29 Mar

BMO ramping up its broker channel division with new network partnerships

Latest News

Posted by: Dean Kimoto

Since its official launch in late January in Ontario and Atlantic Canada, BMO’s BrokerEdge division has been making waves and slowly growing its presence in Canada’s mortgage broker channel.

The bank kicked off its return to the broker channel—following a 16-year hiatus—in a “small and very deliberate” way, Justin Scully, Head of BMO BrokerEdge, told CMT in a recent interview.

That involved working with a small group of brokers from DLCG (Dominion Lending Centres Mortgage Group) and M3 Group during its soft launch in January before expanding to a select group of brokers from TMG the Mortgage Group in early March.

“We have been in a controlled state with a very small group of select brokers to ensure that all the functionality is working as intended and that we can deliver on providing an excellent broker and customer experience,” said Paula Oliveira, BMO’s Regional Vice President, Ontario and Atlantic Canada. “That’s our main priority right now.”

Scully added that despite all of the team’s preparations in the lead-up to the launch, “we’ve learned a few things and we feel even better about coming back into the channel.”

“Basically we’ve been able to test the different intake points to make sure things worked with each network, each sub-network, each POS [Point of Sale], different deal types, and it’s all gone according to plan,” he added.

And so far, feedback from the bank’s broker partners has been positive.

Scully confirmed that BMO expects to be operating in the broker channel nationwide by fiscal 2026, with a West Coast roll-out up next.

Working to expand its product offerings

BMO has also confirmed that it is actively working to introduce more of its lending products and programs to the broker channel.

For now at least, access to certain specialty lending programs are only available through BMO’s proprietary channel. This includes the bank’s Canadian Defence Community Banking program, which caters to members of Canada’s armed forces, as well as BMO’s Homeowner ReadiLine, the bank’s revolving home equity line of credit (HELOC).

“We don’t have our HELOC product yet, but we will,” Scully confirmed, adding it should be available by the end of the year or early 2025. “I would say the risk appetite in both channels is the same. We do not have a different appetite by channel.”

Oliveira noted that broker clients do have access to some of the bank’s other popular programs, including its short-term rental financing program, which caters to services like Airbnb and is unique in the A-lending space.

Other programs include new construction financing, which uses the current appraised value of the property to determine the loan-to-value (LTV), and a program for high-net-worth clients that allows them to use liquid assets as an alternate source of down payment up to a maximum LTV of 80%.

“So products like this will give us the leverage to be very respected in the broker space,” Oliveira said.

In addition to these product offerings, BMO has also been promoting the benefits of its team of Welcome Advisors, who will connect with clients in the post-approval and pre-funding phase and work with them again post-funding.

“It’s about really understanding what the client needs and how can we help ensure they are in a better financial position after going through such a large purchase,” Oliveira said.

“The design decisions we’ve made around the welcome advisor team and the way we can help customers with all their other financial needs, and the way we envision that ultimately interfacing as a value add to brokers, has been really well received,” Scully added.

A focus on customer acquisition

Since it first publicly announced its return to the broker channel last summer, BMO has been open about its goal of building holistic relationships with customers rather than merely securing mortgage deals.

Interestingly, Scotiabank has recently embarked on a similar path, reporting that in the first quarter, 70% of its new mortgage deals involved clients who had multiple financial products with the bank. This move signals a broader industry trend of banks wanting to deepen their relationships with clients across various financial products and services beyond the traditional mortgage offering.

“This is about customer acquisition, not just mortgage acquisition for BMO,” Scully said. “And so, we’re looking for brokers who want to be with us on our journey to franchise customers, to take a mortgage customer and have a real, meaningful conversation about how we can help them across their financial needs.”

Scully acknowledges that it’s not a vision that will necessarily be shared by all brokers. “If our broker doesn’t support that and doesn’t understand that’s the most critical element for BMO, it’s okay,” he said. “So, there will be brokers for whom BMO BrokerEdge is not a fit, and we’re good with that.”

The brokers BMO wants to partner with

Once BMO BrokerEdge is fully expanded across the country, Scully said the bank will continue to be selective about the brokers it chooses to work with to maintain a focus on quality and BMO’s business objectives within the channel.

“We’re really transparent about what matters to us. We we want brokers that run a really clean business, with a propensity to do a lot of A-, bank-type business,” he said.

“We do know that in the broker channel there tends to be a little bit more focus on first-time homebuyers who tend to be a little bit more in default insured business,” he added. “And so, that’s certainly part of the approach and we intend to be very competitive in those spaces.”

Q&As

Both Oliviera and Scully addressed a variety of other topics during the interview, with some of the key highlights below.

  • On the bank’s commitment to offering same-day pricing responses to brokers:

“Definitely one of our commitments to our customers and to the brokers is to be responsive and to have everything aligned for them in order to provide an answer to their clients,” said Oliveira. “I’m not that in the beginning everything is going to be perfect, because we are going through a transition, but that’s our objective.”

  • On the reputation BMO is trying to build:

“We’re being really transparent with the brokers upfront. We’re going to do a lot of training on our appetite. What types of deals we like, what types we were less favourable, Because, if you’re going to meet a broker a year from now and you ask them about BMO, I want them to say we’re really efficient, we’re fast to yes, and we’re really reliable. And if they said those things, then I’d be thrilled.”

