Brokers support CMHC foreclosure policy

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CMHC’s request Realtors refrain from labelling properties as "in foreclosure" on MLS was, in fact, designed to protect the market from the kind of collapse the U.S. is still recovering from, suggest brokers supportive of the policy.

“If the CMHC disclosed all of their foreclosures to a client, they would get low-balled on all the offers,” says Bruce Flanagan, with Verico Premiere Mortgage Centre. “Why should they (the investors) take a loss on the property – and by extension, the taxpayers as well?”

CMHC, as the leading provider of mortgage loan insurance and mortgage-backed securities, effectively controls 75 per cent of the default insurance business. This year, its nationwide policy, or request, was challenged by some Quebec Realtors who feared they would be guilty of an ethical breach in keeping consumers in the dark as to whether properties were under power of sale.

Those concerns were brought to the Quebec Federation of Real Estate Boards, which in turn challenged the CMHC.

Ultimately, CMHC and the Quebec Federation resolved the conflict by no longer making the foreclosure disclosure mandatory, based on the seller’s instructions.

Still, many industry players, including brokers, argued the original CMHC policy provided the housing market more protection, especially if the economy hits a rough patch and defaults rise. Any appreciable rise in "foreclosure" listings on MLS might further cool sales and challenge buyer confidence, say proponents of the policy.

 

  • Paul Jackson on 2013-03-01 5:00:27 AM

    I work as a real estate broker and a mortgage broker. Not agent and not agent! Anyway, I understand that CMHC and even realtors don't want the fact that a property is in forclosure to translate to low ball offers. The impacts are obvious and we all understand them. However, CMHC have to realise the reality.
    1. When a property is listed under POS the bank is the seller and is shown as such on the realtors data sheet.
    2. Even if the realtor manages to keep the POS a secret - the banks name appears as the seller on any agreement of purchase and the game is up at that stage for sure.
    3. There's usually stickers all over the windows of the home either from the bank saying that it is POS or a management company stating that they are looking after the property.
    4. There's often two lock boxes, the realtors and the property managers - a dead give away!

    The point is - if you're trying to stop low ball offers then you have to make it appear that the property is a regular listing which is virtually impossible. Plus, the homes are often trashed!
    I think being listed on the MLS is the least of a forclosed homes problems.

  • Paul Jackson on 2013-03-01 5:12:31 AM

    Further: My comments above relate to regular bank first mortgages. If the seller is in fact a private lender taking the property back then his or her name would be on the listing in which case no one would know that this is a forclosure. I also don't know what name CMHC uses if they are selling the property. All I have ever seen as a realtor is the banks name being used as seller.

    Paul

  • @mortgagepro10 on 2013-03-01 11:57:15 AM

    Hi Paul,

    I've actually just recently worked on two separate files, one being sold by Genworth Financial and the other by Canada Mortgage & Housing Corp. The fact that properties are being sold "as-is where-is" is usually another sign that it's a foreclosed property.

  • JSydneyH on 2013-03-01 3:43:12 PM

    The reason the bank is listed as the seller is because it is the seller of the property. CMHC only gets involved - in the background - when the bank fails to cover its loss exposure through the sale of the property and makes a claim to CMHC. CMHC wants to drop the POS tag to minimize its claims exposure, and help the bank realize the maximum returns from the property.

    In the GTA, POS doesn't really make much of a difference to the eventual price as the demand is pretty steady.

  • David O'Gorman CPMB on 2013-03-01 11:22:11 PM

    I am concerned about the reporting on this issue. I think getting your information about how CMHC deals with real estate sales of POS/foreclosures from a mortgage broker has more than a couple of degrees of separation from reality.
    This is a disclosure issue & a potential issue of liability for real estate registrants.There are buyers out there who will not buy POS/foreclosures because they feel that "bad luck" runs with the property or they feel they are taking advantage of someone else's misery.
    In Ontario real estate registrants have the responsibility to disclose "material facts". The fact that a property is POS/foreclosure is material.
    If indeed this article is factual, the whole idea of a government agency wanting to hide information from the real estate buying public & wants the cooperation of organized real estate to aid in this deceit, just plain stinks.
    As Mr. Jackson pointed out, lenders or their realtors often have POS or management stickers/signs all over the listed property. By doing so are they attempting to get the best price for the property? If CMHC or the lender tries to sue the borrower for a deficiency balance after the sale, could the claim be reduced or nullified because these signs/stickers "advertised" the property was POS/Foreclosure?
    Hiding anything in a real estate transaction leads to litigation & lack of respect for the profession & the people in it....just sayin'.

  • Paolo Di Petta | dipettamortgage.com on 2013-03-02 7:42:34 AM

    Anyone that's saying "it doesn't matter whether the CMHC is hiding POS/Forclosures because demand is strong" is missing the real story here.

    For the past 10 or so years, the CMHC has been pretty lax about insuring mortgages because LTV's automatically drop while the market rapidly appreciates. The amount of "insurance" they actually needd to provide was pretty negligible considering that the property would often be worth more than it originally was insured for if the borrower to default.

    As we start to look into the longer term, that may no longer be the case. This is probably only the first in a series of moves for them to reduce potential losses on a projected increase of future defaults.

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