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101 Series: Why You Should Use a Vancouver Mortgage Broker

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Why You Should Use a Vancouver Mortgage Broker

It’s a simple fact that over 50% of Canadians use their own bank to obtain their first mortgage.

It’s a common practice adopted by many first time mortgage borrowers because it’s a convenient place to apply since they know you.

But, did you also know that if you use your bank and you accept the rate they offer, it could end up costing your thousands of out of pocket dollars because you did?

Many Canadians are under the impression that it’s better to use their bank because you are under the impression you will have to pay a commission to a mortgage broker such as myself.

Vancouver Mortgage Brokers Don’t Charge You a Fee

That’ right! You don’t pay us to do this work for you because we earn our commission directly from the lender. The commission we receive has nothing to do with any costs that are reflected on your mortgage. They pay us this commission because we brought the business to them.

The commission we make is specifically based on the size of the mortgage and has nothing to do with interest rates. Mortgage brokers have to go through a stringent process to get a license, so you know that you can expect a high degree of competent professionalism when you use our services.

Bottom line – you pay nothing to use our services!

A Vancouver Mortgage Broker Offers Greater Convenience

Let’s say you did go through your bank. You went through all the ropes and put your paperwork together. You may have met with them several times to clarify aspects of your application or to sign some papers. You have to take time off from work to meet with them during business hours.

You go through all this and what might happen? They turn down your application. So, what happens next? You have to go through all this rigmarole to do it all again with no guarantee.

By using the services of a Vancouver mortgage broker, you only have to complete all the paperwork once. Then we take over and do all the rest for you. We have access to numerous lenders and can save you a lot of legwork because we can repeat the process without having to inconvenience you with a bunch of stressful appointments.

Many people who apply for mortgages also happen to be either single or self-employed. Other applicants have less than stellar credit history. These and other issues can present new hurdles which you might not be prepared to address.

As the banks are more stringent when it comes to people in this boat, I can advise you on how to manage these hurdles with a lot less hassle.

A Vancouver Mortgage Broker Can Find You Cheaper Mortgage Rates

We not only have access to many different types of lenders, we are also apprised by our lenders about any changes in interest rates on a daily basis. We have hands-on information on the most updated mortgage rates from all our available lenders.

We can find you rates which are cheaper than traditional lenders such as banks. This means we can save you money by seeking out and finding you the best rates.

Why Should You Use a Mortgage Broker?

It boils down to 3 basic reasons. We don’t charge you anything. We offer greater convenience to ease you through the mortgage process. We can find you better rates and have access to multiple lenders.

Need a Vancouver mortgage?  Give me call and let us help!

Q2 2013 Bank Earnings – Mortgage Morsels

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Q2 2013 Bank Earnings – Mortgage Morsels

By Steve Huebl & Rob McLister, Editor,

CanadianMortgageTrends.com

If there’s one recurring mortgage theme from the Big 6 banks’ recent earnings announcements, it is “stress testing.” That’s where a bank simulates extremely adverse economic scenarios in a statistical model and then watches how its mortgages perform.

Stress testing has been a buzzword of late. Banks have been talking up their stress tests to show investors that things will remain under control if the floor drops out in the housing market.

Among other trends this quarter:

• Homeowners are increasingly renewing into fixed rate mortgages, which are more profitable for the banks
• Most banks are posting decreases in their insured mortgage portfolios (not surprising given last year’s insured mortgage rule tightening)

These and other observations can be found in the compilation that follows. It’s the fruit of pouring through quarterly earnings reports, presentations and conference calls. If you’re time-pressed, some of the focal points are highlighted, with our comments in italics. 

*********

 

Bank of Montreal
Q2 net income: $975 million (-5.3% Y/Y)
Earnings per share: $1.42

