Don't Believe the BS: The "Business" of Risk Management for Investors in Financial Products

To all: MortgageQuote Existing and Future Private Equity Mortgage (PEM^TM) investor-lenders

Recently seen on a publicly posted website that belongs to a government and securities commission regulated mortgage investment company; in an answer to a potential investor's question regarding guaranteeing of principal and risk:

IS MY PRINCIPAL GUARANTEED?
No. Your investment is secured by the mortgages held by the fund, and there is always risk associated with this type of investment. It is our business to manage risk on behalf of our investors and we have a strong record of successful risk management.

Well, at MortgageQuote, we have always preached about the risks of investing your money in any mortgage investment that is not directly registered on the underlying real estate - AVOID IT. Investing in the shares of a mortgage investment company is no less risky than investing in the shares of a company listed on a financial exchange. You are really placing your trust in the people who RUN THE COMPANY; you do not get the benefit of the safety of the underlying mortgage investment and there are many companies who have good mortgage investments but go into CCAA or CHAPTER 11 because not of the risk of the underlying investments but the RISK OF POOR BUSINESS MANAGEMENT. (Contact us if you have questions about this paragraph).

Anyhow, the point is this:

ANY COMPANY WHO SAYS THEY ARE IN THE BUSINESS TO MANAGE RISK ON BEHALF OF INVESTORS should also have the supporting third-party, objective proof to show HOW the business manages risk. One internationally recognized and certifiable approach is implementing an ISO 9001 quality management system. The ISO 9001 quality management system enables businesses to prevent and correct unwanted actions and outcomes. The system is a nothing less than a risk management system.

All savvy investors know that any company in the finance industry whose management purports to be in the BUSINESS OF MANAGING RISK, is required to let the audience know what tested, certifiable, auditable and established risk-management system they have in place to effect the risk management outcome. If not, the savvy investor knows that it's only BS: "Business Selling-a-line."

Conclusion:

FOR COMPANIES WHO ADVERTISE FINANCIAL INVESTMENTS, IT IS NOT SUFFICIENT TO REPRESENT BY MERELY STATING YOU ARE MANAGING RISK, IT IS INCUMBENT UPON THE COMPANY TO ADVERTISE PROOF OF HOW THEY MANAGE RISK - IN A MANNER THAT THE INVESTOR CAN VERIFY WITH A THIRD PARTY SOURCE BEFORE DECIDING TO INVEST.

MortgageQuote Canada Corp. is your answer.

(1) FOR MORTGAGE INVESTOR-LENDERS, IS MORTGAGEQUOTE IN THE BUSINESS OF MANAGING RISK?

YES

(2) HOW DOES MORTGAGEQUOTE MANAGE RISK?

CERTIFICATION TO ISO 9001:2008 QUALITY MANAGEMENT SYSTEM (QMS)

(3) CAN A PROSPECTIVE OR EXISTING LENDER OBTAIN THIRD-PARTY VALIDATION OF MORTGAGEQUOTE'S (QMS)

YES (HERE) - OR EMAIL US


#1 in Canada for Quality Management in the Finance Industry: serving the needs of borrowers, brokers and investor-lenders (proof).

Learn more at investor.mortgagequote.ca

What's on your title? Illegal mortgages? Undischarged mortgages?

What’s on your title? Barbarians in your house.

If you read periodicals or watch television, you may have seen the credit card company advertisement where a gang of barbarians rampage through the streets and end up asking you the question: “what’s in your wallet?”. The message is simple: if you don’t have their credit card, you are paying barbaric interest rates. So you better check your wallet and see what you have, before you become a victim of the barbarians.

The same idea holds true regarding your land titles certificate. Simply put: if you

don’t check your land titles certificate at least once a year, you may be unknowingly be a victim of barbarians in another way: unauthorized registrations, undischarged registrations, builders liens or charge-in clauses.

If you own real estate, you may be familiar with the land titles certificate. This certificate is a document which is maintained at the Land Titles Office under the authority and management of the Alberta Government. The purpose of the certificate is to let the public know who is the registered owner of a property. Additionally, the certificate lets the public know who else, other than the registered owner, has a legal interest in the property.

Other interested parties would include mortgage lenders who have lent money to the registered owners; community associations who have rules such as architectural controls which they want to enforce; and, municipalities and utility companies who have right-of-way or encroachment permissions.