  • On the bank’s plans to continue offering fixed-payment variable-rate mortgages in light of concerns from OSFI:

“As we evolve, we’ll evolve the same across channels. When we did a fixed-payment variable rate product we did it because, in a rising rate environment, it gives customers time and flexibility to manage payments, and that’s been proven right,” said Scully. “Customers can take voluntary actions, whether they make a lump sum payment or they increase their payment, and many are doing so prior to renewals so that they minimize the payment increase. And then in a declining rate environment, the benefit would be that they’ll pay off their mortgage sooner.”

 

This article was written for Canadian Mortgage Trends by:

Steve Huebl
Steve Huebl is a graduate of Ryerson University’s School of Journalism and has been with Canadian Mortgage Trends and reporting on the mortgage industry since 2009. His past work experience includes The Toronto Star, The Calgary Herald, the Sarnia Observer and Canadian Economic Press. Born and raised in Toronto, he now calls Montreal home.
27 Mar

Fairness for every generation

Latest News

Posted by: Dean Kimoto

Vancouver, British Columbia

Posted on: https://www.pm.gc.ca/en/news/news-releases/2024/03/27/fairness-every-generation

 

Everyone deserves to succeed. But today, for too many younger Canadians, doing as well as your parents or better – doesn’t seem possible. The middle-class dream feels out of reach. Your hard work isn’t paying off like it did for previous generations. Your paycheque doesn’t go as far as costs go up, and saving enough to go after your dreams seems harder and harder. It doesn’t have to be this way. Everyone deserves a fair shot at success.

One of the biggest pressures on young people right now is housing. This is particularly true for renters – where it feels like the deck is stacked against them. They are facing skyrocketing rents, renovictions, unfair competition, and a lack of housing options. While we’ve taken bold action to build more homes, faster, improve access to housing, and make homes more affordable, we know there is more to be done.

The Prime Minister, Justin Trudeau, today announced measures from the upcoming Budget 2024 to make the playing field fairer for renters and make it easier for them to become homeowners.

These measures include:

  • Launching a new $15 million Tenant Protection Fund. This would provide funding to legal aid and tenants’ rights advocacy organizations to better protect tenants against unfairly rising rent payments, renovictions, or bad landlords.
  • Creating a new Canadian Renters’ Bill of Rights, developed and implemented in partnership with provinces and territories. This would require landlords to disclose a clear history of apartment pricing so renters can bargain fairly. We will also crack down on renovictions, create a nationwide standard lease agreement, and give renters more agency.
  • Making sure renters get credit for on-time rent payments. Renters deserve credit for the money they put toward rent over the years, especially when it comes time to apply for a mortgage for their first home. We’re going to amend the Canadian Mortgage Charter and call on landlords, banks, credit bureaus, and fintech companies to make sure that rental history is taken into account in your credit score.

This is about protecting renters. But this is also about generational fairness – making sure Millennials and Gen Z, who are most likely to rent, get a level playing field in the rental market. This is just one of the things that we are going to be doing in this budget to build an economy that is fair for every generation. Alongside these measures, we’re building more homes faster, making life more affordable, and creating good jobs, to make sure every generation can get ahead. We will relentlessly fight for Canadians – taking concrete action to strengthen the middle class and make life better for everyone.

Quotes

“It’s too hard to find an affordable place to rent, especially for younger Canadians. That’s why in Budget 2024, we’re taking action to protect renters, make the rental market fairer, and open new pathways for renters to become homeowners. Let’s make sure renters count.”

The Rt. Hon. Justin Trudeau, Prime Minister of Canada

“Renters are facing rising rents across the country, and they need support today. Budget 2024 will take action to deliver generational fairness, help renters – who are increasingly younger Canadians – become homeowners, and ensure they aren’t alone when they have to defend their right to a place to call home. Renters deserve credit for the money they put toward rent over the years. We’re helping them get credit for rental payments so they can qualify for a mortgage, or even a lower rate, sooner and unlock the door to their first home.”

