm the client’s acceptance. Hopefully no Real Estate agent would try to process a sale without a signed Purchase & Sale Agreement.

Furthermore, why does the NSAR website http://www.nsar-mls.ca/content.php?id=financiallinks only link to the major banks? Aren’t these links a form of referral? I would like to see a link to the Canadian Association of Accredited Mortgage Professionals website at www.caamp.org listed to ensure NSAR is not trying to influence clients to only consider the major banks as a source for mortgages.

If you are truly suggesting real estate agents should never refer any business to mortgage brokers, I should recommend that CAAMP advise their membership not to refer any of their brokers’ clients to any real estate agent. Maybe we, all mortgage brokers and lenders, should only deal with private sales. I have cc’d Jim Murphy, President of CAAMP, as well as Canadian Mortgage Professional (CMP) magazine.

Sincerely,
James Shinners

2010 Mortgage Rate Predictions

Fixed Rates will go from 3.99% for a 5-year fixed at the beginning of the year to the mid-4% range as early as February. By late summer of 2010 we will be back up into the 5% range.

Variable rate mortgages, which are based on the Canadian Prime Rate (currently at 2.25% set by the Bank of Canada) will remain the same until June 2010 as promised by the Bank of Canada. The Prime Rate will then jump to 3% as the economy continues to improve.

Variable Rate mortgage products will remain at Prime - 0.10% until the Fall of 2010. At that point, as the Prime Rate increases, lenders will begin offering Prime - 0.25% for a 5-year term mortgage.