Elizabeth Blair

I have run into this question a few times, over the years, and decided that I should sit down and write about it. When you purchase a home, as the mortgagor, you will come across some questions around whether the home you are buying is going to be your primary residence (you will be living there yourself) OR whether you have intentions of renting out ANY portion of the house.

1. Is this your primary residence? This question will be asked of you, at the mortgage application stage. It is important to specify exactly what your intentions are with this new home you are buying. If you are planning on renting out the home, you must state this. Your answer will determine how your mortgage application is underwritten. If you purchase a home and it will be your primary residence, you may purchase a home in Canada with a minimum down payment of 5%. However, if you purchase a home and have intentions of renting it out, your down payment must now be 20% per Department of Finance new borrowing guidelines introduced on April 19, 2010.

The question will also be asked of you, at the lawyer’s office. The lawyer will require you to sign a legal affidavit stating that this is your primary residence and it is not intended for use as a rental property. If the client even hints that they will be renting out any portion of the house, the lawyer cannot and should not commission the affidavit.

2. Is ANY PORTION of the house to be rented out? This statement will appear in your mortgage commitment and applies if this is your primary residence. You may be wondering why would it be a concern to my lender if I decide to just rent out a PORTION of my house? Here is likely the most apparent reason why a lender would not allow this. Should the mortgage go into default, how quickly can they (the lender) get a tenant out of the house, as opposed to the owner? At one time, when someone was about to go into default, they might immediately sign a lease with a friend and then the mortgagee would have to go through a cumbersome process to evict them. While it is now easier to evict a tenant, there is always concern about delays that might occur getting a tenant out. Also, it is important to mention, that since the tenant does not own the home, they may not take the same care of the property, that an owner would.

In summary, some very important things to consider:

If you purchase a home, and you have indicated that it is your primary residence, the lawyer is instructed, by the lender, to prepare a legal affidavit stating that this is your primary residence and that you do not have intentions of renting out the home. Remember that if the borrower even hints that they will be renting out any portion of the house, the lawyer CANNOT commission the affidavit.

Also remember that if this is your primary residence you should not even rent out a PORTION of your home UNLESS you have notified your lender. If your lender finds out, EVEN IF you are not in default on any other provision, there will most certainly be a default coming if you do not disclose the new rental arrangement.

Be absolutely sure to disclose up front, to the bank, or your broker, exactly what your intentions are with the property at the time you are planning to buy, OR, if you make any changes to your plans after you move in.

This blog post was written by Elizabeth Blair on June 24, 2010. Elizabeth is a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario. Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area. You can contact Elizabeth directly by phone at (905) 510-5785 by email at eblair@mortgageedge.ca

or you visit any of her websites at: www.missmortgage.ca

www.burlington-mortgage.ca

www.oakville-mortgage.com

www.streetsville-mortgage.ca

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) www.imba.ca Lic # M08005880 / Brokerage Lic # 10680 Head office is located at: 15 Wertheim Court, Suite 210, Richmond Hill, Ontario, Canada.

If you are not working hard at building a loyal client, you will no doubt lose them unless you are. How does one find and develop a loyal client anyway? As each day goes by, your clients, past and present, are meeting people around them, at work, socially, and even through other business and service providers they know. Suppose they meet someone who is in the same business as you are, there is no doubt that this new service provider is already working hard at soliciting your client to use their service or product. Despite what you may have done for that client in the past, all of your hard work you offered them, may be jeopardized as that client may already be pondering this new and shiny offer right before them.

Consumers today have many options and a wealth of services to pick from. They are bombarded daily, with discount deals and quick cash incentives, at the supermarket, on the radio, in the mail, internet, and television. As those same clients you helped today, enter back into the free market, after your deal is done and signed, will they be repeat customers, in 1 year, 2 years or 5 years from today?

I have put some thought into this, as I have worked to build my own business, and have observed the activities and actions of those other business colleagues around me and have observed that there are some practical ways to build loyal clients.

1. differentiate yourself. What makes you different and unique? What makes your service stand out from the others? I realized that a client may not necessarily come back to me unless their experience was truly better than that of my competition. I work in mortgage financing and so do hundreds of others, right here, in my city, and they can all access the same “great mortgage rate”, many have spent considerable time and resources to build sharp-looking websites, others have developed fancy informative blog pages, some twitter about their every move, and others who make promises to get financing for just about anyone. As I reviewed all of these things, I wondered whether all of this activity and stuff was “really important” to the average mortgage shopper. I initiated some surveys, to past clients, and was surprised to discover that many of the above items were never mentioned. The strongest and most prevailing theme was: a high level of personal service and attention during the financing process. If I could differentiate myself to develop myself, in this area, I believe I will build up a strong network of loyal clients.

