Are Big Banks jumping the gun? Interesting Globe and Mail article below on interest rate increases says “it looks like the Big Banks are pushing things a bit with mortgages”…….
• TSX -69.85 fell for a second straight day as worries over Europe's fiscal troubles outweighed a brief shot in the arm provided by a more upbeat U.S. Federal Reserve outlook. Spain was hit by a credit rating downgrade, following downgrades to Greece and Portugal on Tuesday
• DOW +53.28 to 11,045 after the U.S. Federal Reserve left interest rates unchanged near zero and offered a brighter economic view. The U.S. central bank renewed its promise to keep rates low for an "extended period" and said U.S. consumer and business spending were picking up steam.
• Dollar +.86c to 99.13cUS
• Oil +$.78 to $83.22US per barrel.
• Gold +$9.60 to $1,171.80 USD per ounce
Are Big Banks jumping the gun?
Rob Carrick
The Globe and Mail Published on Thursday, Apr. 29, 2010
Interest rates are rising – we all get that – but it looks like the Big Banks are pushing things a bit with mortgages.
After a pair of increases in the past two weeks, the posted Big Bank five-year fixed mortgage rate now stands at 6.25 per cent. Does that seem high? In fact, it’s just half a percentage point below the average level for the past decade.
We’re supposed to be in the early phase of what could be a long cycle of rate increases. The Bank of Canada hasn’t even started raising its overnight rate, which sets the trend for borrowing costs other than fixed-rate mortgages. The overnight rate could very well start rising June 1 (that’s the central bank’s next rate-setting date), but even then it’s not dead certain that rates will move.
Mortgage rates are linked to bond yields, which have been rising for a while now. But mortgage rates have been moving faster.
Thanks to the always helpful Bank of Canada online interest rate database, we know that the yield for five-year Government of Canada bonds has averaged 4.03 per cent since the beginning of 2000. Five-year Canada bonds had a yield of 3.02 per cent yesterday, which means they’re three-quarters of the way back to their average of the past decade.
The 10-year average for posted five-year fixed-rate mortgages is 6.75 per cent, which means this rate is almost 93 per cent of the way back to its long-term average. There is zero consensus that things have normalized after the financial crisis, but the banks are just about all the way back to pricing mortgages as if they were.
And, no, this “go big or go home” attitude to rates has not been extended to guaranteed investment certificates, which are one source the banks use for the money they lend out as mortgages. The current posted Big Bank five-year GIC rate tops out at 2.1 per cent, or 63 per cent of its 10-year average rate of 3.31 per cent.
John Turner, director of mortgages at Bank of Montreal, said the banks are simply reacting to the rising rate environment in setting borrowing costs for mortgages.
“It’s not about any of us trying to get ahead of things, because the market won’t let us,” he said. “It’s a very competitive market.”
Mr. Turner cited two factors that have driven fixed-rate mortgages lately. One is an effort by the banks to anticipate higher bond yields and avoid repeated increases in mortgage rates. “We don’t like to move rates because it causes dissatisfaction, and it causes disruption in the sales force.”
The other driver of higher mortgage costs is the rising cost of providing interest-rate guarantees for people who are smart enough to lock in a rate as soon as they start looking for a home. Mr. Turner said these costs haven’t been a factor much in recent years because the general trend for interest rates has been downward. Now, with rates on a definite upward path, rate guarantees are a bigger consideration for lenders.
Banks won’t say this out loud, but their own internal business considerations help set mortgage rates as well. Sometimes, this works in favour of borrowers. In February, for example, the banks lowered mortgage rates even as bond yields rose a tick or two. Now, the banks seem to be in a mood to emphasize profits over market share or, as it’s known in bank land, widen spreads between what they charge and what they pay.
“The banks normally do this when interest rates are moving,” said David McVay, a financial services industry consultant with McVay and Associates. “But their retail profits have been pretty strong, and they widened spreads quite well when they put up line-of-credit rates [in 2008-09]. That was a big boost to profits right there.”
Mr. McVay seconded Mr. Turner’s comment about the mortgage marketplace being too competitive for banks to be out of line with their mortgage rates. In fact, there is a huge variation in rates right now that demands some shopping around from homebuyers and people facing renewals.