The Hon. Chrystia Freeland, Deputy Prime Minister and Minister of Finance

Quick Facts

  • The Government of Canada’s Budget 2024 will be tabled in the House of Commons by the Deputy Prime Minister and Minister of Finance on Tuesday, April 16, 2024.
  • The measures outlined above build on the progress we have already made to help renters become homeowners, address the unique challenges they face, and build more rental housing across Canada, including:
    • Launching the Tax-Free First Home Savings Account, which is already helping over 500,000 Canadians save faster for their first downpayment.
    • Removing the Goods and Services Tax (GST) from new rental housing to incentivize the construction of more apartment buildings, student housing, and seniors’ residences built for long-term rental accommodation.
    • Unlocking $20 billion in new financing to support up to 30,000 more rental apartments per year by increasing the annual limit for Canada Mortgage Bonds from $40 billion to up to $60 billion.
    • Helping low-income Canadians with the cost of housing by delivering direct rent support through the Canada Housing Benefit, an initiative jointly funded and co-developed with provinces and territories. The federal government recently announced a $99 million top-up to this benefit to make rent more affordable for Canadians. By 2027-28, the Canada Housing Benefit is expected to have helped over 300,000 low-income households with the cost of rent.
  • Canada’s economic plan is to build more homes faster and to make housing more affordable. This plan also includes:
    • The Apartment Construction Loan Program, a $40+ billion initiative that boosts the construction of new rental homes by providing low-cost financing to homebuilders. Since 2017, the Apartment Construction Loan Program has committed over $17 billion in loans to support the creation of more than 48,000 new rental homes. It is on track to build 101,000 new rental homes across Canada by 2031-32.
    • The Affordable Housing Fund, a $14+ billion initiative that supports the creation of new market and below-market rental housing and the repair and renewal of existing housing. It is designed to attract partnerships and investments to develop projects that meet a broad spectrum of housing needs, from shelters to affordable homeownership. As of December 31, 2023, the Fund has committed $8+ billion to repair or renew over 150,000 homes and support the construction of more than 32,000 new homes.
    • The Housing Accelerator Fund, a $4 billion initiative that encourages municipalities to incentivize building by making transformative changes, such as removing prohibitive zoning barriers. To date, the federal government has signed 179 Housing Accelerator Fund agreements which, combined, will fast-track an estimated total of over 750,000 housing units across the country over the next decade.
    • The Rapid Housing Initiative, a $4 billion fund that is fast-tracking the construction of 15,500 new affordable homes for people experiencing homelessness or in severe housing need by 2026. The Rapid Housing Initiative also supports the acquisition of existing buildings for the purpose of rehabilitation or conversion to permanent affordable housing units, focusing on the housing needs of the most vulnerable, including people experiencing or at risk of homelessness, women fleeing domestic violence, seniors, Indigenous Peoples, and persons with disabilities.
  • Progress on these and other programs and initiatives under Canada’s National Housing Strategy are updated quarterly at www.placetocallhome.ca. The Housing Funding Initiatives Map shows affordable housing projects that have been developed.
  • Since 2015, the federal government has helped almost two million Canadians find a place to call home.
25 Mar

How could the US’s seismic real estate settlement impact Canada?

General

Posted by: Dean Kimoto

Multimillion-dollar agreement could have ripple effects north of the border

A recent settlement announced by a trade body in the US could have ripple effects on Canada’s real estate sector and allow home sellers to make more on their deals, according to a CBC News report.

 

The National Association of Realtors (NAR) has agreed to settle a lawsuit filed by American home sellers claiming that the group artificially inflated commissions.

The NAR used to require listing brokers to offer a commission to the buyer’s agent upfront. The commission was around 6% of the home’s sale price, to be divided between both the seller’s and the buyer’s agents.

US home sellers said in their lawsuit that this forced them to enter into commission-sharing agreements to market their properties on multiple listing services (MLS) without missing out on potential buyers.

As part of the settlement, the NAR agreed to pay US$418 million and abolish the practice.

Tom Davidoff, a University of British Columbia associate professor specializing in real estate economics, said the NAR settlement strengthens the possibility that the same thing could happen in Canada, especially as a similar suit has made its way to the Federal Court.

What does this settlement mean for Canada’s real estate sector?

The Canadian Real Estate Association (CREA) and several brokerages were recently named defendants in a proposed class action alleging that there is “conspiracy, agreement or arrangement” to illegally inflate residential commission prices.

Canada largely mirrors the broker commission model seen in the US, with real estate brokerages charging commissions based on the sale price of a home to be split between buyer’s and seller’s agents.

Garth Myers, a partner at the law firm Kalloghlian Myers LLP, which is handling the Canadian lawsuit, believes the US settlement undermines any justification the CREA might have for maintaining current commission rules.

“We think that the consequence of our lawsuit will mean more money in the pocket of home sellers and it’ll reduce the cost of residential real estate across the country,” he said.

The lawsuit against CREA was filed in January and has yet to be certified as a class proceeding, according to CBC.

 

This article was written for CMP by Mar 21st, 2024.

23 Mar

Canada’s credit market risks are on the rise, but CIBC’s Tal sees reasons for optimism

General

Posted by: Dean Kimoto

With credit growth grinding to a near halt and delinquency rates on the rise, it’s clear that Canadian borrowers are feeling the pinch of high interest rates and a slowing economy.

Yet, CIBC Deputy Chief Economist Ben Tal sees some silver linings amidst these challenges, which he says suggest we’re heading for more of a spending freeze rather than a large credit risk event.

First, let’s look at some of the concerning trends taking place in Canada’s credit market right now.

At the forefront is the dramatic slowdown in credit growth to levels not seen since the double-dip recession of the 1980s.

This slowdown is particularly pronounced in the mortgage sector, where the sensitivity to rate hikes has led to a dramatic decrease in new lending activity to what Tal says are recessionary levels.

“The speedy and aggressive slowing in the pace of credit growth reflects both supply and demand forces,” he writes, pointing to Bank of Canada data showing a tightening of credit availability compared to during the pandemic. “The year-over-year growth rate in credit limits available to households is now rising by half the pace seen in mid-2022 and below the pre-pandemic rate. In real terms, limits are hardly growing.”

Households are also more reluctant to use that available credit, Tal adds, with utilization rates falling in recent months.

Incoming wave of mortgage renewals

Additionally, delinquencies are on the rise, signalling increasing financial stress among borrowers. Tal notes that arrears are rising across various forms of consumer credit, from credit cards and auto loans to mortgages.

As has now been widely reported, challenges for mortgage borrowers are only expected to intensify in the coming years due to the large number of low-interest rate fixed terms that are set to renew.