2. always, always, always be honest and up-front with those you work with and those individuals who come to you for a mortgage and never make promises that you cannot keep. I have found that many mortgage companies like to dangle the lowest mortgage rate as the way to entice the client to call them. Brokerages and banks have always marketed low mortgage rates and have often declared that they are the only ones who have these rates. The “low mortgage rate trick” is the oldest and not the most effective way to find clients these days because most people already know that mortgage rates are available to them, on the internet:

http://www.financialpost.com/personal-finance/rates/mortgage-closed.html

Of course, accessing the best mortgage rate is always an important consideration to the client, but it should not prevail as the reason why someone should work with you. I would even argue that just advertising a low mortgage rate can sometimes have a negative effect on the applicant. Mortgage applicants need to understand that the lending market has changed for good and it is wise to ensure they understand this up front. We are now, in a market, where clients are no longer “entitled” to the lender’s best mortgage rate advertised by you but rather lenders now pick and choose who they want to do business with. Not so long ago, mortgage applications submitted to lenders would be snapped up and processed by almost any lender but no so anymore. Lenders have learned painful lessons from the US credit crunch of 2007 and as a result they have had to tighten underwriting guidelines considerably in order to protect themselves from risk. Ensuring applicants understand that the advertised “best rate” is not necessarily available to all will not lead to disappointment should the mortgage application be submitted to a lender that offers higher rates. How does this all fit in with the subject of “loyalty”? Be honest with a client right from the initial conversation that you will work hard to place them with the best mortgage rate and lender that they will qualify with and that it may not necessarily be that lowest rate they saw advertised. If a client can appreciate these lending market changes, and understand the challenges you face in properly assessing their application to place it with the right lender, they will surely give their loyalty to you when you have found them the best deal despite their circumstances. Getting a mortgage application approved is no longer an easy task because it now requires a thorough understanding of lenders and each lender’s own stipulated underwriting guidelines.

3. Loyality: build it and enforce it with your network partners or end up losing your loyal clients to them and to their other network sources down the road. Do you REALLY KNOW who you are handing your clients to? If you do not, your clients may be solicited away from you in the near future. Are you bringing your clients to a service partner just to get a cash reward or just because you may see an immediate reciprocal lead? Does your network partner maintain a good database? How will they know in two years, who referred that business lead to them? If they do not maintain good records, they may very well be soliciting your clients sometime soon. Maintaining loyal clients is much more than a business transaction, it is a heart issue that comes with careful and thoughtful assessment of who you have chosen to work with. Be sure to assess your network partners carefully to evaluate their values. If you want to operate your business with a clear conscience and a list of satisfied loyal clients, you need to assess those network partners who also work with your client. See if they uphold integrity and honesty and most importantly do they give your clients whole-hearted service level and commitment. If not, you need to take steps to weed them out of your network.

I recently watched a video interview with Seth Godin, a best-selling author who has written many books related to business marketing. The short interview is excellent and describes how to “build a tribe of loyal clients”:

http://www.attorneymarketing.com/2010/04/25/seth-godin-explains-how-to-build-a-tribe-of-loyal-clients/

Building loyalty is the only way to guarantee that a client today will be a client tomorrow.

© 2010 This blog was written by Elizabeth Blair at Mortgage Edge on May 24, 2010. Elizabeth Blair services mortgage clients primarily in Mississauga and all over the Greater Toronto area You can contact Elizabeth directly by phone at (905) 510-5785 by email at eblair@mortgageedge.ca or you visit her website at: www.missmortgage.ca Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) www.imba.ca Lic # M08005880 / Brokerage Lic # 10680. Head Office: Park Place Corporate Centre, 15 Wertheim Court, Suite 210, Richmond Hill, ON, L4B 3H7, Canada.

Fed up with telemarketing calls so I finally did it........ I picked up the phone and called the CRTC to make a complaint about an unsolicited telemarketing fax I received last night on my fax machine. A telecom company decided to fax me one of their marketing ads which annoyed me.

A few years ago, the CRTC (Canadian Radio Television and Telecommunications Commission) set up the "National Do-not-call Registry" in Canada which is an online tool where individuals can register their telephone numbers on this registry. This tool became available after Canadian Government passed Bill C-37 and it became law empowering CRTC to issue fines on those who violated the do-not-call rules. I remember when I first heard about this tool, I pounced on the opportunity immediately to register my numbers.

