Forum

Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Notify me of new replies via email
Mortgage Broker News | 13 Apr 2010, 12:00 AM Agree 0
Canada could be facing a mortgage nightmare in the next few years with an estimated 30,000 subprime loans - now dubbed "orphan loans" - coming up for renewal in the next few years, according to a report in the Financial Post.
  • anne perala | 14 Apr 2010, 05:35 AM Agree 0
    Give me a break, - but no bailout, please!!!
    There is such a thing as SELLING your property if you cannot renew or refinance your mortgage that is up for renewal, folks. Anyone heard of realtors and the housing market being short of houses...?
  • David R Young, AMP | 14 Apr 2010, 05:45 AM Agree 0
    I think there is ample time for most of the home owners to establish credit enough to qualify for a A or alt A mortgage. If the reason was because of bad credit at the time of application then it is time they wake up and fix their credit issues.

    If they are self employed they need to start declaring more income so they can get a proper mortgage with a market rate, need to wonder if they ever looked at the interest rate difference, maybe paying their fair share of tax is worth it.

    The last option is they can sell the home and be prepared to deal with short falls.
  • karim lalji - Intracap Financial Inc | 14 Apr 2010, 06:00 AM Agree 0
    We are sub prime lenders and have no losses and do not expect any losses. The simple formula? Don't lend your money up to 95% ltv and expect anyone to pay you back. There are numerous brokers who will lend money out at high ltvs and at time of renewal its the home owner that suffers.
  • Liam Cragg | 14 Apr 2010, 06:07 AM Agree 0
    Anne, if these people could sell, they would, but we are talking about high loan to value mortgages (95% to 100% financing - or higher). If they sold, the realtors might not get paid in full, the lawyers might not get paid in full and the existing lender might have a shortfall. These borrowers have been making their payments on time for a number of years, but still do not qualify for a traditional insured mortgage. It is an ugly situation.

    Perhaps an agreement whereby the existing lender gets 90% to 95% of the existing mortgage balance and the difference goes into an insurance fund with a government guarantee might be a solution (but I will leave the details up to others).
  • jean paul | 14 Apr 2010, 06:09 AM Agree 0
    canadian governement has to step in to protect consumers and the mortgage industry. I understand that "Selling" is the last option for most of the clients however canada may face the same issue as US market if people can not renew their commitments therefore they will be forced to sell by all means even dropping the price of houses which will crash the market; this is serious concern ahead; the key industry players must be prepared to face this reality including the canadian government.
  • M | 14 Apr 2010, 06:13 AM Agree 0
    Some of these lenders such as Xceed and Resmor are also doing prime loans. I believe that Xceed would probably renew the mortgage if the clients have been in good standing throughout the term. Don't know about Wells or Accredited.
  • David D | 14 Apr 2010, 06:23 AM Agree 0
    I agree with Jean Paul. If these consumers have the opportunity to sell then they will...but keep in mind not every market in Canada has had big real estate market increases - if any at all and once you factor in real estate commissions, legal fees and disbursements, taxes (now a little higher with HST) and lenders premiums that were added to the original mortgage you won't be left with enough equity to pay every one out. Once the media really wraps their minds around this issue that home owners are being forced from homes that they've paid every mortgage payment on we are in for dip in real estate values.
  • Finn Larsen | 14 Apr 2010, 06:27 AM Agree 0
    We have been living in an economic enviroment that wants folks to live on credit , It is not the governmenst resposibility on folks greed and being unresponsible with financial handling. I have given advive not to do what they did, turned folks away , explaained all the pitfalls , an dyes they went to another broker got themselves into this situation. . Yes folks bankruptcy may be the only solution. These same folks live paycheque to paycheque and should not be in this financail situation. Why should the citizens bailout irresponsible citizens?
    The best thing to help everyone is to get after te credit card companies with their excess rates and fees for folks with great credit.
  • anne perala | 14 Apr 2010, 07:19 AM Agree 0
    I have already re-financed a few of these loans, and in every case there was a huge premium added on to the mortgage at the time of borrowing. This bonus or premium did not go to a third party for insurance as is with cmhc- or genworth insured loans, but it went to the lender for the risk they were taking. So the lenders were already compensated for the possible future loss and I really do not feel that they should be conpensated again for their own risk taking by bailouts! The clients who decided to use those lenders were the ones who paid and are paying again, and hopefully will learn something from this exercise. I did not put them with those lenders but I am trying to get them cmhc or genworth financing this year and so far so good in Toronto area. And in every case there is a shortfall that so far has been filled with cash or withdrawal from client's rrsp, personal loan, etc. I understand that this situation is getting worse with the latest government action to tighten the lending, so it will get ugly but I still feel that the lenders should not be bailed out but should be encouraged to renew their loans or take their losses. Perhaps those lenders should try selling their loans to cmhc with the proper discounting using the bonuses they collected...
  • Chris | 14 Apr 2010, 07:46 AM Agree 0
    How about calling TD Financing Services....there are places for these clients...up to 90% LTV and we review credit not beacon!!!
  • Karen | 14 Apr 2010, 07:50 AM Agree 0
    I believe at some point that these clients have to take responsibility for their own actions. I see these clients regularly and when they have exhausted their equity from numerous refinances after being guided through the first one and the second one, then damaging their credit and then ended up with an Accredited or Exceed. Maybe they need to start being more responsible. There are still lenders that will take on RESPONSIBLE clients even credit challenged, RESPONSIBLE clients. They will not get the discounted rates that they seem to demand and expect. But they will be given the opportunity just like they were before, to get their affairs in order and behave more responsibly. Why should it be anyone else's problem? Get your credit in order, get a part time job, stop spending more then you make or... OMG ... sell your house and downsize! It is that simple folks... No drama...
  • Chris | 14 Apr 2010, 08:12 AM Agree 0
    Again, why not pick up the phone and see if these clients have a home with TD Financing Services....I find it very funny how each of the posters automatically feel the client should sell...the foreclosure rate on mortgages is like .05%...Canadians PAY their Mortgages regardless of what we are led to believe....