CIBC’s research suggests 50% of outstanding loans have reset to higher rates, which still leaves more than $1 trillion worth of mortgages to renew in the coming years.

“Based on term distributions and our interest rate forecast, we estimate that the average interest payment shock in 2024-26 will amount to around 15% a year,” Tal writes. However, he says the key word is “average,” with some borrowers who are now in shorter terms seeing their rates actually fall in the coming years, and others experiencing a much sharper payment shock.

The average “masks the pain at the margins — where credit risk resides,” Tal notes.

While one has to “dig deep” to find early signs of credit vulnerability, Tal says they do exist. Early-stage delinquencies in the below-prime mortgage space are “rising strongly;” non-mortgage debt held by homeowners is well above 2019 levels with half of all mortgages yet to be repriced; and renters are being impacted to a greater degree by the weakening labour market and rising rents.

Reasons for optimism

Against this backdrop, Tal has found some silver linings that suggest we may be headed for more of a “squeeze on spending” as opposed to a “large potential credit risk event.”

For one, while insolvencies are up over 20%, Tal says they’re rising from a “very tame” level. Additionally, a record high of 80% of those insolvencies are proposals, which involve restructuring the debt, rather than outright bankruptcies.

“That’s important because the legal costs and the losses per proposal are lower for lenders than in bankruptcies, and the recovery rate is much higher,” he says, meaning financial institutions aren’t seeing their loss rates spike.

There also appears to be “increased communication and coordination” between lenders and borrowers based on the fact that 30- to 60-day delinquencies are rising, while the share of those moving to the 60- to 90-day category is actually on the decline.

“Also encouraging is the fact that the share of mortgages that are in a trigger rate
position (a situation in which interest payments account for 100% of debt service payments) has been falling steadily in recent months,” Tal adds. “That early treatment of the symptoms was not seen in previous recessions.”

The bottom line? Yes, there are signs of stress among borrowers—both homeowners and renters alike—and delinquencies are expected to continue to rise in the coming quarters.

“But the fact that we had to dig deep to find signs of stress, combined with our expectations that the unemployment rate will not exceed 6.5%—miles below the rate seen during recessionary periods in the past, means that upcoming credit losses will be manageable,” Tal says.

This article was written for Canadian Mortgage Trends by:

Steve Huebl
Steve Huebl is a graduate of Ryerson University’s School of Journalism and has been with Canadian Mortgage Trends and reporting on the mortgage industry since 2009. His past work experience includes The Toronto Star, The Calgary Herald, the Sarnia Observer and Canadian Economic Press. Born and raised in Toronto, he now calls Montreal home.
22 Mar

What You Need to Know About Smart Homes!

Latest News

Posted by: Dean Kimoto

Technology is constantly evolving and adapting to our needs as a society and individuals. One of these exciting developments has been the creation and evolution of smart homes.

WHAT IS A SMART HOME?

A smart home is any home where the homeowners are able to control thermostats, lighting, appliances and other devices remotely over the internet through a smartphone or tablet. These can be set up through wired or wireless systems, allowing you full control wherever you are.

BENEFITS OF SMART HOMES

  • Easy Home Management: One of the biggest and most appealing aspects of a smart home is the easy home management it provides. The integrated systems not only give you full control over every smart aspect of your home, but also allows you to view insights and data, which can help you analyze daily habits and energy use.
  • Energy Savings: Smart homes provide opportunity for extensive energy efficiency and cost savings, depending on how you use the technology. Precise control over heating and cooling systems allows the system to learn your schedule and set preferences for the highest energy efficiency outcome. In addition, you can manage lighting to turn on and off at specified times to prevent energy waste. In addition, these homes are often stocked with top of the line appliances and electronics, with improved energy efficiency leading to further cost savings.
  • Increase Appliance Functionality: Using smart appliances and electronics allows you to get even more out of these household tools. For instance, a smart oven can help you cook your chicken to perfection and a built-in audio system can provide the perfect atmosphere to any party. Plus, connecting your appliances and other systems will improve automation and give you even more to love about your home.
  • Flexibility: With the ever-changing smart home technology, this affords you greater flexibility when it comes to your home and your changing needs.Smart homes are typically highly flexible, allowing you to easily swap out old models for updated versions, or to install new technology seamlessly.
  • Improved Home Security: Incorporating security and surveilliance features, such as cameras, into your smart home network will help you maximize your home security. There are various options for home automation systems containing motion detectors, automated locks and surveillance cameras so that you always know what is going on. You can even set it to receive security alerts in real time!
  • Growing Industry: Another advantage to smart homes is that this is a growing industry with technology that is constantly being worked on and improved. This means bigger and smarter tech will be available in the coming years, allowing for even greater cost savings, automation and control.

CONSIDERATIONS FOR SMART HOMES

I bet you are probably pretty excited now that you know what smart homes can do! However, before you jump in there are a couple considerations to keep in mind.

  1. How much automation do you want/need?
  2. What systems are most important to you (lighting, audio, climate, security, etc)?
  3. What is your budget?
  4. What are your future plans?

With the right preparation, a smart home can be a dream come true. It is important to understand how much technology you are comfortable with, and what systems are most important to you, so that you can create a plan and a budget to upgrade your current home – or so you know what to look for when you begin shopping.