• BMO’s total Canadian residential mortgage portfolio stood at $81B. (Source)
• BMO said mortgage balances are up 13.7% Y/Y, with balances up 1.9% Q/Q, “reflecting (a) softer market.” (Source)
• 62% of the bank’s residential mortgage portfolio is insured, down from 70% in Q2’12. (Source)
• Average loan-to-value (LTV) on the uninsured portfolio is 59%. (Source)
• 64% of BMO’s portfolio has an effective remaining amortization of 25 years or less. (Source)
• Loss Rates for the trailing 4 quarter period were less than 1 basis point. (Source)
• 90-day delinquency rates have improved, dropping quarter-over-quarter and year-over-year. (Source)
• BMO’s condo mortgage portfolio is $11B with 56% insured. (Source)
• “…we’ve gained share in mortgages by bringing in new customers and encouraging them to borrow smartly with shorter amortization periods, and we’ve executed on cross-sell,” said William Downe, President and CEO. (Source)
• BMO said, “Tighter mortgage rules have restrained activity in the housing market, while weak global demand is holding back exports.” It added that “Strength in business loan growth should partly offset a slowing in consumer loans and residential mortgages.” (Source)
• BMO on regulatory changes: “In 2012 new residential real estate lending rules were introduced for federally regulated lenders in Canada including restrictions on loan-to-value (LTV) for revolving HELOCs, waiver of confirmation of income, debt service ratio maximums, as well as maximum amortization of 25 years and maximum home value of $1 million for high ratio insured mortgages (LTV greater than 80%). The regulatory changes resulted in some adjustments to loan underwriting practices including reducing the maximum LTV on revolving HELOCs to 65% from 80% previously.” (Source)
• BMO on stress testing:  “Residential mortgage and home equity line of credit (HELOC) exposures are areas of interest in the current environment. BMO regularly performs stress testing on its mortgage and HELOC portfolios to evaluate the potential impact of tail events. These stress tests incorporate moderate to severe adverse scenarios. The resulting credit losses vary depending on the severity of the scenario and are considered to be manageable.” (Source)
• “With respect to stress testing our portfolios, in a scenario that could be adverse, when we say that we are able to manage, it’s a combination of things. Firstly, I think even if our losses from that particular segment were to go up – and I’m not talking about the Consumer segment in total, because strangely but logically the losses really do not come out of the residential mortgages or from the HELOCs; they actually are felt more acutely in the Personal lines of credit as well as in credit cards,” Surjit Rajpal, EVP and Chief Risk Officer. (Source)
• Asked about BMO’s systemic problems in the U.S. with product origination, and issues surrounding incompetence around documentation, and whether BMO sees any systemic issues in Canada, Rajpal said: “Not that I can see, but if it was proven that systematically valuations were being done erroneously by somebody, then it could become an issue, but I don’t think that’s the case here; and so, it’s hard to see.” (Source)

CIBC
Q2 net income: $876 million (+8% Y/Y)
Earnings per share: $2.12 a share

• Residential mortgages were down $1.3 billion to $143.7 billion, “primarily due to attrition in our FirstLine mortgage business, partially offset by new mortgage originations through CIBC channels.” This follows a $1.1 billion decline in Q1. (Source)
  (We’ll evaluate CIBC’s mortgage market share losses in an upcoming story.)
• FirstLine mortgages stood at $37.1 billion, down from $48.2 billion a year ago. (Source)
• “Our exit from the FirstLine mortgage broker business continued to progress well, with both conversion volumes and spreads well exceeding our stated targets. The CIBC brand mortgage portfolio grew 12% year-over-year, which represented the 14th consecutive quarter of outperformance versus the industry,” said Kevin A. Glass, Chief Financial Officer and Senior Executive Vice President. (Source)
• 74% of CIBC’s Canadian residential mortgage portfolio is insured, with over 90% of this insurance being provided by CMHC. (Source)
• The average loan to value of its uninsured mortgage portfolio, based on March house price estimates, is 54%. (Source)
• Of CIBC’s $143-billion residential mortgage portfolio, approximately 46% is originated in Ontario, followed by B.C. at 20% and Alberta at 16%. (Source)
• “The credit quality of this portfolio continues to be high, with a net credit loss rate of approximately 1 basis point per annum,” said Thomas D. Woods, Chief Risk Officer and Senior Executive Vice President. (Source)
• Condos account for approximately 12% of the bank’s total mortgage portfolio, with about 72% of those in Ontario and B.C. (Source)
• 75% of the condo sub-portfolio is insured, and the uninsured portfolio has an average loan to value of 54%. (Source)
• David Williamson, Senior Executive Vice President and Group Head of Retail & Business Banking: “…With the runoff of the FirstLine book and a move to our branded products, happening in mortgages…the mix is moving more to profitable areas. And that’s where we get this kind of tailwind we’ve got, which is the impact of moving out of FirstLine and having a desire to get 25% of that into the higher-margin branded products. As I mentioned, we’re running quite a bit higher retention than the 25% and that’s having quite a positive impact. That’s one of the things that’s helping our NIMs, and frankly, offsetting the headwind, which everyone has, which is a slow interest rate environment.” (Source)

National Bank of Canada
Q2 net income: $434 million (-22% Y/Y)
Earnings per share: $2.49 a share