One of the better deals in the mortgage market today is BMO’s offer of a 4.35-per-cent five-year, fixed-rate mortgage. You can’t take an amortization longer than 25 years with this mortgage, and there’s less room to make pre-payments than there is with a standard BMO mortgage. But a glance at the websites of several mortgage brokers yesterday suggests you won’t find a lower rate.
http://www.theglobeandmail.com/globe-investor/are-big-banks-jumping-the-gun/article1550163/
Thursday, April 29, 2010
Wednesday, April 28, 2010
Financial Update For April 28, 2010
• TSX -134.43 fell from a 19-month high as investors bailed out of stocks across all industry groups after ratings agency Standard & Poor's downgraded Greek ratings to junk status on concerns about its ability to implement the reforms needed to address its high debt burden and also cut the rating on Portugal by two notches to A-minus, four levels above speculative, because of concerns about the country's ability to deal with high debt levels. The worst fear is that other heavily indebted governments such as Spain and Italy will face the same vicious spiral, in which default fears lead to higher borrowing costs that in turn fuel default fears even more. A key indicator of attitudes toward Greece — the interest rate gap, or spread between Greek 10-year bonds and the benchmark German equivalent — hit an astonishing 9.63 points, a massive jump from around 6.4 points on Tuesday. The higher the spread, the more investors think Greece might default
• DOW -213.04 to 10,991.99 falling below the 11,000 benchmark
• Dollar -1.59c to 98.27cUS the downgrades sparked a flight-to-safety U.S. dollar rally that pressured commodity prices.
• Oil -$1.76 to $82.44US per barrel.
• Gold +$8.20 to $1,161.70 USD per ounce
Canada consumers get the blues, accountants brighten
(Reuters) - Consumer confidence fell in April in Canada, but the nation's accountants displayed optimism about the economy in the first quarter that approaches levels not seen since 2007, surveys on Tuesday showed. The Conference Board of Canada said its consumer confidence index was down a sharp 7.8 points to 84.8 this month.
"This last month was a surprise to see it come down," said Pedro Antunes, director of national and provincial forecasts at the Conference Board. "We think it may have something to do with the fact that there's a lot of news about interest rates and lending rates coming up."
Antunes said the market consensus that interest rates will rise this year has also spurred concern about a correction in Canada's booming housing market. Changes in mortgage rules and revised sales-tax regimes in Ontario and British Columbia have added to the concern about falling demand.
"Households are very heavily invested in their homes and if they feel there may be some correction to housing prices that may have played a role in the numbers," he said.
The quarterly Business Monitor survey done in March by the Canadian Institute of Chartered Accountants and Royal Bank of Canada, however, did not reflect the concern. The survey seeks the opinions of executive chartered accountants who have first-hand knowledge of the financial performance of Canadian companies.
Sixty-one percent of executive chartered accountants surveyed said they were optimistic about the economy over the next 12 months, up from the 48 percent who expressed optimism in the final quarter of 2009. The figure was in stark contrast to the 4 percent who were optimistic in the first quarter of 2009.
"The latest findings clearly underscore a growing comfort with the Canadian economy," Kevin Dancey, president and chief executive of the Canadian Institute of Chartered Accountants.
U.S. consumer confidence rises to 57.9 in April, highest since September 2008
Anne D'Innocenzio, The Associated Press NEW YORK, N.Y. - Americans' confidence in the economy rose in April to its highest level since September 2008, just as the financial crisis escalated, according to a private research group.
The upbeat reading, combined with bullish earnings reports this week from companies ranging from Whirlpool Corp. to UPS Inc., offers more hope the economic rebound is gathering steam. Meanwhile, a key home price index reported its first annual increase in more than three years, though it's too early to say the housing market is recovering.
The U.S. Conference Board, a private research group based in New York, said Tuesday that its consumer confidence index increased to 57.9, up from a revised 52.3 in March. The April reading is the highest since September 2008's 61.4. That was when the financial crisis intensified with the collapse of Lehman Brothers, sending confidence into freefall the following month. Economists surveyed by Thomson Reuters were expecting a reading of 53.5.
The index — which measures how shoppers feel about business conditions, the job market and the next six months — had been recovering fitfully since hitting an all-time low of 25.3 in February 2009. Economists watch the number closely because consumer spending including health care and other major items, accounts for about 70 per cent of U.S. economic activity.
April's reading is still far from what's considered healthy. A reading above 90 indicates the economy is on solid footing; above 100 signals strong growth. Still, the monthly survey of consumers showed that consumers' current and short-term concerns about jobs and the overall economy are easing.
Real estate fraud rare but experts warn homeowners to be on the lookout
by Malcolm Morrison, THE CANADIAN PRESS
TORONTO - Real estate fraud is a rare thing but experts in the field say that doesn't mean people should assume it will never happen to them - considering the misery it can inflict on the unwary homeowner, it's worth knowing that it's out there and it's nasty.
"I compare the fraud issue to the lottery," said Ray Leclair of title insurance provider TitlePlus.
"There are millions of transactions in Ontario alone in real property every year. A very minute number of those are fraudulent. So for the public to win or lose in the fraud lottery, the odds are very low."
But it's not an experience you would ever want to go through, he said, even though governments have put in place some measures to make it easier for people to regain ownership title that have been fraudulently pilfered.
"At the end of the day, even if you get your title back, there's the question of (legal fees)."
There are two types of real estate fraud to be concerned about - mortgage fraud and title fraud.