    Yes, we are not going to be able to help everyone...but people..pick up the phone and call us...don't fall into the trap of saying NO...

  • Chris | 14 Apr 2010, 08:27 AM Agree 0
    Another thing to remember...you are calling these people subrime...for the most part Canadian non-prime lenders made sure they did due diligence for serviceability however credit history (even though Beacon may have been below 600) ...people could pay...don't mix this up with the US subprime and NINJA loans, teaser rates etc....Canadian non-prime (subprime) lenders did their due diligence unfortunately, the media have put everyone in the same boat...in most cases they are not....TELL ME>>>WHAT IS THE DIFFERENCE IN DOING A LOAN AT 95% WITH DOWNPAYMENT COMING From CASHBACK???..same as 100% however it is an A deal...give me a break....

  • jean paul | 14 Apr 2010, 08:28 AM Agree 0
    With the most recent market regulations, we've seen clients struggling to keep their mortgage in good standing, despite the low inreste rate in the market, canadians are not buying houses, it is difficult to hold consumers RESPONSIBLE in such difficult time, subprime lenders will not hesitate to work away from their responsibility without being held accountable (i.e ABODE mortgage corporation), I do not support bailout however if the Government is taking time to regulate the industry, it should take time to protect canadian consumers!
  • GM | 14 Apr 2010, 09:12 AM Agree 0
    Let's get a grip people, Government Bailout, this is such a media hype, estimates are 30,000 mortgages nationally!!!!! That percentage is miniscule, to compare that to the US meltdown is riduculous.
  • GM | 14 Apr 2010, 09:15 AM Agree 0
    Further, certainly there will be people who are upside down on the values of their homes, that happens when greed and speculators jam the market, such as we have seen. New rules only allow 90% refinances.
  • GM | 14 Apr 2010, 09:23 AM Agree 0
    sorry for he numerous posts, keep hitting enter.When mortgages are not renewable by existing lenders, there will be fallout, and some people will have to walk away, but as they were not insured at least the insurer's will not be coming after them personally, forcing them into the Bankruptcy route. Final point, Vancouver and Toronto obviously do not know what a "bubble" is. People you are there and please do not be crying when it bursts!!! Cause you do not even have to look back historically, it just happened mere months ago....yes, greed is alive and well, and never learns.
  • Chris | 14 Apr 2010, 09:31 AM Agree 0
    However there are clients who can pay their mortgages and their debt who underserved by CMHC etc.

    It is so nice that Jim Flaherty wants to stop Canadians from purchasing their deream due to servicing of that debt...maybe Jim and the rest of the provinces and their finance ministers should take a hard look at the taxes that we as Canadians pay...our mortgage payments are fixed in most part however income and property traxes are not....these govenerments are out of contraol and the ones who have to pay for their misuse of our funds are us, the taxpayer....

    You must remember CMHC was insureing 100% puchases..were these bad...NO, not until the government decided they were bad.......so let's take a step back

    Again...Canadians pay their mortgages...the market conditions changed that's it...