• Total revenues on personal banking were up $15 million or 2%, mainly due to higher consumer and mortgage loan volumes. (Source)
• Residential mortgages rose 4% Q/Q and 13% Y/Y to $34.8 billion in Q2. (Source)
• The loan-to-value for HELOCs and uninsured mortgages was approximately 59% and 55%, respectively.
• Mortgages in Toronto and Vancouver represented only 11% and 2% of National Bank’s books, respectively. 67.9% of National’s mortgage portfolio is in Quebec. (Source)
• During the six months ended April 30, 2013, the Bank acquired a portfolio of residential mortgage loans with a higher credit risk profile for a total amount of $328 million. (Source) “It’s one of three or four small portfolios that we purchased typically from banks that were exiting the Canadian market,” said William Bonnell – EVP, Risk Management. (Source)
•  The Bank does not have any significant direct position in residential and commercial mortgage-backed securities that are not insured by CMHC. (Source)
• “…the risk of economic slowdown is real and could adversely affect the profitability of the mortgage portfolio. In stress test analyses, the Bank considers a variety of scenarios to measure the impact of adverse market conditions. In such circumstances, our analyses show higher loan losses, which would decrease profitability and reduce the Bank’s regulatory capital ratios. To counteract the negative impact of an economic slowdown, the Bank has acted preventively by defining a contingency plan to guide its response in such an event.” (Source)

Royal Bank of Canada
Q2 net income: $1.94 billion (+26% Y/Y)
Earnings per share: $1.27

• Residential mortgage volume rose to $177 billion in Q2, up 5% Y/Y from $169 billion. Average LTV was unchanged at 47%. (Source)
• 42% of RBC’s residential mortgage portfolio was insured in the quarter, up from 40% in Q1. (Source)
• RBC repeated its wording from previous quarters, saying it has a “well-diversified mortgage portfolio across Canada” and that it continues to conduct “Ongoing stress testing for numerous scenarios including unemployment, interest rates, housing prices.” (Source)
• RBC states it has “Strong underwriting practices with all mortgages originated through our proprietary channels.” (Source)
• “We continue to see stable performance in our retail portfolios with provisions on residential mortgages of 2 basis points and 279 basis points for (credit) cards,” said Morten N. Friis, Chief Risk Officer. (Source)
• Peter Routledge from National Bank Financial asked this question: “Is there any reason to think that there is a systemic issue with appraisals that might rebound on the banks in the form of the CMHC refusing claims…How likely an outcome is that?” 
  
  Gordon M. Nixon – President and CEO, responded:  “…Most of the banks, including ourselves, use the emili appraisals service, which is CMHC’s own appraisal…They would do their own due diligence with emili. So, I don’t think it would be the nature of the appraisal service. I think where operational risk evolves is the representation of the fact. So, if they were to go back to the loan application and find that the facts on income or on rental versus cost, other costs are different than what was presented during the adjudication process, then I think you have technically an opportunity to negate the claim. But I don’t think it’s just on how you use appraisal. It’s really the adjudication process that would create most of the operating risk, which is why our bank, including I’m assuming most others, are very careful about our facts that are being submitted and how we put those applications together.”
  
  Morten N. Friis – Chief Risk Officer, added:  “…In terms of the use of emili…it is one of several tools that we use, depending on the property, we have full appraisal…So emili is a supplemental tool that we use in the appraisal process. To reiterate Dave’s point, the risk around refusal on the insurance all relates to the accuracy of the documentation that we provide. We have ongoing audits and reviews with CMHC and our track record with them is extremely strong. So, the point on the risk put-back (of claims to the bank), first of all, would be completely inconsistent with our historical experience with them, and as Gord was saying,I think it’s an extreme tail risk…They obviously as an insurer have some ability to dispute claims, but I think our track record on accurate documentation is pretty strong.” (Source)

Scotiabank
Q2 net income: $1.6 billion (+9.6% Y/Y)
Earnings per share: $1.23

• The bank’s residential mortgage portfolio totalled $188 billion in Q2, a 27% increase year-over year (or 7% increase excluding ING). Of this total, $169 billion is related to freehold properties and $19 billion is related to condominiums. (Source)
• Of Scotia’s residential mortgage portfolio, 58% is insured, unchanged from Q1. (Source)
• The uninsured portion has an average loan-to-value ratio of approximately 55%. (Source)
• “The credit risk in the Canadian residential mortgage portfolio remains benign and delinquencies are continuing to decline,” said Robert H. Pitfield, Group Head and CRO. (Source)
• Pitfield added: “The Canadian Housing market generally remains balanced between supply and demand. Reasonable economic performance has allowed consumers to manage debt levels well. However, we do expect some softness in the Canadian Housing market in the short-term.” (Source)
• “Credit quality and performance of the residential portfolio remains strong, a disciplined and consistent underwriting standards have resulted in extremely low loan losses and again have been stressed under a series of severe tests which confirm the appropriateness of our risk appetite,” Pitfield continued. (Source)
• Sean McGuckin, EVP and CFO, said, “In the last nine months on the mortgage portfolio you’ve seen that the customers who are renewing their mortgages or came in on a variable basis are now taking fixed term mortgages, which are giving also additional better margins.” (Source)

