One industry player is calling on the mortgage insurers to make a list of red-flagged properties available to mortgage brokers and Realtors, after a deal fell through in the 11th hour.
“I think (a list of flagged properties should be made available to realtors and brokers) and the reason I say that is because if (a) condo is having a problem, then steps need to be taken to remedy that problem,” Joe Sammut of Mortgage Architects
Mortgage Gate told MortgageBrokerNews.ca. “I believe that if we don’t have a list available and we don’t make this public knowledge so the consumer knows what they are about to embark on, there are people out there who might try to railroad a client into buying a property that they might otherwise shouldn’t have.”
Such a list would have come in handy when Sammut, who was referred to a deal by Toronto Realtor, David Fleming, felt he had a deal in the books before finding out that no mortgage insurer would provide insurance for a particular property – The Printing Factory Lofts in Leslieville; despite more than one lender willing to lend for the purchase.
And the reason for the blacklisting, according to Fleming, is because of the condominium corporation took out a $2 million loan to fund legal fees and repairs – without first consulting with condo owners.
“The Corporation took out a $2 Million loan from Laurentian Bank which was meant to top the Reserve Fund and help pay for various repairs, many of which the Corporation believes result from original construction deficiencies,” states a letter shared by Fleming on his blog that was circulated to residents of the building in November 2012 by the corporation. “As a result, the Board of directors considers that the Reserve Fund is now adequate, and has decided not to follow the Reserve Fund Study circulated to all owners in 2011.”
Because of the financial instability of the property, no client can fund a unit purchase with a high-ratio mortgage. And it came as a shock to both Sammut and Fleming, who are usually aware of any black-listed properties.
“In this particular case it was a beautiful property, great location and the applicant was absolutely stellar, so we didn’t think that there would be any issue,” Sammut said. “I had already pre-approved the client, didn’t believe there would be an issue with this particular property because any of the properties that David and I were discussing didn’t come up on the radar as (a property) that CMHC or Genworth
would not insure.
“In 21 years of doing mortgages this one blindsided us; we didn’t have any reason to suspect there was a problem with the building and lo and behold, boom, we had it,” he said.