Mortgage fraud is something that is more troublesome for lenders. It involves a fraudster leaving the title or ownership of a property in the current owner's name but mortgaging it without their knowledge, sometimes by fraudulently discharging the existing mortgage. It can also happen when a would-be homeowner falsifies information to get a mortgage.
"That's just a fact of lending," said Laura Parsons, manager of specialized sales for Bank of Montreal in Calgary.
"There are people out there who normally wouldn't get a loan granted to them but because they are fraudulent and give incomplete information or they don't let the lender know all the information, they end up getting approved."
What the average homeowner has to look out for is title fraud. It happens when a fraudster changes the ownership or title of a property into another name in order to sell or refinance the property.
According to the Ontario Ministry of Consumer Services, "it often involves fraudsters using stolen identity or forged documents to transfer a registered owner's title to himself or herself securing a mortgage on the property and then disappearing with the mortgage proceeds."
Parsons calls it a form of identity theft.
"So they know all the details of the person, they go to the land title registry, they pull a title and they find out that there is no encumbrance on the property," she said.
"Now they have basically a ticket to sell the property, so they go in and they can change home ownership."
If the fraudster has enough information, they can change ownership of the property at a land titles office, put a property in their own name. Then they either sell it or go to the bank and get a homeowner line of credit or a mortgage put on that property for their own purposes.
You would think that you would know immediately if you had been scammed, but fraudsters aren't entirely stupid and there are ways to delay finding out.
"They have gone in and taken the title or put a mortgage on and then they will pay it for two or three months," said Leclair.
In the meantime, you're getting all your bills and everything looks fine.
"In the meantime, your mortgage is gone and there's a new mortgage on there - it's going to be paid for two or three months and then two or three months later, they default, there's two or three months waiting time before the bank actually does something so six months, nine months down the road, you now get an angry bank calling you, saying they're going to sell, or you get someone showing up at the door saying you're out the door."
Leclair also pointed to a fraud victim in Vancouver who started wondering why he wasn't getting his property tax bill.
He called city hall and was told "well, you sold the property."
"It's very ordinary things. You don't get a water bill, you don't get those kind of things that could be a hint that something has changed along the way."
Leclair notes that while the government has systems in place to help you if you are defrauded, it's up to the homeowner to monitor. Both he and Parsons emphasized the importance of protecting your private information as a way to avoid becoming a target of real estate fraud.
Parsons said, in particular, you want to keep your social insurance number confidential. And that means not carrying around your SIN card in your wallet where it could be lost or stolen.
"And now with these recycling bins, people are throwing more and more of their mail and personal information in the blue bin - people should get a shredder - $149 buys you some security," she said.
And consider title insurance. Not only does it protect you now and in the future, it provides coverage for fraud that may have occurred prior to your purchase of your home.
Leclair said the insurance costs about $200 to $300, depending on the value of the property, and it is good for as long as you own the home.
And one of the worst things you can do?
"I've read articles where people say the best protection against fraud is to get the biggest mortgage you can on your property - it's a fallacy," said Leclair.
"People figure, well if there's no equity in the property, how can they steal it? Well they can go in and fraudulently discharge the mortgage. I laugh every time I see this. Discharging a mortgage is probably simpler than anything else. It's the bank's signature, it's very easy to imitate. Who knows what a bank's signature looks like?"
http://ca.finance.yahoo.com/personal-finance/article/cpmoney/real-estate-fraud-rare-but-experts-warn-homeowners-lookout-20100408
Beware fraudsters' dirty tricks
A hot real-estate market has lit a fire under criminal activity
Be warned: Booming markets bring not only higher home prices but often a significant increase in residential real-estate fraud.
That is the word coming out of such disparate organizations as title insurance companies, mortgage insurance firms and law enforcement agencies.
“Yes indeed, we see instances of fraud rise with booming markets, especially in major cities,” says Ray Leclair, vice-president at TitlePLUS, the title insurance arm of Lawyers Professional Indemnity Co., which provides lawyers their version of medical malpractice insurance.
But, he adds, real-estate fraud is not confined exclusively to any upsurge in prices. “It can also take place years after you have bought a home, at a time when homeowners would not expect it.”
While there are no hard statistics on real-estate and mortgage fraud for Canada, in the United States estimates of annual losses run between $4-billion (U.S.) and $6-billion a year. In June, 2008, the U.S. Federal Bureau of Investigation had 42 working groups investigating 1,380 cases – and that was after the U.S. real-estate bubble burst.
“Industry statistics suggest mortgage fraud alone results in annual losses in the hundreds of millions of dollars,” Mr. Leclair says. “In many cases there is little publicity because banks are concerned about maintaining customer confidence.
“They just quietly absorb the losses.”
If you want another statistic, think about this one. Many forms of real-estate fraud require the participation of a lawyer. Last fall, The Globe and Mail reported that in Ontario, between 100 and 140 lawyers were under investigation for complaints having to do with alleged mortgage irregularities.
So what is real-estate fraud?
