House prices to cool in 2011
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Why are you seeing CMHC respond with “unsupported values” recently?
When CMHC says they can only support $x on a file, they aren’t necessarily saying the house is only worth that amount.
The interpretation is ,…
“based on the home value and possible renovations done, how recent an mpac assessment is, the type of home-o/o or rental, the clients job consistency and security, their credit and amount utilized and whether it’s a purchase or refi and for what reasons …..
they are saying, “based on above, we have $xxx comfort level with doing that deal”.
Based on new rules and qualifications they are taking less risk this year. It is important to remember that a property valuation is not a fixed or permanent number
Sometimes an appraisal will assist, but if their concern is based more on covenant criteria as opposed to an old mpac value, we are also seeing files where the appraisal doesn’t increase their comfort.
So when discussing with your clients a value to use when submitting your applications, take all the criteria above into consideration before using the highest resale on the street to base your qualifications on. This will assist you to under-promise and over-deliver, provide you with more expert guidance than a bank employee provides, have less puzzled and disappointed clients, and improve your efficiency ratios too!
House prices to cool in 2011, says TD
Financial Post
OTTAWA -- The latest housing forecast from TD Economics leaves 2010 totals for sales and prices in Canada largely the same as its previous expectations in December, though that masks a wider discrepancy it now expects between a hot first half of the year and cooler second half.
The forecasting unit of Toronto-Dominion Bank released a report on Wednesday that maintained its call for housing resales this year to rise 2.1% to 475,000, and the average price to gain 9% to $349,000.
"While sales in Q1 were slightly higher than our late-2009 forecast, we view the strength as borrowing from future sales in a move by buyers and sellers to pre-empt regulatory and interest-rate changes," TD said in its report.
The bank said that people in Ontario and British Columbia are pushing ahead with home purchases to avoid higher costs associated with harmonized sales taxes that take effect in those provinces in July.
As well, it said homebuyers across the country have felt rushed to avoid higher interest rates. Major banks have already started raising their borrowing costs, and the Bank of Canada is expected to start hiking its overnight target rate from a record-low 0.25% in June or July.
The more accelerated cooling effect during the second half of this year will lead to lower prices than previously thought in 2011, TD said. It now expects the average home price to fall 2.7% to $339,700 next year; it previously called for a 1.6% price gain.
TD said housing prices in Canada are currently overvalued by about 15%, based on longer-term economic factors such as income growth. That gap should narrow to 10% by the end of next year, it said.
The gap will close further in the following two to three years, the report said, as housing prices grow at about the rate of inflation - after having averaged 8% annual gains over the last eight years - and household incomes catch up.
Read more: http://www.financialpost.com/news-sectors/economy/story.html?id=2990374#ixzz0n98RQoRI
Bank of Montreal alleges huge mortgage fraud
By Charles Rusnell, CBC News
The Bank of Montreal is suing hundreds of people in Alberta, including lawyers, mortgage brokers and four of its own employees, in what is one of the largest alleged cases of mortgage fraud in Canadian history.
Legal documents obtained exclusively by CBC News allege the bank was the target of a sophisticated fraud operated by 14 inter-connected groups. The documents allege the scheme generated at least $140 million, about $70 million of which was for phoney mortgages.
The bank has estimated it may lose as much as $30 million.
Toronto forensic accountant Al Rosen said he has never seen anything like it.
"This is massive in the sense that it is so broad and so deep," Rosen said Tuesday. "This is [allegedly] a huge fraud. I can't think of any situation that has so many people involved and over a period of time like this one."
Problems detected in 2006
The bank said it first detected the alleged scam in 2006 when its security department noticed "irregularities" in a number of mortgages in Western Canada. Officials immediately hired a forensic accounting firm, which spent nearly a year unravelling what the bank calls a sophisticated scheme.
The bank's investigators say the scam's ringleaders would identify the worst house in a good neighbourhood. They would buy at an affordable, fair-market value price, but convince the bank it was worth much more because of the neighbourhood it was in.
The bank, which relies on a software program to determine house prices by neighbourhood, claims it would end up providing a grossly inflated mortgage, and the ringleaders would pocket the difference.
To carry out the alleged scheme, the bank claims masterminds would recruit what's known in fraud parlance as a "straw buyer." For a payment of $2,000 to $8,000, these straw buyers, mostly new immigrants, would allow their name to be used to obtain the mortgage on the house.
According to the court documents, the ringleaders allegedly created fake, inflated wage and net income documents for the straw buyers to make them appear richer than they were.
Lawyers, who are alleged to have been in on the scheme, would then produce the necessary legal documents for the house sale. Seventeen lawyers have been named in the bank's lawsuit.
House nets $180,000
In one case, a house in the Bearspaw district of Calgary was bought for nearly $900,000 and in three years, its value was inflated to $2.3 million, a profit of $1.4 million for the alleged fraudsters. An Edmonton house is alleged to have netted the scheme nearly $180,000.
During its investigation, bank investigators seized records that showed millions of dollars from the alleged scheme have been transferred to such countries as Lebanon, India, Saudi Arabia, the United Arab Emirates and Pakistan.
The Bank of Montreal said it conducted the investigation and filed the lawsuit for two reasons.
"One was to recover as much as possible of what was taken from the bank from the fraud," Ralph Marranca, the bank's spokesman told the CBC on Tuesday.
"And secondly was to send a very strong message to fraudsters and anyone who might contemplate something like this that the bank will pursue this very aggressively and will not tolerate fraud."
Other banks don't appear to be as aggressive in their approach, even though documents indicate they may have been targeted too. Bank of Montreal investigators found documents that showed one Calgary management company had 150 suspect mortgages from 16 different financial institutions.
Rosen said this alleged fraud illustrates how weak and ineffective the controls are in our banking system.
"To me the most exasperating part of our business is we are not doing what we are supposed to be doing," he said. "We are kidding ourselves that we have good systems, because we don't."
Read more: http://www.cbc.ca/canada/calgary/story/2010/05/04/mortgage-fraud-bank.html#ixzz0n43X4GCP