TD Bank
Q2 net income: $1.72 billion (+1.8% Y/Y)
Earnings per share: $1.78

• TD’s residential mortgage portfolio was up slightly to $156 billion in Q2, up from $155 billion in the previous quarter and $145 billion in Q2 2012. (Source)
• TD says its real estate secured lending (RESL) volume increased 4% Y/Y (Source)
• The bank’s 3% Y/Y growth in personal lending reflects “a slowing housing market and continued consumer deleveraging.” (Source)
• TD adds its RESL portfolio, including securitized mortgages, benefits from the fact that 68% of the portfolio is government insured, and 73% of HELOCs are in first lien position (down from 75% in Q1) and a further 23% are in second to a TD first (up from 20%). (Source)
• When asked about the substantial decrease in TD’s insured portfolio and increase in its uninsured portfolio, Tim Hockey, Group Head, Canadian Banking, Auto Finance, and Credit Cards, responded: “We’ve been quite concerned about the overall growth rate of real estate secured lending for the last number of years. And so the regulatory changes that have actually been taking place over a number of years, quite prudently implemented over a long period of time, are actually having almost precisely the effect that we would have expected, which is a slow landing.” (Source)
• He added: “…Because of the changes around the high ratio mortgage versus conventional, all the mortgage originations are down year-over-year, but conventional are down less. So in other words, what you would ascribe to be first-time home buyers have actually had more of an impact, which you could say is probably bang-on what the regulatory changes would have expected.” (Source)
• “We’re clearly seeing that even notwithstanding a low interest rate environment, and obviously there’s been lots of conversation about that rate, that consumers are not backing up the truck and actually creating a frothy housing market as low interest rates are usually incenting them to do.”
• “In terms of channel originations, all channels are down year-over-year. In our particular case, our broker channel is down less, but that I would ascribe much more to service improvements and changes we’ve made in our own channels as opposed to an industry phenomenon,” Hockey continued. (Source)
  (TD’s broker channel has seemed to get more competitive this year.)
• “I would say pricing is aggressive, but not unduly so for a spring market. And clearly it was a cold spring, so that does have an effect on the activity… There’s some speculation [on], is there going to be a resurgence? But if you talk to Craig Alexander at TD Economics, he would say our expectation is still for having a fairly tepid spring mortgage market.” (Source)
• “Every time we do [stress tests], and we’ve become quite expert at doing stress tests, it continues to show that in Canada, given the nature of this business, given the government guarantees and the insurance portfolio, that we continue to make money in Canadian banking overall – we don’t go into the negative.”
• “…Three or four years into the (mortgage rule) changes, [the market is] moderating exactly as expected. But if we’re wrong, at whatever percentage of likelihood that is, then we still feel good about the stress test(s).” (Source)
• “On the stress tests, it’s really not the mortgage portfolio that you’re worried about…If you paint that type of scenario where you have such a reduction in house prices across the country, it’s really your other credit portfolios that would be more of a concern – the unsecured credit portfolios, then your commercial portfolio. So we stress that as well, and really to the deepest scenario that we can paint, the Canadian operations remain profitable. It’s not a good picture but it’s a profitable picture,” said Mark Chauvin, Group Head & Chief Risk Officer. (Source)

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Note: Transcripts are provided by third parties like Morningstar. Their accuracy cannot be 100% assured.

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By Steve Huebl & Rob McLister, Editor,

CanadianMortgageTrends.com

 

 

Reasons to Avoid FSBO (For Sale by Owner) – Consult with a Vancouver Mortgage Broker

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Reasons to Avoid FSBO (For Sale by Owner)

For Sale by Owner or FSBO might sound like a good idea on paper but it could it end up costing you big time.

One of the major appeals of FSBO is that people believe it will make them more money because you don’t have to pay a commission to a realtor. Sounds like a great idea, because how hard can it be?

You probably think all you have to do it advertise the home on some website, put a “For Sale” sign on the yard, or an ad in the local paper. Prospects drop by and someone falls in love with your house and you sell it. It sound simple but here a few hard facts you should consider before you attempt to do so.

You Will Not Get a Good Real Estate Listing

Realtors have one significant advantage over you and that’s because only a licensed real estate broker can access the Multiple Listing Service which is also known as the MLS for short.

You can’t! And, that is a big disadvantage because this is actually what most serious homebuyers use when they are looking to buy a home. Also, if you think you’re going to be avoiding out of pocket expenses then think again. Listing you home on any other website or in the papers is going to cost you money.