Criminals are an inventive lot. If there is money to be made, they will find ways to get at it. When 1930s bank robber Willie Sutton was asked why he robbed banks, his answer was a no-brainer. “Because that is where the money is,” he said.
Same with real estate. When the average home price in the GTA is well above $450,000 and a $400,000 mortgage is at stake, that is a powerful incentive for a few days’ work for those with a criminal bent.
The Criminal Intelligence Service Canada (cisc.gc.ca), a group that represents 308 law enforcement agencies across Canada, lists half a dozen schemes that have made villains millions in recent years. They range from tarting up a grow-op house and selling it complete with mould and structural damage to unsuspecting buyers to “fraud for shelter.”
In those cases, a buyer wildly overstates family income, buys a home, gets a mortgage and then promptly stops paying the bills. These relatively garden-variety criminals can often get six months free of basic living costs before they are forced to move on.
More common scams are variations on the Oklahoma, in which a property is sold to a fictitious buyer, who then arranges a large mortgage, pockets the proceeds and disappears. This may also involve a number of equally fictitious buyers flipping the property one to another. Each sale raises the purchase price until the final sale involves a whopping big mortgage.
This crew then pockets the proceeds and vanishes.
Then there are those involving identity theft. Criminals find ways – almost always involving bent lawyers – to change the name of the registered owner on the title to the property. They then obtain a mortgage or even sell the home, collect the proceeds and move on.
The real owners only find out when the mortgage company starts sending nasty letters about missed mortgage payments or the new owners show up with a moving van.
Is there any way to protect homes against fraud? Not surprisingly, Mr. Leclair is a keen proponent of title insurance. Yes, lawyers are supposed to do due diligence, but all they can certify is that everything was ship-shape on closing day.
Title insurance, however, safeguards against fraud, misrepresentation or error as long as a person owns a home.
Title insurance can even kick in should a builder make an unintentional error in paperwork. Mr. Leclair talks about a recent case where a client bought a condo with a lake view and paid extra for it. On moving day, however, his key did not fit the door of the suite he thought he bought. It did, however, open the door to the one across the hallway with a lovely view of a parking lot.
“It was a clerical error,” Mr. Leclair says. “It was not intentional.”
TitlePLUS worked with their client and the developer to find a resolution. The client liked the suite, so a significant reduction in purchase price was arrived at.
“Title insurance can also cover a huge range of small items,” Mr. Leclair says. “We get lots of cases involving things like the vendor not paying taxes or utility bills as claimed or buyers not given the parking spots they were entitled to.”
He suggests simple preventative measures such as checking credit scores regularly to spot inquiries you do not recognize; protecting personal documents so no one can access birth certificates, social insurance numbers, bank statement or credit card information; and keeping an eye on the mail lest property tax and utility bills you do not recognize show up.
“Real-estate fraud is one of those crimes that can happen to anyone,” he says. http://www.theglobeandmail.com/real-estate/beware-fraudsters-dirty-tricks/article1535677/?cmpid=rss1
• DOW -213.04 to 10,991.99 falling below the 11,000 benchmark
• Dollar -1.59c to 98.27cUS the downgrades sparked a flight-to-safety U.S. dollar rally that pressured commodity prices.
• Oil -$1.76 to $82.44US per barrel.
• Gold +$8.20 to $1,161.70 USD per ounce
Canada consumers get the blues, accountants brighten
(Reuters) - Consumer confidence fell in April in Canada, but the nation's accountants displayed optimism about the economy in the first quarter that approaches levels not seen since 2007, surveys on Tuesday showed. The Conference Board of Canada said its consumer confidence index was down a sharp 7.8 points to 84.8 this month.
"This last month was a surprise to see it come down," said Pedro Antunes, director of national and provincial forecasts at the Conference Board. "We think it may have something to do with the fact that there's a lot of news about interest rates and lending rates coming up."
Antunes said the market consensus that interest rates will rise this year has also spurred concern about a correction in Canada's booming housing market. Changes in mortgage rules and revised sales-tax regimes in Ontario and British Columbia have added to the concern about falling demand.
"Households are very heavily invested in their homes and if they feel there may be some correction to housing prices that may have played a role in the numbers," he said.
The quarterly Business Monitor survey done in March by the Canadian Institute of Chartered Accountants and Royal Bank of Canada, however, did not reflect the concern. The survey seeks the opinions of executive chartered accountants who have first-hand knowledge of the financial performance of Canadian companies.
Sixty-one percent of executive chartered accountants surveyed said they were optimistic about the economy over the next 12 months, up from the 48 percent who expressed optimism in the final quarter of 2009. The figure was in stark contrast to the 4 percent who were optimistic in the first quarter of 2009.
"The latest findings clearly underscore a growing comfort with the Canadian economy," Kevin Dancey, president and chief executive of the Canadian Institute of Chartered Accountants.