Smart technology has come a long way! Smart homes are already incredibly intuitive and automated, with more technology and advancements to come. While some of us will always remain the “labor of love” type, many of us have less time and energy than we used to. Smart homes not only help save you money, but time and energy too so you can focus on more important things.

21 Mar

Bank of Canada’s Governing Council divided over timing of future rate cuts

Latest News

Posted by: Dean Kimoto

While conditions for rate cuts are expected to materialize over the course of the year, the Bank of Canada itself appears divided over when exactly these conditions will be met.

That’s according to the latest summary of deliberations from the Bank of Canada’s March 6 monetary policy meeting, where its six-member Governing Council unanimously voted to leave the benchmark rate unchanged at 5.00%.

They agreed that if the economy performs in line with expectations, “the conditions for rate cuts should materialize over the course of this year.”

However, the summary of deliberations revealed a “diversity of views” among members as to “when there would likely be enough evidence that these conditions were in place, and how to weight the risks to the outlook.”

As the Bank has communicated repeatedly, members agreed that they need to see a “further and sustained” easing in underlying inflation towards its neutral 2% target. On top of that, they said they would also be considering the balance of supply and demand in the economy, corporate pricing behaviour, wage growth and inflation expectations.

The Bank’s latest data show early signs that wage growth is moderating, and that corporate pricing bahaviour is “gradually normalizing.”

Inflation is easing, but upside risks remain

The members said a key risk to their outlook is that inflation remains “more persistent than expected,” adding that the Bank’s preferred measures of core inflation had “yet to show much downward momentum.”

However, these discussions were prior to February inflation data that was released Tuesday, in which both headline and core inflation measures slowed more than expected.

The data from Statistics Canada showed headline inflation eased to 2.8% from 2.9% in January. The Bank’s preferred measures of core inflation, which strip out food and energy prices, also came in lower than expected, with CPI-median easing to 3.1% (from 3.3% in January) and CPI-trim falling to 3.2% from 3.4%.

Given slowdown in inflation and data pointing to a quickly slowing economy, markets and economists largely expect the Bank of Canada can begin cutting interest rates by its June meeting.

While the Bank’s Governing Council said the current level of monetary policy is “doing its work” to slow economic growth and ease price pressures, they warned that future progress on inflation is likely to be “gradual and uneven.”

 

This article was written for Canadian Mortgage Trends by:

Steve Huebl
Steve Huebl is a graduate of Ryerson University’s School of Journalism and has been with Canadian Mortgage Trends and reporting on the mortgage industry since 2009. His past work experience includes The Toronto Star, The Calgary Herald, the Sarnia Observer and Canadian Economic Press. Born and raised in Toronto, he now calls Montreal home.
18 Mar

Homeowners, realtors should take steps to protect against title fraud: experts

Latest News

Posted by: Dean Kimoto

It’s been years since you finished paying off your mortgage, so the letter in the mail from a bank saying you’re in default and now owe money comes as a shock.

Not only did you not take out another mortgage on your property, you’ve never even dealt with that bank before. Yet the documents you’re presented with say otherwise.

At this point, you realize you may have been the victim of fraud.

The chances of that scenario playing out may seem far-fetched, but experts say title and mortgage fraud are fast growing in Canada and homeowners should take steps to protect their properties — and their identities.

Title fraud refers to when the ownership or title of a property is fraudulently changed or documents are forged to allow a fraudster to illegally sell or refinance the property.

The issue gained prominence last year amid two Toronto police investigations in which homes were allegedly listed for sale without the owners’ knowledge, including one where the home was sold.

While those were “extreme” cases, more common is mortgage fraud, where fraudsters obtain a mortgage from a lender under false pretenses, said Daniel La Gamba, a real estate lawyer and partner at LD Law LLP.

La Gamba said a typical case of such fraud involves the perpetrator stealing the identity of a legitimate homeowner — using a fake ID, job letter, credit report or references — to obtain a mortgage through a bank.

If the bank is convinced of the person’s identity, it will advance them the funds for the mortgage, only to find the false owner hasn’t made any payments on it months later.

“Even with all the safeguards in place … fraudsters are getting quite sophisticated in their ability to replicate ID, steal identity,” said La Gamba.

“Sometimes, we’re really left with only our gut feeling. If something doesn’t smell right, then we start digging and asking a few more questions.”

When the true owner receives the bank’s letter demanding that payment, setting off alarms they’ve been defrauded, it can be a “stressful and very costly burden” of proving they’ve been the victim of fraud and shouldn’t be required to pay that mortgage, La Gamba said.

He said the most cost-effective defence for the homeowner is if they already have title insurance — the premium for which typically costs around $900 for a $1 million property, and which covers the entire period of ownership.

“If you have title insurance, they basically step into your shoes and take whatever steps are required to rectify the matter,” he said.

“If you don’t have title insurance, that’s when you’re on your own … and it will be a very costly and time-intensive endeavour.”

Newcomers, seniors most vulnerable

Title insurance companyFCT estimates at least one attempted title or mortgage fraud takes place every four business days. In the past two to three years, the company has refused to insure $539 million worth of mortgages and transfers “on the basis that they were too suspicious for us,” said John Tracy, senior legal counsel at FCT Canada.

He said the reason the real estate sector is such a growing area of focus for fraudsters is simple: “The payoff is huge.”