  • Pam - Industry Partner | 14 Apr 2010, 10:51 AM Agree 0
    I find it a bit disappointing that broker news is putting forth comments such as 'nightmare'.These are inciteful words and I am so weary of fear and panic hitting the consumer.It seems as a broker these days we are constantly having to encourage our clients and general public that our financial institutions are quite healthy in our county. It would be nice to have the media support as well in that area instead of doom and gloom and panic. I agree that this sub prime percentage of loans in Canada is so small compared to U.S. and.. we have done a much better job of it here. I believe that the majority of industry partners have done at least a fair job in making sure these sub prime clients had some kind of plan to refinance into a better mortgage within 3 to 5 yrs. It is encouraging that TDFS has come into our industry to provide needed services (Thank you for that!) and I believe there will be more of this type of lender coming back to the table in the not so distant future. Of all of the 30,000 sub prime loans, I wonder how many of them are at the 95% LTVR to begin with, likely a much smaller percentage of the 30,000 - so.... Please people and MEDIA - quit spinning panic -
  • Tim | 14 Apr 2010, 11:41 AM Agree 0
    Agree with Karen above but am curious as what exact plan brokers actually have to reach out to the consumers they placed with these dozen or so lenders to assist them? large part of the responsibility has to also lay with the consumer to be more aware as well but where do we get such advice and assistance if not from the broker?
  • FJ | 14 Apr 2010, 04:30 PM Agree 0
    When the subprime mortgage hit, I advised many people to immediately consider putting a substantial portion of their portfolio into subprime mortgages. Most didn't listen (albeit the ones that did made double, occasionally triple digit returns). But the ones I didn't need to suggest it to - the hedge guys running PE in the U.S. - did exactly that anyways. They didn't need me to tell them they were staring trillions of dollars of easy profits in the face.

    Basically the game was played like this: PE's went in after panic round one, took over massive amounts of firesaled structured MBS and CMBS products, as well as CMOs and some other funky permutations of such products. Many deals came as a package (ie. "structured") with CDOs. CDO's are structured finance products that are really just insurance policies.

    Now, AIG had long ago underwritten CDO risk both directly and also by insuring entire investment bank portfolios that were full of these things (Lehman, Bear.. both good examples). But as things would have it, things got so rough eventually (and nobody predicted this part) that many A-credit consumers saw that they just had to declare bankruptcy in order to turn around and buy the same house across the street for a third of the price. That was huge.

    So panic round number two took hold. And this time, PE needed out, fast. Cashing out to the tune of, well, nobody actually knows because PE is unregulated, didn't pose a big problem despite what we might think. PE cashed out - likely to the tune of trillions - fairly painlessly. Don't forget, they had those trusty CDO's.

    The CDO's were almost entirely issued by issuers, who in turn had issuers that were ultimately backed by AIG. And courtesy of the U.S. government, AIG was propped up to the tune of $181 billion in first round TARP funding. Hedge guys were doing high fives, making trillions, while repo co's were ripping families out of their homes and throwing their furniture on the the sidewalk. Net effect: PE paid 30 to 70 cents on the dollar, and collected $1.00 on a dollar in a very short time.

    Same thing, at least fundamentally, is going to happen up here, just in a way that won't be as easily recognizable and as transparently analogous. There are different players up here, different news outlets beholden to different interests and, of course, different etiquette in our national capital about the value of dissent as a career-advancing move.