U.S. consumer confidence rises to 57.9 in April, highest since September 2008
Anne D'Innocenzio, The Associated Press NEW YORK, N.Y. - Americans' confidence in the economy rose in April to its highest level since September 2008, just as the financial crisis escalated, according to a private research group.
The upbeat reading, combined with bullish earnings reports this week from companies ranging from Whirlpool Corp. to UPS Inc., offers more hope the economic rebound is gathering steam. Meanwhile, a key home price index reported its first annual increase in more than three years, though it's too early to say the housing market is recovering.
The U.S. Conference Board, a private research group based in New York, said Tuesday that its consumer confidence index increased to 57.9, up from a revised 52.3 in March. The April reading is the highest since September 2008's 61.4. That was when the financial crisis intensified with the collapse of Lehman Brothers, sending confidence into freefall the following month. Economists surveyed by Thomson Reuters were expecting a reading of 53.5.
The index — which measures how shoppers feel about business conditions, the job market and the next six months — had been recovering fitfully since hitting an all-time low of 25.3 in February 2009. Economists watch the number closely because consumer spending including health care and other major items, accounts for about 70 per cent of U.S. economic activity.
April's reading is still far from what's considered healthy. A reading above 90 indicates the economy is on solid footing; above 100 signals strong growth. Still, the monthly survey of consumers showed that consumers' current and short-term concerns about jobs and the overall economy are easing.
Real estate fraud rare but experts warn homeowners to be on the lookout
by Malcolm Morrison, THE CANADIAN PRESS
"I compare the fraud issue to the lottery," said Ray Leclair of title insurance provider TitlePlus.
"There are millions of transactions in Ontario alone in real property every year. A very minute number of those are fraudulent. So for the public to win or lose in the fraud lottery, the odds are very low."
But it's not an experience you would ever want to go through, he said, even though governments have put in place some measures to make it easier for people to regain ownership title that have been fraudulently pilfered.
"At the end of the day, even if you get your title back, there's the question of (legal fees)."
There are two types of real estate fraud to be concerned about - mortgage fraud and title fraud.
Mortgage fraud is something that is more troublesome for lenders. It involves a fraudster leaving the title or ownership of a property in the current owner's name but mortgaging it without their knowledge, sometimes by fraudulently discharging the existing mortgage. It can also happen when a would-be homeowner falsifies information to get a mortgage.
"That's just a fact of lending," said Laura Parsons, manager of specialized sales for Bank of Montreal in Calgary.
"There are people out there who normally wouldn't get a loan granted to them but because they are fraudulent and give incomplete information or they don't let the lender know all the information, they end up getting approved."
What the average homeowner has to look out for is title fraud. It happens when a fraudster changes the ownership or title of a property into another name in order to sell or refinance the property.
According to the Ontario Ministry of Consumer Services, "it often involves fraudsters using stolen identity or forged documents to transfer a registered owner's title to himself or herself securing a mortgage on the property and then disappearing with the mortgage proceeds."
Parsons calls it a form of identity theft.
"So they know all the details of the person, they go to the land title registry, they pull a title and they find out that there is no encumbrance on the property," she said.
"Now they have basically a ticket to sell the property, so they go in and they can change home ownership."
If the fraudster has enough information, they can change ownership of the property at a land titles office, put a property in their own name. Then they either sell it or go to the bank and get a homeowner line of credit or a mortgage put on that property for their own purposes.
You would think that you would know immediately if you had been scammed, but fraudsters aren't entirely stupid and there are ways to delay finding out.
"They have gone in and taken the title or put a mortgage on and then they will pay it for two or three months," said Leclair.
In the meantime, you're getting all your bills and everything looks fine.
"In the meantime, your mortgage is gone and there's a new mortgage on there - it's going to be paid for two or three months and then two or three months later, they default, there's two or three months waiting time before the bank actually does something so six months, nine months down the road, you now get an angry bank calling you, saying they're going to sell, or you get someone showing up at the door saying you're out the door."
Leclair also pointed to a fraud victim in Vancouver who started wondering why he wasn't getting his property tax bill.
He called city hall and was told "well, you sold the property."
"It's very ordinary things. You don't get a water bill, you don't get those kind of things that could be a hint that something has changed along the way."
Leclair notes that while the government has systems in place to help you if you are defrauded, it's up to the homeowner to monitor. Both he and Parsons emphasized the importance of protecting your private information as a way to avoid becoming a target of real estate fraud.
Parsons said, in particular, you want to keep your social insurance number confidential. And that means not carrying around your SIN card in your wallet where it could be lost or stolen.
"And now with these recycling bins, people are throwing more and more of their mail and personal information in the blue bin - people should get a shredder - $149 buys you some security," she said.
And consider title insurance. Not only does it protect you now and in the future, it provides coverage for fraud that may have occurred prior to your purchase of your home.
Leclair said the insurance costs about $200 to $300, depending on the value of the property, and it is good for as long as you own the home.
And one of the worst things you can do?