“Compared to getting a credit card in my name — you might get $10,000 worth of stereo stuff or gift cards. But if you can steal my ID and mortgage my house, the payoff is a magnitude of times bigger.”

Experts say the most common targets of title or mortgage fraud attempts include newcomers to Canada, who are particularly vulnerable if they face language barriers, as well as seniors.

“Generally speaking, fraudsters really like to target homes that are mortgage-free,” said La Gamba.

“The elderly tend to be targeted quite frequently in this scenario. They’ve had the home for 20, 30-plus years, their mortgages are paid off in full.”

Daniela DeTommaso, president at FCT Canada, said the company began tracking attempts at title fraud in 2010, seeing a 70 per cent increase in the first 10 years. She said that rate likely accelerated during the pandemic as reliance on remote technology and digital verifications increased.

“Technology is a fabulous thing, but it’s also created the ability for fraudsters to duplicate identity in a way that, to even a trained eye, is almost impossible to catch,” she said.

“For $5,000, you can buy a printer that can pretty much replicate a piece of identification.”

DeTommaso said FCT monitors “a moving target” of potential red flags. The organization employs a certified fraud examiner and teams of underwriters “whose sole job it is to really look for some of these red flags,” she said.

“As good as our underwriters are, there are schemes that are always one step ahead, so we are now partnering with a company where we’re leveraging digital identity verification that actually goes beyond a physical review of a document,” she said.

Ontario brokers required to monitor for red flags

Last fall, the Financial Services Regulatory Authority of Ontario released guidance aimed at combating mortgage fraud, which set out requirements for brokers “to conduct business in a manner that does not facilitate dishonesty, fraud or any other illegal conduct.”

The guidance included obligations such as monitoring for increased warning signs of potential fraud. It also recommended the use of multi-factor authentication as the best practice for identity verification.

“From our perspective, what a broker needs to be able to demonstrate is that they have taken reasonable steps to identify fraud and that would include … to verify the identity of a client, verify the client actually has the authority to mortgage a property,” said Antoinette Leung, FSRA’s head of financial institutions and mortgage brokerage conduct.

“Anyone who notices these red flags should be following up and looking into them.”

She said red flags could include a person’s name linked to the title of a property looking slightly different from what’s listed on their ID or utility bill. The guidance also highlighted employment letters, which should be cross-referenced to ensure the mortgage applicant’s employer does actually exist and that they work there.

FSRA, which has authority to regulate and sanction licensed mortgage brokerages, brokers, agents and administrators, warns it may take enforcement action if it receives credible information about potential fraud or failure to comply with the law and its regulations.

“If you’re facilitating fraud, and there is no way for you to see evidence that suggests otherwise, then (brokers) will have to step away from that transaction,” Leung said.

 

This article was written for Canadian Mortgage Trends by Sammy Hudes

12 Mar

Home sales up in major metro areas as buyers bet on rate cuts later this year

Latest News

Posted by: Dean Kimoto

Homebuyer sentiment appears to be improving across the country with major real estate boards reporting an increase in sales activity in February.

On an annual basis, February home sales were up by double digits in Toronto (+18%), Vancouver (+14%), Montreal (+30%), Calgary (+22%) and Ottawa (+17%).

While Toronto activity was down by 12% on a seasonally adjusted monthly basis, the Toronto Regional Real Estate Board (TRREB) noted that monthly data can be volatile, “especially when the market is approaching a transition point.”

While activity remains low compared to historical norms—in Vancouver, for example, sales are 23.3% below its 10-year average—real estate boards say sentiment is improving among both buyers and sellers, leading to overall higher sales and more listings hitting the market.

“We have recently seen a resurgence in sales activity compared to last year,” noted TRREB President Jennifer Pearce. “The market assumption is that the Bank of Canada has finished hiking rates [and] consumers are now anticipating rate cuts in the near future.”

In Calgary, continued strong activity led to a 15% decline in active listings. “Purchasers are acting quickly when new supply comes onto the market, preventing inventory growth in the market,” said Ann-Marie Lurie, chief economist at the Calgary Real Estate Board.

Home sales expected to pick up throughout the year

In addition to potential interest rate cuts on the horizon later this year, continued strong population growth and the ongoing supply-demand imbalance are expected to lead to stronger housing activity over the course of the year, experts say.

“I continue to believe that we’ll see a pretty good spring market due to improving sentiment,” analyst Ben Rabidoux of Edge Realty Analytics wrote in his newsletter to clients.

He pointed to not only a rise in overall consumer confidence as measured in weekly surveys by Bloomberg and Nanos, but specifically improved sentiment towards real estate.

“We think a pivot towards rate cuts mid-year will get the wheels turning faster over the second half—perhaps even sooner,” Robert Hogue of RBC Economics wrote recently.

“There will be a lot of pent-up demand to satisfy once confidence returns, which could heat things up in a hurry,” he added. “However, poor affordability conditions will restrain the recovery and make it a gradual liftoff.”

Regional housing market roundup

Here’s a look at the February statistics from some of the country’s largest regional real estate boards:

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Greater Toronto Area

Toronto real estate market
February 2024 YoY % Change
Sales 5,607 +17.9%
Benchmark price (all housing types) $1,108,720 +1.1%
New listings 11,396 +33.5%
Active listings 11,102 +15.1%
Source: Toronto Regional Real Estate Board (TRREB)

“As we move through 2024, an increasing number of buyers will re-enter the market with adjusted housing preferences to account for higher borrowing costs,” said TRREB Chief Market Analyst Jason Mercer.