    All in all, it's hard not to say (under your breath, of course) 'God Bless America'. They've shown us the way on subprime already. Let's take a lesson out of their history book. Let the free markets be free, and when the threat of a bank failure or two looms, lean on the Cdn. government to issue Canadianized TARP.
  • John | 14 Apr 2010, 11:17 PM Agree 0
    I know this is silly, I have sent a letter to the finance minister asking the same question.
  • John | 14 Apr 2010, 11:20 PM Agree 0
    I know this is silly, I have sent a letter to the finance minister asking the same question. Why should I finance a bailout of a lender who made a reckless loan to a person with bad credit in the first place, and who could not, in 3 - 5 years, reestablish their credit so they could obtain a high ratio loan, at perhaps 1/2 the interest rate they are paying on the current loan. I highly object to one penny of my taxes going to bail out people who are not responsible enough to own a house in the first place. God, I have to be responsible to keep my house and pay my bills.
  • Don | 15 Apr 2010, 12:10 AM Agree 0
    Did anyone at Broker News.ca reads read this editorial before sending it to press. You are attempting to create a "tempest in a tea pot"?It is disappointing - this editorial was presented for HYPE value only.
  • Joe Ornato | 15 Apr 2010, 12:43 AM Agree 0
    I find it funny that media blames subprime for this! Don't get me wrong; there are customers placed into products about which they know nothing because their broker never explained things properly. However, it is the fact that some of these subprime loans are not being renewed because those very same lenders have changed their policies, not because clients are defaulting!
  • Joe Ornato | 15 Apr 2010, 12:45 AM Agree 0
    Take CMHC and Genworth's 40 year, no money down mortgages of the past few years. Those clients were "A" quality mortgages, but they won't be easily renewed because both CMHC and Genworth changed the policy!
  • Rick | 15 Apr 2010, 04:06 AM Agree 0
    Speaking as someone with Wells Fargo, I can tell you that there is a cause for concern here. Mortgages made at 104% of the property value are, in some parts of Canada, well below that. That takes away the customers ability to sell and get out of the mortgage with no residual debts.
    I don't however accept the reference to people with bad credit getting unqualified mortgages. Sure that has happend (and is still happening) but the vast majority of "sub-prime" customers were borderline A clientelle. The GE Money's and the Wells Fargo's of the Canadian mortgage market did not deal with chronic credit problems, but rather with situations where there was a unique problem and that problem was past or if, by providing financing, the lender helped to resolve the issue. In other words, they dealt with folks who had "hit the wall but had started to bounce back".
    I find it very interesting that the largest "sub-prime" lender in Canada is a lender who does deal with the chronic non payers or customers who have experienced regular and sometimes serious mortgage repayment problems. The brokers who talk about the mess the customer has gotten themselvs in to are referring to those types of customer and not the type of customer who had a temporary problem brought about by health, marriage or employment situations. There's a huge world of difference between those two.
  • FJ | 15 Apr 2010, 05:09 AM Agree 0
    Cleveland Ohio is a place - or at least was 18 months ago - where anyone seeking to understand the REAL effects of suprime just had to tour. It was considered ground zero of the subprime crisis in the U.S. Many mortgage brokers from the Clevland area are in jail today - and were already going there back then.

    But this isn't about mortgage brokers who may have embellished. I like mortgage brokers - honest ones.

    Cleveland was a place that would've changed virtually anyone caught up in the RE market. The "huge world of difference" that Rick refers to above, in terms of covenants, was not a pretty small world in Cleveland.

    Last time I checked, doesn't it also violate a fundamental economic principle - the allocation of scarce resources - to use $2,400 of your earnings every month and be the only one on your block paying such a high mortgage, especially given you can buy the house across the street with no money down virtually, have a mortgage a third of the size, and in a few years you'll not only own your house but have your credit re-established.

    We learn - at least here in Canada - that the 5 c's of credit include "character", etc. etc. Well, that sure is a nice thought. But the maintenance of "character" in terms of a high credit score certainly doesn't prevent most people who previously thought of themsleves as ethical, upstanding, good charactered souls, from tripling their net worth virtually overnight when the opportunity is there. Don't believe it? Well, Cleveland is your university. If you see what happened there - the rawest of human nature coming to the surface - I think you'll agree that when push comes to shove, that'll happen anywhere. FICO? What's FICO in that economy and with that type of opportunity? Truth is, very few care about FICO when they're paying $2,500 for 30 years instead of $800 for 10 years, and end up in the same spot.

    The biggest subprime lender in Canada is a very, very smart company. Take a look at their earnings, read their financial statements and the notes in those statements. More importantly, take a look at the fact that they place next to no importance on FICO, other than for pricing. Human nature being what it is, a convenant is worthless paper not only in the subprime market, but also in an A market when things go south.
  • AC | 15 Apr 2010, 05:22 AM Agree 0
    Who is considered the biggest subprime lender in Canada anyway?
  • Wayne | 15 Apr 2010, 05:41 AM Agree 0
    We as a Brokerage industry bought into this hype from the Sub Prime lenders and went out and sold it because of the high earnings. Did we do our clients a favour or were we selfserving because of the dollar and the ease of putting these hard money loans together?
    Yes, I think our government needs to step in and do something. Yes, as an industry we owe these clients some support rather than say sorry but their is nothing I can do.
  • Stella | 22 Apr 2010, 12:19 AM Agree 0
    As a past underwriter for two sub prime Alt A companies I agree with Wayne's comments and there were valid points in this article that some of us our missing. What about the client's who have paid their mortgages faithfully? Are we all that cavalier to say "Sorry thanks for playing our game, allowing us to collect big fees but now the rules have all changed and you are on your own." Do they share some of the blame, yes but let's face it, they are not the professionals in this industry we are, what are the brokers AND lenders doing to be proactive to help these customers that are maturing in 2011 and 2012? Should they not receive a decent amount of warning from the lender that they will not be offering a renewal, to give these clients the chance of reaching out for help. I would think there is an opportunity for brokers to develop a plan to help some of these past clients get positioned so they have a chance at qualifying for insured mortgages where possible. Reminiscing about the past I don't recall anyone complaining when they were paid on these deals only when we couldn't get the deal done.