In normal events, after you purchase your dream property, the land titles certificate will show that you and/or your spouse are the registered owners thereof. The certificate will also list the names of the lender who provided you with your mortgage. Down the road, if you borrower additional money, say from a second mortgage lender, their name too, would appear on your property’s land titles certificate, right below the name of your first mortgage lender.

If you were to sell your house, the buyers of your home would have their names replace your name and their mortgage lender’s replace your mortgage lenders.

If you were to keep your house and change your mortgage lender, then the old mortgage company’s name would be removed from title and your new mortgage companies name would appear.

In the last 90 days, I have had cases where clients find unauthorized or undischarged registrations on their land titles certificates. When this occurs, things become serious and may result in a lawsuit or worse.

An unauthorized registration is simply another way of saying mortgage or title fraud. 

There are thousands of examples of such fraud, however a basic description is when a fraudster finds a way to impersonate a legitimate property owner and then borrows money from a lender and never pays it back. Another example is when the fraudster steals the legitimate property owners identity then fraudulent transfers ownership to another person by way of sale.

There are cases when a house has been sold as a “rental property” on a “as-is basis” to ignorant buyers. So be suspicious if a vendor advertises: “Private sale… rental property…do not bother tenants” – it might be a real-life case of title fraud. Of course as buyer, if you use a Realtor, this problem should not arise.

An undischarged registration is a lot better, when compared to an unauthorized

registration but still very much a bad thing. In the case of an undischarged registration, you may have borrowed money say, $100,000.00 from one lender, when you first bought the house and some years later, you may have changed banks and applied for a new mortgage for let’s say $150,000.00.

Sometimes, the old lenders do not have their name removed from your land titles

certificate, so it appears that you owe one lender $100,000.00 and another lender

$150,000.00. Imagine waking up one day and finding out that your house which may be worth $200,000.00 has mortgages registered on title for over $250,000.00?

This happens more often than you may think. In fact, less than two months ago, one client applied for a refinance of their home. They bought their home in 1998 and the last time they borrowed money against the home was in 2004. After their new mortgage was approved, in May of 2009, all the paperwork went to the lawyer’s office for signing.

While at the lawyer’s office, it came to everyones attention that the bank who originally lent the money for the purchase of the house in 1998, did not have their name removed from the land titles document. This means that the borrower appeared to owe two different banks a combined mortgage amount which was double what the house was worth.

The moment the undischarged mortgage was identified, the new lender refused to lend money until the borrower resolved the matter of the undischarged mortgage.

To say the least, this was a major headache. After dealing with the shock of knowing that for the past 5 years, they were sleeping with an undischarged mortgage, the clients had to prove they were not fraudsters.

When the client’s approached the bank to get to the bottom of the problem, another series of problems followed. First, the old lender did not have files at the branch, so they could not verify that the borrower had ever borrowed money or not. Next, they bank would only speak with the husband who was later identified as the principal applicant – even though the original mortgage was in both husband and wife’s name. 

Finally, After 4 weeks of telephone tag, branch visits and senior management intervention, the clients were able to get the necessary proof that the mortgage from 1998 should have been discharged in 2004.

The cost to the borrowers was more than money. Yes, there were additional legal fees, however they also lost almost a month in time, so they could not do what they needed to do, when they originally needed the money. Imagine if they needed money for a wedding, a holiday or a family emergency. The delay caused by finding an undischarged mortgage could have been horrific.

Who was to blame? It is hard to say. The bank said they mailed out the discharge papers to the client. The client says they never received the papers because they were working with a lawyer at the time. The originally lawyer is now retired, so he had no comment on the matter. At the end of the day, the situation was resolved with patience, a positive outlook and the persistence to ask questions and stay on top of the matter.

In addition to the unauthorized registrations and undischarged registrations, there are other examples of land title certificate items that may negatively affect you, such as builder’s liens and charge-in clauses. If you would like more information on this subject, on a general basis, contact me. If you have specific questions, please speak to a lawyer. 

If you would like a current copy of your title, ask your lawyer or simply go to your

nearest Alberta Registry office and they will provide you with one. The cost is less than $20.00. Once you have your title, make sure you understand its contents and if there is anything which may give you cause for concern, contact a lawyer immediately.