“In the second half of the year, lower interest rates will further boost demand for ownership housing,” he added. “First-time buying activity will also be a contributing factor, as many renters look to trade high monthly rents for a long-term investment in which they can live and build equity.”

Greater Vancouver Area

Vancouver housing market
February 2024 YoY % Change
Sales 2,070 +13.5%
Benchmark price (all housing types) $1,183,300 +4.5%
New listings 4,560 +31.1%
Active listings 9,634 +16.3%
Source: Greater Vancouver Realtors (GVR)

“While the pace of home sales started the year off briskly, the pace of newly listed properties in January was slower by comparison,” said Andrew Lis, Director of Economics and Data Analytics at Greater Vancouver Realtors, formerly the Real Estate Board of Greater Vancouver.

“A continuation of this pattern in February would have been concerning, as it could quickly tilt the market towards overheated conditions,” he added.

Montreal Census Metropolitan Area

Montreal housing market
February 2024 YoY % Change
Sales 3,843 +30%
Median Price (single-family detached) $550,000 +7%
Median Price (condo) $395,000 +4%
New listings 6,769 +32%
Active listings 18,110 +18%
Source: Quebec Professional Association of Real Estate Brokers (QPAREB)

“This is the first time since 2004 that we have seen a surge in new listings of over 36 per cent in a month of February,” said Charles Brant, QPAREB Market Analysis Director.

“More homeowners are counting on the imminent drop in interest rates to put their property up for sale,” he added. “Moreover, increasing numbers have no choice but to put their property up for sale, as they are squeezed by monthly mortgage payments which are at unsustainable levels in a much less favourable economic context.”

Calgary

Calgary housing market
February 2024 YoY % Change
Sales 2,135 +22.8%
Benchmark price (all housing types) $585,000 +10.3%
New listings 2,711 +13.6%
Active listings 2,355 -14.2%
Source: Calgary Real Estate Board (CREB)

“Purchasers are acting quickly when new supply comes onto the market, preventing inventory growth in the market,” said CREB Chief Economist Ann-Marie Lurie. “It is this strong demand and low supply that continues to drive price gains in Calgary. The biggest supply challenge is for homes priced under $500,000, which saw inventories fall by 31% compared to last February.”

Ottawa

Ottawa housing statistics
February 2024 YoY % Change
Sales 629 +16.5%
Benchmark price (all housing types) $628,500 +2.8%
New listings 1,539 +29.5%
Active listings 2,158 +16.3%
Source: Ottawa Real Estate Board (OREB)

“Even with higher prices and the interest rate holding steady, Ottawa is a strong, active market,” said OREB President Curtis Fillier. “With metrics across the board up from last year, it’s clear both buyers and sellers are making moves. The metrics, however, don’t tell us about all the people relegated to the sidelines because affordability remains out of reach for many.”

 

This article was written for Canadian Mortgage Trends by:

Steve Huebl
Steve Huebl is a graduate of Ryerson University’s School of Journalism and has been with Canadian Mortgage Trends and reporting on the mortgage industry since 2009. His past work experience includes The Toronto Star, The Calgary Herald, the Sarnia Observer and Canadian Economic Press. Born and raised in Toronto, he now calls Montreal home.
8 Mar

National Bank sees delinquencies for its insured variable-rate mortgages rise to pre-pandemic levels

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Posted by: Dean Kimoto

National Bank of Canada, the country’s sixth-largest bank, saw a rise in mortgage delinquencies during the first quarter, with the largest increases contained to its insured variable-rate mortgage portfolio.

The bank reported the percentage of residential mortgages that are behind on payments by at least 90 days rose to 0.13% in Q1, up from 0.11% in Q4 and just 0.8% a year ago.

However, it’s the clients with variable-rate mortgages, who represent 28% of the bank’s $91.3 billion residential mortgage portfolio, that are finding it most challenging to keep up with their payments.

National Bank, like Scotiabank, offers adjustable-rate mortgages, where the borrower’s monthly payment fluctuates as prime rate changes. As a result, the bank’s floating-rate clients have already experienced payment shocks brought on by the sharp rise in interest rates over the past two years.

Its fixed-rate clients, on the other hand, will only see their interest rates increase at renewal time.

The delinquency rate for National Bank’s variable-rate clients jumped to 0.21% of its portfolio from 0.14% in Q4 and 0.07% in Q3. That’s now on par with its pre-pandemic rate of 0.21% reported in Q1 of 2020.

“Variable-rate mortgage delinquencies have continued to normalize as borrowers have absorbed a significant increase in interest rates,” Chief Risk Officer Bill Bonnell said on the bank’s earnings call this week.

“Where the delinquencies have…increased the fastest is where there’s been more leverage in the consumers,” he added, pointing to the delinquency rate of 0.32% for its insured variable-rate borrowers vs. 0.17% for their uninsured mortgage counterparts.

“Typically the insured mortgage holder is a first-time buyer [who] doesn’t have the 20% down payment,” Bonnell added. “And so, it’s not a surprise that we see a differentiation between the delinquency trends for insured…and uninsured variable rate [mortgages].”

Looking ahead to fixed-rate renewals

As for the the bank’s fixed-rate mortgages, just 12% of its portfolio will be coming up for renewal in 2024, with the bulk of renewals coming in 2025 (27%) and 2026 (38%).