  • Bobby | 11 May 2010, 04:41 AM Agree 0
    I am but one of many mortgage "orphans." In my case, I bought a house in 2007 for $156,000 with Wells Fargo. No money down, 40 yr am. In retrospect, one of the most foolish decisions we made.

    I moved in 2008 and rented my original home out b/c there was just not enough equity to sell it. Flash forward to 2010, there's still a limited amount of equity, and Wells Fargo is renewing, sure, but at 13.9%. Needless to say I can't afford the increase.

    Coupled with the tighter mortgage rules governing rental properties I couldn't find anyone to finance the place. Now, the term is up and it's on the market. Will it sell for high enough? My fingers are crossed.

    While I take some responsibility, I can't help but feel I'm getting screwed, too. I mean three years ago, it was all good. Then, the rules of the game get changed and I lose a house.
  • Steve B | 28 May 2010, 10:57 PM Agree 0
    I am a home owner who has a mortgage with Xceed. I ve been told that after being with them for 7years and never missing a payment that my mortgage will not be renewed and that on July 28/10 they will take my home. Yes I am one of those individuals that does not fall into the regular bank system. I find Xceed to be heartless to just drop A1 repayment clients and cause them to lose their homes and the money they have invested in them. The only positive thing to come out of this is that the media where I live say that this is a great story to run.
  • mortgage needs | 29 May 2010, 12:10 PM Agree 0
    Well, Xceed has had to tighten its lending i.e. re-structure itself.
    There are still lots of lenders out there who will be happy to take your business, so you needn't worry. lmrobertson@dominionlending.ca
  • Irene | 13 Jun 2010, 12:35 PM Agree 0
    As a real estate broker, I have a client who is in his early 70's. He and his wife never should have qualified five years ago for a mortgage. My clients in question have NEVER defaulted in their payments and have loved their house and called it home for 11 years. Its beyond comprehension how these American mortgage giants can sneak into our country and devalue our Canadian people and pretty much get away with it. They have been to every bank, and I have exhausted all my resources in my desperate attempt to find refinancing for them. If anyone knows of a class action suit, or can offer some other avenue please contact us thomas@castle-properties.ca Their clock is ticking.
  • mortgage needs | 15 Jun 2010, 04:03 AM Agree 0
    Dear Irene, There are imperfections in the lending market, as much as there are in the realty market, everywhere and/or from time to time. I have replied to Thomas Castle this morning - that it would be hard to put up any case of alleged attempt to mislead for that as much as there are lenders out there willing to lend, there are borrowers out there willing to borrow; and that lenders need to re-adjust lending criteria as they see fit, and in the case of exuberance in the market need to tighten lending to safeguard the security of their portfolio.
    As to American mortgage giants devaluing Canadians, I would beg to differ. I have much respect for America and the robustness of the free-enterprise economic model, even as it is not perfect. Americans themselves must not be having an easy time now. A possible solution to their situation is to temporarily extend amortization period to 100 years ( as the Japanese did when their realty market was overblown such that they have inter-generational mortgages ) so as to lower payments for a softer lending; and pulling that back to the regular 25 - 40 years on some target housing indices such as their S&P/Karl Case-Robert Shiller House Price Index over the next 5-7 years ( so that they don't actually end up with inter-generational mortgages because that will not sit well in North America and is not necessary if we do a gradual pull-back ).
    Certainly give me more details so I can have a look at your client's situation, with no obligations. Have a good day.
  • ronjv | 27 Mar 2011, 06:05 PM Agree 0
    I just read Mr Tiger's Blood has lost one of his Adult Star Girlfriends, Rachel Oberlin aka Bree Olson. Even though he is acting all freaky and shit I think she is a loser for leaving.. he is still loaded and either way a boost for her carrer. I guess he will easily replacing her as XXX stars seem to beg for him. I mean come on, if she was with him this long his his Epic Tiger Blood obviously didn't bother her.

    At least for him and us there are still a lot of places to get our slutty chick fix over the net!
  • SymnImavionia | 03 Apr 2011, 01:37 PM Agree 0
    thanks
  • pamdn | 08 Apr 2011, 07:26 AM Agree 0
    A question to you all. Guys, do you think you have to to go all out and spend thousands on an engagement ring to please your girl?

    Women, does the amount spent on the ring actually increase how much love you feel for your man?

    I dont have a gigantic budget but the ring I brought home for my girlfriend the other day she said was to small so that sucked and now I don't know what to do. So, what's your felling about this?
Post a reply