Apply Now for your mortgage or contact MortgageQuote.ca for details at 1-866-948-7283.

Own a home or rent a home? Which is best for you?

Click here to read the article.

Apply Now for your mortgage or contact MortgageQuote.ca for details at 1-866-948-7283.

Mortgage Myths and Misconceptions - the straight goods

There are several myths and misconceptions regarding mortgages that may have an impact on you. Seven of the more common myths and misconceptions are:

1) if you are self employed, you require complete income verification before you can get a mortgage.

False: self employed persons do qualify for mortgages even if formal income verification is not available. Although some lenders will demand up to three years of corporate financial statements and personal tax returns; other lenders will be satisfied with a Notice of Assessment for the most recent tax year. If you need greater flexibility, another group of lenders will base their decision on your self declared, not reported income.

2) if you let someone assume your hi-ratio or conventional mortgage, you are

responsible for the mortgage payments, no matter what.

False: Canada Mortgage and Housing Corporation (CMHC) has an exemption from the provincial legislation which could make you responsible for ongoing payments, if another person assumes your hi-ratio mortgage and subsequently defaults on their mortgage payments. In fact, CMHC has adopted a policy that if an assumption takes place and the mortgage payments are kept current for 12 consecutive months, you would no longer be liable in the event of a default after 12 months. In addition, there are other options available to you.

For example, GE Capital allows any Canadian to purchase a home with as little as 5% down and if another person assumes your GE insured mortgage, you will not be responsible for any payments. Additionally, you are also not responsible for mortgage payments if a person assumes your conventional (more than 25% down payment) mortgage.

3) If you went bankrupt you no longer qualify for a new mortgage, for up to seven

years.

False: Some banks will let you re-borrow as early as one year from the date of discharge; so long as you have re-established your credit history for at least 12 months by way of a car loan, major credit or personal loan. Furthermore, high ratio insurers such as CMHC or GE will often approve a person for as little as 5% down, providing that two years have passed from the date of discharge and you have re-established credit.

4) If your income is too low to qualify for the traditional 32/40 gds/tds threshold,

you cannot get a mortgage.

False: Certain lenders in the market will approve you for a larger mortgage than others. It is often the smaller banks or trust companies who tend to be more flexible than the major, chartered banks. The reason why certain lenders are so flexible and others are not, is very simple: not every lender has the same risk tolerance and guidelines.

5) You must have at least 25% down to purchase a home.

False: There are lenders in the Canadian market who will finance your home purchase with less down payment. In order to qualify for this type of flexibility you must have excellent credit history, reasonable income and the home may not be a revenue property. Although you may pay a slightly higher interest rate because you do not have a down payment, you do get on the road to home ownership much faster.

6) If you are not a Canadian citizen or landed immigrant, you do not qualify for a

mortgage.

False: One lender in particular is willing to lend to a new Canadian providing that they have been in the country for at least 6 months, have clean banking history (ie: no NSF cheques), are gainfully employed and have at least 13.5% down payment. This is a big change considering that, most lenders historically demanded that new immigrants put down at least 25% to 35%.

7) If you have a non-conforming basement suite (often called a mother-in-law suite), you cannot use that income to help qualify for your mortgage.

False: Although major chartered banks may disqualify such income from your mortgage applications, there are a number of lenders who would contribute 100% of the extra income towards helping you qualify for a mortgage.

Apply Now for your mortgage or contact MortgageQuote.ca for details at 1-866-948-7283.

Appraisals are NOT Home Inspections - be careful

Appraisals are NOT Home Inspections - be careful

When you obtain financing for a property, if you are purchasing the property, the lender will want an appraisal to determine if the value is good enough to lend against. If the value is not good, then the bank may say NO or may lend less money than you are requesting, which means you must use your own cash towards purchasing the property.

The appraisal does not tell the bank that their is a leaky water pipe, or that their is mold in the basement, or a crack in the foundation or the shingles on the roof need repair. 

So, if you buy a house what are you to do? Well, you can hire a home inspection company. You will find them on the internet. Look for good feedback and hire that firm. The home inspection company will let you know what is materially wrong with the house so that you can either negotiate a lower price from the vendor or look for another house to buy. 

As with the appraisal cost, the cost of the home inspection is normally paid by you.

Contact MortgageQuote.ca 1-866-948-7283 for details. Or Apply Now for your mortgage.