"I've read articles where people say the best protection against fraud is to get the biggest mortgage you can on your property - it's a fallacy," said Leclair.
"People figure, well if there's no equity in the property, how can they steal it? Well they can go in and fraudulently discharge the mortgage. I laugh every time I see this. Discharging a mortgage is probably simpler than anything else. It's the bank's signature, it's very easy to imitate. Who knows what a bank's signature looks like?"
http://ca.finance.yahoo.com/personal-finance/article/cpmoney/real-estate-fraud-rare-but-experts-warn-homeowners-lookout-20100408
Beware fraudsters' dirty tricks
A hot real-estate market has lit a fire under criminal activity
Be warned: Booming markets bring not only higher home prices but often a significant increase in residential real-estate fraud.
That is the word coming out of such disparate organizations as title insurance companies, mortgage insurance firms and law enforcement agencies.
“Yes indeed, we see instances of fraud rise with booming markets, especially in major cities,” says Ray Leclair, vice-president at TitlePLUS, the title insurance arm of Lawyers Professional Indemnity Co., which provides lawyers their version of medical malpractice insurance.
But, he adds, real-estate fraud is not confined exclusively to any upsurge in prices. “It can also take place years after you have bought a home, at a time when homeowners would not expect it.”
While there are no hard statistics on real-estate and mortgage fraud for Canada, in the United States estimates of annual losses run between $4-billion (U.S.) and $6-billion a year. In June, 2008, the U.S. Federal Bureau of Investigation had 42 working groups investigating 1,380 cases – and that was after the U.S. real-estate bubble burst.
“Industry statistics suggest mortgage fraud alone results in annual losses in the hundreds of millions of dollars,” Mr. Leclair says. “In many cases there is little publicity because banks are concerned about maintaining customer confidence.
“They just quietly absorb the losses.”
If you want another statistic, think about this one. Many forms of real-estate fraud require the participation of a lawyer. Last fall, The Globe and Mail reported that in Ontario, between 100 and 140 lawyers were under investigation for complaints having to do with alleged mortgage irregularities.
So what is real-estate fraud?
Criminals are an inventive lot. If there is money to be made, they will find ways to get at it. When 1930s bank robber Willie Sutton was asked why he robbed banks, his answer was a no-brainer. “Because that is where the money is,” he said.
Same with real estate. When the average home price in the GTA is well above $450,000 and a $400,000 mortgage is at stake, that is a powerful incentive for a few days’ work for those with a criminal bent.
The Criminal Intelligence Service Canada (cisc.gc.ca), a group that represents 308 law enforcement agencies across Canada, lists half a dozen schemes that have made villains millions in recent years. They range from tarting up a grow-op house and selling it complete with mould and structural damage to unsuspecting buyers to “fraud for shelter.”
In those cases, a buyer wildly overstates family income, buys a home, gets a mortgage and then promptly stops paying the bills. These relatively garden-variety criminals can often get six months free of basic living costs before they are forced to move on.
More common scams are variations on the Oklahoma, in which a property is sold to a fictitious buyer, who then arranges a large mortgage, pockets the proceeds and disappears. This may also involve a number of equally fictitious buyers flipping the property one to another. Each sale raises the purchase price until the final sale involves a whopping big mortgage.
This crew then pockets the proceeds and vanishes.
Then there are those involving identity theft. Criminals find ways – almost always involving bent lawyers – to change the name of the registered owner on the title to the property. They then obtain a mortgage or even sell the home, collect the proceeds and move on.
The real owners only find out when the mortgage company starts sending nasty letters about missed mortgage payments or the new owners show up with a moving van.
Is there any way to protect homes against fraud? Not surprisingly, Mr. Leclair is a keen proponent of title insurance. Yes, lawyers are supposed to do due diligence, but all they can certify is that everything was ship-shape on closing day.
Title insurance, however, safeguards against fraud, misrepresentation or error as long as a person owns a home.
Title insurance can even kick in should a builder make an unintentional error in paperwork. Mr. Leclair talks about a recent case where a client bought a condo with a lake view and paid extra for it. On moving day, however, his key did not fit the door of the suite he thought he bought. It did, however, open the door to the one across the hallway with a lovely view of a parking lot.
“It was a clerical error,” Mr. Leclair says. “It was not intentional.”
TitlePLUS worked with their client and the developer to find a resolution. The client liked the suite, so a significant reduction in purchase price was arrived at.
“Title insurance can also cover a huge range of small items,” Mr. Leclair says. “We get lots of cases involving things like the vendor not paying taxes or utility bills as claimed or buyers not given the parking spots they were entitled to.”
He suggests simple preventative measures such as checking credit scores regularly to spot inquiries you do not recognize; protecting personal documents so no one can access birth certificates, social insurance numbers, bank statement or credit card information; and keeping an eye on the mail lest property tax and utility bills you do not recognize show up.