National Bank estimates those with renewals this year will face a payment increase of around 15%, or between $200 and $300. Those renewing in 2025 and 2026 are likely to see slightly higher payment increases of 22% and 18%, respectively, or between $250 and $400.

“As we look ahead at what will happen upon renewal for the fixed rate mortgages, there are a lot of metrics…which give comfort.,” Bonnell said.

“When you look at the nature of those fixed rate mortgages for 2025 and 2026 renewal, there’s a high percentage which are insured [and have] a relatively low loan-to-value, which provides flexibility for the borrower or depending on where rates are at the time,” he continued, saying they typically have high credit scores as well. “So, we’re quite confident in the resiliency of those borrowers.”

Quebec borrowers show greater resiliency to payment shocks

Bonnell also addressed some regional differences, noting that delinquencies on average are lower in Quebec.

“In our portfolio, we do see Quebec consumers appearing to have more resilience and [are] performing better on a delinquency basis,” he said.

He pointed to lower average home prices in the province, which means “lower mortgages, so less consumer leverage, more dual incomes [and a] diversified economy.”

“It generates factors that support resiliency in our mortgage borrowers and that’s coming through in the numbers,” he added.

National Bank earnings highlights

Q1 net income (adjusted): $922 million (+5% Y/Y)
Earnings per share: $2.59

Q1 2023 Q4 2023 Q1 2024
Residential mortgage portfolio $89B $91.1B $91.3B
HELOC portfolio $29.5B $29.6B $29.4B
Percentage of mortgage portfolio uninsured 38% 39% 39%
Avg. loan-to-value (LTV) of uninsured book 57% 56% 57%
Fixed-rate mortgages renewing in the next 12 mos 11% 13% 12%
Portfolio mix: percentage with variable rates 33% 28% 28%
Residential mortgages 90+ days past due 0.08% 0.11% 0.13%
Canadian banking net interest margin (NIM) 2.35% 2.36% 2.36%
Percentage of the Canadian RESL portfolio comprised of investor mortgages 11% 11% 11%
CET1 Ratio 12.6% 13.5% 13.1%
Source: National Bank Q1 Investor Presentation

Conference Call

  • “Growth in personal loans remained slower, reflecting a lower level of mortgage originations. We will continue to be disciplined across our portfolio, balancing volume growth with margin and credit quality,” said President and CEO Laurent Ferreira.
  • “Looking ahead, we expect delinquencies and impaired provisions to continue their upward path,” said Chief Risk Officer Bill Bonnell.
  • National Bank’s base case economic forecast has the unemployment rate in Canada increasing to about 7% by early 2025.
  • “Credit card delinquencies now exceed their pre-pandemic level. Within this population, we find the client segment most impacted has been non-homeowners, a segment that has been absorbing significant increases in rental costs,” Bonnell said.

Source: NBC Conference Call

Note: Transcripts are provided as-is from the companies and/or third-party sources, and their accuracy cannot be 100% assured.

Feature image: Roberto Machado Noa/LightRocket via Getty Images

 

This article was written for Canadian Mortgage Trends by:

Steve Huebl
Steve Huebl is a graduate of Ryerson University’s School of Journalism and has been with Canadian Mortgage Trends and reporting on the mortgage industry since 2009. His past work experience includes The Toronto Star, The Calgary Herald, the Sarnia Observer and Canadian Economic Press. Born and raised in Toronto, he now calls Montreal home.
6 Mar

No Recession In Canada, As Q4 GDP Growth Rose 1%

Latest News

Posted by: Dean Kimoto

Still no recession in Canada thanks to huge influx of immigrants

Real gross domestic product (GDP) rose a moderate 1.0% (seasonally adjusted annual rate), a tad better than expected and the Q3 contraction of -1.2% was revised to -0.5%. This leaves growth for 2023 at a moderate 1.1%. Monthly data, also released today by Statistics Canada, showed that December came in flat, well below the robust flash estimate, while the January preliminary estate was a strong +0.4% (subject, of course, to revision). The January uptick was driven by the return of Quebec public servants and a mild winter.

The fourth quarter growth was fuelled by higher oil exports and was moderated by a significant decline in business investment. Housing investment declined again in Q4–a sixth decline in the last seven quarters. Despite increased activity in Q4 new residential construction and renovations, it was more than offset by a large drop in home ownership transfer costs, reflecting the weakening resale market across Canada. Single-family units and apartments led the rise in new construction, as all provinces and territories, except Prince Edward Island, post a rise in housing starts.

Investment in non-residential structures fell sharply, as did spending on machinery and equipment, especially on aircraft and other transportation equipment. Even government spending declined.

Bottom Line
This is the last major economic release before the Bank of Canada meets again on March 6. The central bank will hold interest rates steady at next week’s meeting, and while some are suggesting the first rate cut this cycle will be as soon as the April confab, the consensus remains at June. With the uptick in growth in Q4, there is no urgency for the Bank to ease.

Policymakers will wait for their favourite core inflation measures to fall within the 1%-to-3% target band. They know that GDP per capita is falling and that mortgage renewals at higher interest rates will dampen household discretionary income. That’s why a June rate cut is widely expected.

Please Note: The source of this article is from SherryCooper.com/category/articles/