FSBO’s Aren’t Very Reputable

Credibility is a very big concern when you are investing $500,000 in buying a new home. The Vancouver real estate market is hot which means home prices are high. Buying a home is the biggest single investment that most people make in their lifetime.

Let’s face it – is a new buyer really going to believe you when it comes to making a full disclosure about any issues they should know about when they are buying a house from a complete stranger? Although I have no doubt that most people are relatively honest, it’s just bad business if you don’t disclose everything that’s negative about your home.

You could end with more costly litigation issues because you could end up being sued, and it might not even have been your fault. The issue or problem might only have appeared after you sold the house and you had no legitimate knowledge about it. You might escape having to pay a judgement, but there’s still no avoiding the costly legal fees involved.

 Do You Have the Time It Takes to Sell a Home?

Real estate agents work wacky hours. They work when their clients need them and not the other way around. From evenings and weekends, when a client wants to see a house, it’s their job to do their best to accommodate that client.

And, if you and your partner are working, will you be able to take the time from work to show someone your home? Are you prepared to give up your evenings and weekends to accommodate a prospective buyer?

Are you really going to be getting quality viewers or just a bunch of time-wasting curious tire kickers who have nothing else to do? A real estate agent gets a feel about their clients and in most instances their clients are serious about buying, looking at and possibly putting in a bid on your home.

Another question you might want to ask yourself is whether you really know what it takes to prep a home for sale? If you don’t know what you’re doing and what it takes to sell a home, then you could end up wasting a lot of your valuable time and getting nowhere in the end.

Real estate agents are trained at their job and know what they’re doing so save yourself a bunch of headaches and hire a professional to the job for you.

101 Series – How to Buy a Vancouver Home with a Poor Credit Score – Bruce Coleman Vancouver Mortgage Broker

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How to Buy a Vancouver Home with a Poor Credit Score

Spending beyond your means is common today. Sometimes you get financially jammed up and get behind on those blasted credit cards and other bills.

This scenario can negatively affect your mortgage application. If you’re still struggling to make ends meet then buying a home should maybe be put on hold.

But, if you’re back on track and caught up on your debts then maybe you might be ready to tackle a new home. Your credit score is a reflection of how well you can manage the responsibility of taking on a mortgage.

There are two strategies that you can adopt to improve your chance of getting approved by lenders as the new B20 regulations (Underwriting Guidelines for Residential Mortgages) introduced by the Feds have made getting approved even more of a challenge.

Worst Case Scenario – Recent Bankruptcy

If you’ve recently declared bankruptcy or have made a credit proposal, then your best strategy to use in not only getting approved but qualifying for a decent rate is to hold off and wait it out for awhile.

Your only option at best in these circumstances when it comes to applying for Vancouver home mortgages is to hope that you get approved for a subprime rate. These were somewhat easier to get before the new regulations.

Right now however, it’s a tough sell as many lenders have tightened their belts and are performing a more rigorous due diligence when it comes to applications.

The majority of conventional lenders won’t even give you the time of day until you’ve managed to get 2 years beyond your bankruptcy discharge or credit proposal. You will also need to have qualified for at least 2 sources of credit that have at least a $1000 or $2000 limit with a 2 year track history of paying your debt on time.

If this fits your situation then you might be concerned how you are even going to get approved for any credit card. Well, you can as there are credit cards which you can apply for and these are called “secured credit cards.”

These “secured” credit cards require a security deposit before you are approved but they can help reinstate your credit rating and get you back in financial shape again. You also want to make certain that you choose a lender which will guarantee they will refund your security deposit after a certain period of time.

To rebuild the confidence in lenders you need to make sure that all your bills are paid on time including your household bills so you can rebuild your credit score again. You have to make a plan and stick to that plan and above all else you must be patient.

The More Expensive Approach

Even though you have declared bankruptcy or going through the process of a credit proposal it could be that your financial situation has improved so dramatically you believe you can swing a mortgage. You want a home now, but is it possible even with your circumstances?

It’s by no means impossible but you better be prepared to pay the price. Your best bet will be with a subprime mortgage and that’s going to mean higher interest rates. You will also have to be prepared to put down a fairly substantial down payment of at least 25% if not even more before a lender will give your application any credence.

You may also have fork out between 1 – 2%, and maybe even more for a broker or lender’s fee.

It’s a lot tougher to find subprime mortgages but they are out there.

If you got the cash for a down payment and are still determined to buy a home then you most definitely want to use an experience mortgage broker like me to evaluate and assist with your particular circumstances.