“Real-estate fraud is one of those crimes that can happen to anyone,” he says. http://www.theglobeandmail.com/real-estate/beware-fraudsters-dirty-tricks/article1535677/?cmpid=rss1
Tuesday, April 27, 2010
Financial Update For April 27, 2010
ReMax reports record-breaking sales of luxury homes
• TSX +41.33 to 12,280.97 finished higher for a sixth straight session, helped by strength in consumer discretionary issues and financials -its highest close since September 2008
• DOW +.75 as bank shares fell on fears that financial reforms making their way through Congress would curb profits.
• Dollar -.05c to 99.86cUS
• Oil -$.92 to $84.20US per barrel.
• Gold +$.40 to $1,153.50 USD per ounce
ReMax reports record-breaking sales of luxury homes
Steve Ladurantaye Globe and Mail
Luxury homes sales not only recovered from recessionary depths in the first quarter of this year, ReMax Canada said they shattered previous all-time records in most Canadian cities studied.
Attributing the upswing in sales to “improved economic performance, increased personal wealth, immigration and foreign investment” in its Upper End Market Trends report, ReMax Canada said previous sales records for high-end homes broke records in nine of the 13 regions examined. The real estate sales company didn't provide statistics to back up the reasons for the bounce in sales, but did allow that the comparisons to last year's first quarter are flattering because very few people were buying and selling through the recession.
ReMax's definition of a luxury home varies by market, from $400,000 in St. John's to $2-million in Greater Vancouver.
Those who returned to the market in the first quarter were able to take their time making up their minds because the market is balanced, ReMax said. This contrasts with the broader market, where analysts worry that low interest rates have created an unsustainable bubble as buyers rush to get in on what they see as a market with limited downside.
This has led to a rapid increase in average national sale prices - almost 20 per cent in the last year - as buyers bid each other higher in bidding wars. The market survey doesn't mention anything about the rapid rise in prices, and the role the appreciation may have played in pushing more homes into so-called luxury territory. http://www.theglobeandmail.com/report-on-business/remax-reports-record-breaking-sales-of-luxury-homes/article1546686/
Mortgage rates on the rise again
Garry Marr, Financial Post
A new survey says more than four out of five home buyers feel comfortable with their debt, but another hike in interest rates might get Canadians squirming next time they're polled.
Canada and Mortgage and Housing Corp. surveyed 2,503 mortgage consumers between Feb. 11 and Feb. 28 and found 81% were comfortable with their current debt levels. However, the survey was done before three successive hikes in interest rates that have pushed the five-year, fixed-rate, closed mortgage from 5.25% to 6.25% in less than a month.
"Rates were low throughout most of the time [of the survey]," said Pierre Serré, CMHC vice-president of insurance products and business development, adding it was unclear whether the 81% figure might fall because of the hike.
Based on an average Canadian home-sale price of $340,920 in March and a 5% down payment, the minimum allowed, mortgage payments for a five-year, fixed-rate product have climbed almost 10%.
As it has throughout this rate-hike cycle, Royal Bank of Canada got the ball rolling Monday by adding another 15 basis points to its fixed-rate product. Toronto-Dominion Bank was next, with most of banks expected to follow shortly.
The hike means that a typical Canadian homeowner with a 25-year amortization with that $340,920 home and 5% down is now paying $2,120.54 per month in mortgage costs, up sharply from the $1,930.03 it was costing them before the latest hike in rates. The dramatic shift is likely once again to push people back toward a variable product linked to prime.
The same mortgage based on the current prime rate of 2.25% would cost only $1,410.84 to carry. Still, many economists predict the Bank of Canada will begin raising its rates as early as June, lifting the prime rate.
The survey also found homebuyers are relatively cautious when taking out their mortgages. Only 20% of them took out mortgages based on amortizations of longer than 25 years. CMHC also said 68% of consumers plan to pay off their mortgage sooner than current amortizations.
"In talking to some lenders I've heard of lots of people who get extended amortizations but accelerate their payments," Mr. Serré said.
The survey came out the same day as new statistics from Re/Max which show the high-end of the housing market continues to soar. Re/Max surveyed 13 markets in the first quarter and found records for high-end homes sales in nine of them.
Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada didn't think the latest hike in rates would do anything to slow the market. "It's still minor. Interest rates overall, as far as I'm concerned, are still at historic lows," he said. "Are they climbing up? Yes. It's time to consider locking in. Are they going to skyrocket? I don't think so."
Bernice Dunsby, Royal Bank's director of home equity, said the one percentage point rise in rates was not that large a leap on a historical basis.
"It has been widely anticipated that rates would be on the rise. The cost of funds just continues to raise," said Ms. Dunsby. "The thing our clients are looking for is options that provide additional rate protection."
She said customers have been opting for mortgage products that divide their debt in half, some of it going long and some of it going short. But the percentage of customers just going short continues to slide with variable rate products becoming less popular at Royal Bank.
