Regulator launches disciplinary database

Due diligence is not the exclusive exercise of a lender.  Yes, you may feel like you went under a microscope to get a loan, but smart borrowers are equally inquisitive about where they should go to get a mortgage; and the inquisition just got a little easier.

As mortgage brokers continue to become the preferred choice of consumers seeking a “mortgage originator,” the mortgage broker’s regulatory record is now easily accessed online.  Developed by the Mortgage Brokers Regulators’ Council of Canada (MBRCC), the online database allows consumers to search broker and company names to view disciplinary actions; including license suspensions, administrative penalties, and cease and desist orders.  Good information to know when choosing a trusted advisor, and your mortgage broker is no exception.  As Cory Peters, MBRCC Chair says, “Mortgages are often the biggest financial commitment Canadians make.”  Enough said.  So who have you entrusted?

Furthermore, Peters points out that the online database will be a useful tool to brokerages and regulators, across Canada, assessing the suitability for potential hires and licensees respectfully.  Especially when candidates are moving from one province to another.  “Developing the database supports the MBRCC’s mandate to improve and promote harmonization of mortgage broker regulatory practices across Canada,” Peters said.

Too bad the same level of scrutiny is not available to consumers when investigating other origination alternatives (i.e. mobile bank representatives).  Perhaps another reason to feel good about your choice of originators ?

To access the online database, click here.

If I can help, let me know.

The New Rules

new-mortgage-rulesThe changes announced by the Government of Canada, Department of Finance, on October 3rd, go into effect today!  Here is what you need to know:

  • For now, different rules apply to “conventional” loans (less than or equal to 80% financing) vs. high-ratio loans (80% + financing).  On November 30th, the same new rules apply to both groups.
  • Effective today, insured high-ratio loans must qualify using the interest rate that is the greater of the contract interest rate or the Bank of Canada’s current conventional five-year fixed posted rate*.
  • Most lenders will honour any pre-approvals they committed on prior to today, up until they expire.
  • For some lenders, if a legally binding agreement of purchase and sale was signed prior to October 17, 2016, the old rules will apply.  The mortgage application will be qualified using the contract interest rate regardless of the application or closing date.
  • Homeowners with an existing insured mortgage or those renewing existing insured mortgages are not affected by the new rules.

  the current five-year posted rate is 4.64% as of October 17, 2016

If I can help, let me know.

More Consumer Protection

subburbsAcross Canada, regulators are ramping up their commitment to greater consumer protection. Last January I wrote about FICOM, the mortgage broker regulator, among others, in BC, and their intentions to update the legislation with respect to compensation disclosure.

See: Compensation Transparency

Yesterday, FICOM announced they would be going ahead with their plans to have mortgage brokers disclose the dollar amount of their compensation, even in cases where the mortgage broker is paid by the lending institution. Needless to say, the mortgage broker community had a lot to say about this change, and the subsequent uneven playing field among other mortgage origination channels (i.e. bank representatives, both in branch and mobile). Part of the problem is jurisdictional. FICOM does not regulate banks. That is the responsibility of the Federal Office of the Superintendent of Financial Institutions (OSFI). In an ideal world, all mortgage originators, across all channels, would be regulated by one regulatory body.

But perhaps that ideal, is not so elusive. Also making news yesterday, was the signing of a memorandum of understanding (MOU) between the Investment Industry Regulatory Organization of Canada (IIROC) and the Financial Services Commission of Ontario (FSCO) to share information about their respective licensees. IIROC regulates the securities industry, and FSCO regulates mortgage brokers, pension plans, insurance agents, loan and trust companies, among others.

Many “financial advisors”, including mortgage brokers, hold multiple licenses. The MOU follows a similar agreement between the IIROC and the Chambre de la sécurité financière that was signed back in November 2015. IIROC also has information-sharing arrangements with more than a dozen other Canadian and international regulators.

In fact, Ontario’s regulatory framework, in the financial services industry, was the subject of a government review last year which produced a number of proposals, including merging FSCO and the Deposit Insurance Corporation of Ontario (DICO) into a single regulatory agency. The new, larger regulatory body would be called the Financial Services Regulatory Authority (FSRA).

“The lines that once clearly delineated the various financial services industries are being blurred as the sector evolves and more individuals become active in multiple areas,” said Brian Mills, interim CEO and superintendent of FSCO. “Greater cooperation and coordination between regulators is becoming an increasingly important part of our work to protect consumers.”

Canada’s financial services industry has undergone rapid change in structure, technology, and indeed, consumer expectations. With that comes the necessary change in government oversight to protect the industry’s integrity. That’s good for everyone.

Stay tuned, there will be more to come.

Selling your house; for what it’s worth.

arms-lengthThe Appraisal Institute of Canada released a document encouraging Canadian homeowners to do their own due diligence and have their house appraised before putting it on the market.

You can read the entire document here: Homeowners encouraged to do their own due diligence when selling their home

If you have sold your home before, you understand the importance of getting the listed price right! A qualified, independent, accredited appraiser can help you do that. Both seller and prospective buyers will be more confident in the listed price, and it sets the table for an honest negotiation. It should also lead to a timely sale.

Another good reason to hire an appraiser has to do with the bank’s policy on “market value”. Whoever buys your home, assuming they will need a mortgage, has to satisfy the bank’s criteria for market value. Understand, banks lend money against a property’s market value. What is the bank’s criteria for establishing market value? Simply put, it’s the lessor of purchase price or appraised value.

In an arms-length purchase transaction, where the property was listed on the open market, determining market value can be an easier exercise. Typically, the appraised value will match the purchase price. However, as we have seen many times in markets like Toronto and Vancouver, buyers can pay well over the listed price. When that happens, there is a risk the appraised value will be less than the purchase price. This can potentially increase the buyer’s down payment necessary to obtain financing. For example, listed property for $450,000 sells for $480,000. Maximum financing from the bank will be 95% of appraised value, NOT, purchase price. The buyer will need to come up with the difference. The aforementioned risk is directly related to the amount paid over the listed price, assuming the property wasn’t listed below market value. It’s not exact science, but you get the idea.

Therefore, any effort to establishing the property’s market value in advance can be beneficial to both sellers, who want a timely sale with no surprises, and prospective buyers who can more readily determine their financing requirements.

Book promotion

After almost 20 years of working in the Canadian mortgage industry, I decided to write a book.  That was the easy part.  I was a little surprised to see how easily the words kept coming.  The bigger challenge was finding a publisher to take a chance on an unknown writer.  Fortunately, I found success with Insomniac Press, a small publishing house in London, Ontario, and my book was published in 2011.  I am forever grateful.

This website represents my part of the bargain to do what I can to promote book sales so that everyone involved can benefit from the experience.  From the long hours invested by yours truly, and my publisher, to the education and new confidence acquired by the consumer, ready to take on the formidable task of getting a mortgage.  Or the new mortgage professional entering the industry with a better understanding of what to do.

If this website, and my ongoing blog posts, tweak your interest to learn more about mortgage finance and the Canadian mortgage industry as a whole, I hope you will accept my offer and use the links on this site to purchase your own copy of my book.

Thanks for your support.

Blair Anderson

P.S.  Don’t forget to come back and share your review of the book.