Bruce Coleman, Vancouver Mortgage Broker

TD Joins RBC in Raising Fixed Rates – Consult with a Vancouver Mortgage Broker

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TD Joins RBC in Raising Fixed Rates

 By Rob McLister, Editor, CanadianMortgageTrends.com”

Taxpayer-free housing finance change coming to Canada – Bruce Coleman – Vancouver Mortgage Broker

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Finn Poschmann, Special to Financial Post 

Vancouver Mortgage Broker

The Bank of Nova Scotia, a few days ago, received permission from the Securities and Exchange Commission to market to U.S. retail investors what are known as covered bonds. In pursuing SEC approval for market access, Scotia was following a trail blazed by the Royal Bank of Canada; market rumour has it that the Bank of Montreal is on the same path.

There is no madness to the approach; there is method. Change is underway in Canada’s housing finance system. More of it will be done without the taxpayer backing, or insurance, that common financing channels currently enjoy, by way of the Canada Mortgage and Housing Corporation. RBC’s covered bonds are backed by uninsured residential mortgages – so too will be Scotia’s, in future, and so will others. Lenders, mostly banks, who have not already developed the financial instruments and skills to diversify their funding sources will do so, because they must. This is all to the good.

Background. CMHC, a Second World War era Crown agency intended to help returning vets find homes to live in, until recently grew in leaps and bounds.

CMHC became a source of systemic risk because its mortgage insurance products, which insulate lenders from loss when the loans they make go bad, for years backstopped easy loans, mortgages with long amortizations, and cheap home equity lines of credit that Canadian consumers took up in droves.

Scotiabank, RBC to lead the way with covered bond issues

As consumer debt rose, and housing investment bubbled, so did Canadian house prices, over the past decade, well outstripping income growth. Low interest rates helped, but so too did easy credit terms – with few incentives, owing to CMHC insurance, for lenders to hold back on extending them.

Shrinking CMHCs oversized role in the mortgage market, and taxpayer exposure, became overdue, and Ottawa has gently reined in CMHC and ease of access to its insurance products. Consumer debt growth has slowed, and housing markets have tapered – to this point, gently so.

Alongside, the covered bond market has become important to housing finance. Covered bonds are prized by some investors, because normally they are backed by highly rated assets – like good quality residential mortgages – as well as the security of the fully bank-backed, bankruptcy-remote special investment vehicle that sponsors create to fund them. Their dual cover enables the bonds to attract high ratings and go to market at low spreads, sometimes as low as 10 to 20 basis points over similar term government bonds, perhaps 50 basis points in the U.S. market today – and that means cheap financing all round.

However, Canadian banks’ bonds have long have been shut out of some markets. Many European institutional investors, for instance, are forbidden from buying covered bonds sponsored by issuers who do not operate within a legislated covered bond framework that specifies creditor priority in the event of a bankruptcy.

Changing the Canadian legislation to accommodate market needs was a minor matter, and the government did so in Finance Minister Jim Flaherty’s 2012 budget. Also helpful was establishing CMHC as a bond registrar.

The changes, however, came with a quid pro quo attached. Canadian covered bond issuers would get the legislative framework they coveted, but under conditions: no insured mortgages, whether insured by CMHC or others, would be allowed into the pool of assets backing the bonds, and no writing of contractual covered bonds outside of the legislated framework.

RBC was primed to take advantage of the new rules – their covered bond pools, unlike those of all other issuers, already contained no insured mortgages. And, owing to the 2012 legislative changes, that allowed them to be quick out of the gate in acquiring SEC registration and, with it, access to U.S. buyers who seek index-eligible bonds, better price transparency and higher disclosure standards. For other issuers, the route has been and will be longer and more complex.

And there will be bumps. Covered bonds are not for all issuers; the regulatory and legal hurdles are big, and profitability in the market depends on scale. Smaller market issuers of commercial paper backed by insured mortgage assets will likewise be pinched by the prohibition on taxpayer-backed mortgages in their securities. That means less access to funding and bigger spreads for them.

And Canadian banks eventually will bump into the regulatory policy cap on covered bonds: they may not exceed 4% of bank assets, and the mortgage market is many times bigger than that. A move to expand the cap will encounter headwinds from the Superintendent of Financial Institutions. And from deposit insurers, who will worry that the bigger the share of assets that are bankruptcy remote – and therefore remote from depositors’ claims on them in a bankruptcy – the more costly will be deposit insurance for everyone else.

There is a broader challenge, too, surrounding another alternative, developing a residential mortgage-backed securities (RMBS) market that operates without CMHC guarantees – there isn’t one in Canada, and it will take time to develop both the product and investors’ comfort with it.

Which means there is work to do, and policy and legislative change to come in due course. But a path to a housing finance market that is less dependent on government backing is surely the right one, and taxpayers should rest easier when we are safely on it.

Finn Poschmann is vice-president, research, at the C.D. Howe Institute.