Read more: http://www.financialpost.com/news-sectors/story.html?id=2952380#ixzz0mIZFfOdu
Have a great day!
• TSX +41.33 to 12,280.97 finished higher for a sixth straight session, helped by strength in consumer discretionary issues and financials -its highest close since September 2008
• DOW +.75 as bank shares fell on fears that financial reforms making their way through Congress would curb profits.
• Dollar -.05c to 99.86cUS
• Oil -$.92 to $84.20US per barrel.
• Gold +$.40 to $1,153.50 USD per ounce
ReMax reports record-breaking sales of luxury homes
Steve Ladurantaye Globe and Mail
Luxury homes sales not only recovered from recessionary depths in the first quarter of this year, ReMax Canada said they shattered previous all-time records in most Canadian cities studied.
Attributing the upswing in sales to “improved economic performance, increased personal wealth, immigration and foreign investment” in its Upper End Market Trends report, ReMax Canada said previous sales records for high-end homes broke records in nine of the 13 regions examined. The real estate sales company didn't provide statistics to back up the reasons for the bounce in sales, but did allow that the comparisons to last year's first quarter are flattering because very few people were buying and selling through the recession.
ReMax's definition of a luxury home varies by market, from $400,000 in St. John's to $2-million in Greater Vancouver.
Those who returned to the market in the first quarter were able to take their time making up their minds because the market is balanced, ReMax said. This contrasts with the broader market, where analysts worry that low interest rates have created an unsustainable bubble as buyers rush to get in on what they see as a market with limited downside.
This has led to a rapid increase in average national sale prices - almost 20 per cent in the last year - as buyers bid each other higher in bidding wars. The market survey doesn't mention anything about the rapid rise in prices, and the role the appreciation may have played in pushing more homes into so-called luxury territory. http://www.theglobeandmail.com/report-on-business/remax-reports-record-breaking-sales-of-luxury-homes/article1546686/
Mortgage rates on the rise again
Garry Marr, Financial Post
A new survey says more than four out of five home buyers feel comfortable with their debt, but another hike in interest rates might get Canadians squirming next time they're polled.
Canada and Mortgage and Housing Corp. surveyed 2,503 mortgage consumers between Feb. 11 and Feb. 28 and found 81% were comfortable with their current debt levels. However, the survey was done before three successive hikes in interest rates that have pushed the five-year, fixed-rate, closed mortgage from 5.25% to 6.25% in less than a month.
"Rates were low throughout most of the time [of the survey]," said Pierre Serré, CMHC vice-president of insurance products and business development, adding it was unclear whether the 81% figure might fall because of the hike.
Based on an average Canadian home-sale price of $340,920 in March and a 5% down payment, the minimum allowed, mortgage payments for a five-year, fixed-rate product have climbed almost 10%.
As it has throughout this rate-hike cycle, Royal Bank of Canada got the ball rolling Monday by adding another 15 basis points to its fixed-rate product. Toronto-Dominion Bank was next, with most of banks expected to follow shortly.
The hike means that a typical Canadian homeowner with a 25-year amortization with that $340,920 home and 5% down is now paying $2,120.54 per month in mortgage costs, up sharply from the $1,930.03 it was costing them before the latest hike in rates. The dramatic shift is likely once again to push people back toward a variable product linked to prime.
The same mortgage based on the current prime rate of 2.25% would cost only $1,410.84 to carry. Still, many economists predict the Bank of Canada will begin raising its rates as early as June, lifting the prime rate.
The survey also found homebuyers are relatively cautious when taking out their mortgages. Only 20% of them took out mortgages based on amortizations of longer than 25 years. CMHC also said 68% of consumers plan to pay off their mortgage sooner than current amortizations.
"In talking to some lenders I've heard of lots of people who get extended amortizations but accelerate their payments," Mr. Serré said.
The survey came out the same day as new statistics from Re/Max which show the high-end of the housing market continues to soar. Re/Max surveyed 13 markets in the first quarter and found records for high-end homes sales in nine of them.
Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada didn't think the latest hike in rates would do anything to slow the market. "It's still minor. Interest rates overall, as far as I'm concerned, are still at historic lows," he said. "Are they climbing up? Yes. It's time to consider locking in. Are they going to skyrocket? I don't think so."
Bernice Dunsby, Royal Bank's director of home equity, said the one percentage point rise in rates was not that large a leap on a historical basis.
"It has been widely anticipated that rates would be on the rise. The cost of funds just continues to raise," said Ms. Dunsby. "The thing our clients are looking for is options that provide additional rate protection."
She said customers have been opting for mortgage products that divide their debt in half, some of it going long and some of it going short. But the percentage of customers just going short continues to slide with variable rate products becoming less popular at Royal Bank.
Read more: http://www.financialpost.com/news-sectors/story.html?id=2952380#ixzz0mIZFfOdu
Have a great day!
Subscribe to:
Posts (Atom)