Spring puts bounce back in Canadian home prices – Bruce Coleman – Vancouver Mortgage Broker

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TORONTO — Canadian home prices jumped in May from April as a spring rebound in real estate continued in most cities, offsetting a couple of weak markets, the Teranet-National Bank Composite House Price Index showed on Wednesday.

The index, which measures price changes for repeat sales of single-family homes, showed overall prices rose 1.1% in May, the ninth time in 15 years that May prices were up 1.0% or more from April.

The index was up 2.0% from a year earlier, which matched the April rate and marked the smallest 12-month gain since November 2009.

The report suggested Canada’s housing market regained strength in the spring after a long slow winter of decline following the government’s move to tighten mortgage lending rules in July 2012.

Residential real estate activity typically picks up in the spring, and economists have been waiting to see if demand will return after a dramatic slowdown since the middle of 2012.

The report echoed one released on Monday by the Canada Mortgage and Housing Corp that showed housing starts jumped much more than expected in May from April, suggesting residential construction may contribute to Canadian economic growth in the second quarter.

The Teranet data showed prices rose in May from April in nine of the 11 metropolitan markets surveyed, led by a 2.3% gain in Calgary and a 1.9% rise in Edmonton. Prices were up 1.4% in Hamilton, 1.2% in Montreal and Winnipeg, 1.1% in Ottawa, 1.0% in Toronto, 0.8% in Quebec City and 0.7% in Vancouver.

They were flat in Halifax and down 0.8% in Victoria.

Year-on-year prices dropped in two cities — Victoria, where they were down 4.1% from May 2012, and Vancouver, where prices fell 3.2%. British Columbia had the hottest housing market going into the downturn.

Compared with May 2012, prices were 6.5% higher in Quebec City, 5.8% higher in Calgary and Hamilton, 4.6% higher in Winnipeg, 4.0% higher in Edmonton, 3.9% higher in Toronto, 2.3% higher in Halifax, 2.0% higher in Ottawa and 1.9% higher in Montreal.

© Thomson Reuters 2013

5 Credit Card Fees You Should Never Pay – Consult with Bruce Coleman

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5 Credit Card Fees You Should Never Pay – Consult with Bruce Coleman

Mark Twain once said “Everybody talks about the weather, but nobody does anything about it.” But when it comes to credit card fees, there is actually a lot that credit card users can do to reduce or eliminate them. In fact, conscientious cardholders can avoid paying these fees altogether when they choose the right cards and use them wisely.

Here are the top five credit card fees, and how to avoid them.

1. Annual fee. It is true that many credit card issuers now charge an annual fee, but there are stillplenty of free products available. And even when a card does have an annual fee, there are several clever ways to avoid paying it.

2. Foreign transaction fees. Of all the credit card fees, this might be among the more controversial ones. Credit card issuers exchange currency at interbank exchange rate, which is the best possible rate. And actually, they impose these charges on any transaction processed outside the U.S., even if it’s in U.S. dollars. Nevertheless, most banks choose to tack on a 3% foreign transaction fee to all of these charges. Thankfully there are now many cards without this fee, and several banks that never charge it. For example, Capital One, Discover, and the Pentagon Federal Credit Union (PenFed) have eliminated this fee on all of their products. All you need is just one of these cards to use in foreign countries, and you are good to go.

3. Late fees. In most cases, cardholders must take responsibility to make their payments on time in order to avoid this fee. Setting up automatic payments makes it impossible to forget a payment while paying electronically avoids the risk of having a check lost in the mail. In addition, there are a few cards that boast of no late payment fees. But be careful, it is important to know that ‘No Late Fees’ isn’t an excuse to pay late.

4. Cash advance fees. Most cards have a cash advance fee of 3% with a minimum of $5 or $10. And beyond cash advance fees, a higher APR will be charged on the cash withdrawal, and there is no grace period. To avoid paying this fee, never use a credit card for a cash advance. In fact, it is best to avoid this possibility by not creating a PIN code with your credit card.

5. Balance transfer fee. Most credit cards that feature 0% APR promotional financing on cash advances also have a 3% balance transfer fee. There are two ways to avoid this fee. First, consider the Chase Slate, the only card from a major issuer that has a promotional balance transfer offer and no balance transfer fee. But most of these offers also feature interest-free financing on new purchases. If you absolutely must finance a purchases with a credit card, use a 0% offer on new purchases before you do, and not a balance transfer offer afterwards.

Credit card fees may always be with us, but we don’t have to pay them. By taking the right steps to avoid paying unnecessary fees, you can enjoy these powerful financial instruments for free.

In a nation of borrowers, savings on the rise – Consult with Vancouver Mortgage Broker

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Are Canadians switching from a nation of borrowers to a country of … savers?

New numbers suggest they are.

The household savings rate in Canada rose to 5.5 per cent in the first quarter of this year, according to GDP data released last week by Statistics Canada. That’s now well above the U.S. rate, which had been higher than Canada’s in prior quarters.

“After tracking fairly closely for the past 15 years, there appears to be a bit of daylight between Canadian and U.S. savings rates again,” said Bank of Montreal chief economist Douglas Porter. “At the very least, this calls into question all the yammering about an overextended Canadian consumer.”

In the past year, the savings rate has averaged 5.2 per cent, compared with 3.7 per cent in the U.S.

Income revisions suggest Canada’s much-fretted-about household debt-to-income measures may not be as lofty as previously reported, Mr. Porter said in a research note this week. He figures that ratio – due for release later this month – is “closer to 162 per cent” rather than the 165 per cent first reported.

Canadians’ household debt levels are running at record highs, and while the pace of debt accumulation has slowed markedly, the Bank of Canada has cautioned heavy debt loads represent the greatest domestic risk to the country’s economy.

The savings rate has fallen dramatically in the past few decades – from about 18 per cent three decades ago to below 6 per cent today. Still, the rate has grown from the lows seen in pre-recession levels.

A higher savings rate means many households have a better buffer against economic shocks, like a job loss or injury. On the flip side, it suggests consumer spending will remain soft in Canada as people focus on reducing debt loads.

Sal Guatieri at BMO sees the increase as a net positive. “Given elevated debts, it’s probably a good thing that our saving rate has turned up recently.”

For all of last year, this country’s savings rate is now pegged at 5 per cent – a big revision from the prior estimate of 4 per cent (with the fourth quarter seeing hefty revisions, to 5.4 per cent from 3.8 per cent).

Evidence mounts of soft landing for Canada’s housing market – Consult with a Vancouver Mortgage Broker

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You’d have to see rates move dramatically higher for a major correction

Canada’s housing market is showing signs of a soft landing amid evidence of robust demand and buoyant new construction plans.

Home prices in Toronto, Canada’s most-populous city, rose 5.4% in May from a year ago, the biggest increase in five months, the Toronto Real Estate Board reported Wednesday. Statistics Canada said the value of April municipal building permits posted a 10.5% gain.

Housing-market data are showing few signs of a sharp correction even amid warnings from analysts and policy makers that a bubble may have been forming. Finance Minister Jim Flaherty tightened mortgage rules for a fourth time last year on concern that an overbuilding of condos could lead to sharp price declines. Former Bank of Canada Governor Mark Carney identified record household debt as the biggest domestic risk to the economy.

“The base case scenario is a soft landing,” said David Tulk, chief macro strategist at Toronto-Dominion Bank’s TD Securities in Toronto. “You’d have to see rates move dramatically higher” for a major correction, he said.

Driven by historically low interest rates, Canadian banks have been increasing dependence on real estate lending to drive earnings, with residential and non-residential mortgage assets totalling $955 billion at the end of March, or 26% of total assets, according to OSFI data. That’s up from $521 billion five years earlier, which represented 20% of assets at the time.

Fading Impact

The impact of Flaherty’s policy changes are beginning to fade, Toronto Real Estate Board President Ann Hannah said in Wednesday’s release.

“A growing number of households who put their decision to purchase on hold as a result of stricter lending guidelines are starting to become active again in the ownership market,” Hannah said.

The average sale price rose to $542,174, from $514,567 a year ago, while a composite home benchmark price index for the city was up 2.8%, the Toronto Real Estate Board reported. Unit sales dropped 3.4% from a year earlier to 10,182, the board said in an e-mailed statement Wednesday.

The decline in Toronto sales was led by condominiums and townhouses, while purchases of detached homes rose in May. Prices were up in all categories of homes.

On a year-to-date basis, Toronto sales are down 9.6%.

‘Weaker Volumes’

“The story continues to be one of weaker volumes,” Derek Holt, vice-president of economics at Toronto-based Scotiabank, said in a note to investors. “The question is how that will carry over into construction and prices.”

Residential building permits rose 21% to $4.35 billion in April, Statistics Canada said today, led by a 51.9% jump in condominium construction intentions.

Vancouver made one of the largest contributions to the national increase among 34 cities, Statistics Canada said, with permits rising 50.7% led by multifamily dwellings. Calgary permits also rose 40.6% to $773 million on commercial buildings.

Vancouver’s real estate board said Tuesday that home sales rose 1% in May from a year ago, with composite prices down 4.3%.

Falling home construction, which helped lift Canada’s economy out of recession, has been a drag on growth over the past year, shrinking at an annualized pace of 4.7% in the first quarter, according to GDP data released last week.

www.bloomberg.com