Once listed on the registry, a telemarketer should not contact you to solicit your business or money. Now there are some exceptions on those who can call you and these are charities, newspapers, political parties seeking your support, or a business where you already have had recent consumer transactions. Once you register your telephone number, it takes 31-days, after you register your telephone number, and after the 31-day period, telemarketing companies, other than those listed above, cannot call your number and if they do, they can face fines if you register a valid complaint. Note that the registration of your telephone number is only valid for three years, so after three years, you should call the National do not call registry to re-register your phone number.

To register your number on the registry in Canada, go to this website:

https://www.lnnte-dncl.gc.ca/index-eng

So the process was easy. I called 1-866-580-3625 begin_of_the_skype_highlighting 1-866-580-3625 end_of_the_skype_highlighting and spoke to a very helpful lady, who asked me a few questions:

1) what number did the telemarketer call me at?

2) what is the name of the business, and the phone number of the business that called me?

3) what was the date that the telemarketer contacted me?

And, to top it all off....I received a faxed document - perfect printed "evidence" !!!

She then gave me a unique ID code number, which I was to write across the fax transmission I received, and then she asked me to fax that document I received to this number: 1-888-362-5329 begin_of_the_skype_highlighting 1-888-362-5329 end_of_the_skype_highlighting. She then advised me that any future calls or faxes I received from telemarketers, must be called in and registered separately as they assign a unique ID code to each call or fax........... Easy!

We have family, in the United States, and we were told that the Federal Communications Commission (FCC) Do Not Call Registry, has hefty penalties for telemarketers who do not comply. I found a good example of that -- AT&T was fined $780,000 for failing to comply with the Do Not Call Registry. Wow, $780,000!!!......don't mess with the US or at least don't mess with the US FCC!! Here is a link to the article - I'm not sure if the fine was ever collected, but I hope it was.

http://www.allbusiness.com/legal/consumer-law-telemarketing-regulation-do-not/10221784-1.html

Somehow the CRTC in Canada is just a little weak in the area of imposing penalties to telemarketers who call those who have registered their numbers with the do-not-call list. Canadian companies, who still wish to bother us with their telemarketing calls, have found ways to get around the rules by outsourcing their telemarketing calls to overseas companies.....now that I have followed through on the complaint process, I will be sure to ask some questions to find out who the Canadian company is and what their local number is, so that I can follow through with a formal complaint.

The CRTC in Canada has, what I would consider, "wimpy" penalties especially since consumers need assurance that offending companies really do get the message and avoid calling those who do not wish to be called. For example, in Canada, if found guilty, an individual can be fined $1,500 whereas a corporation can be fined up to $15,000 for each violation. It seems the number of fines issued is also very minimal relative to the actual number of reported telemarketers in violation - see this link:

http://www.crtc.gc.ca/eng/dncl/status-etape.htm

Sorry fellow sales friends, but I'm going to have to tell you that its not the way we should be getting business anymore. Too many people are just simply fed up with telemarketing calls.

© 2010 This blog was written by Elizabeth Blair at Mortgage Edge on March 23, 2010. Elizabeth Blair services mortgage clients primarily in Mississauga and all over the Greater Toronto area You can contact Elizabeth directly by phone at (905) 510-5785 begin_of_the_skype_highlighting (905) 510-5785 end_of_the_skype_highlighting by email at eblair@mortgageedge.ca or you visit her website at:

www.missmortgage.ca

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) www.imba.ca Lic # M08005880 / Brokerage Lic # 10680. Head Office: Park Place Corporate Centre, 15 Wertheim Court, Suite 210, Richmond Hill, ON, L4B 3H7, Canada.

Borrowing Guidelines for Insured Stated Income Programs in Canada are about to change

The borrowing guidelines for insured Stated Income Programs are about to undergo some major changes and these changes will be implemented effective April 9, 2010. The changes are being announced by CMHC (also known as Canada Mortgage and Housing Corporation). CMHC’s changes, as well as those announced by Finance Minister Jim Flaherty effective on April 19, 2010 are all attempts to help cool off the heated housing market which is now being driven by record-low interest rates. More importantly, these new measures are required to protect borrowers from taking on more debt than they can afford especially as interest rate hikes are imminent. While Canada still allows Stated Income programs here, they are becoming very rare in the U.S. The massive number of defaults and foreclosures reported by the U.S. after the 2008 credit crisis were attributed mostly to Stated Income programs that were used to place under-qualified borrowers into mortgage loans that they could not afford. While Canadian lenders continue to use the Stated Income programs here, customized for commissioned and self-employed borrowers, CMHC will now be scrutinizing those same applications using tighter underwriting criteria making the CMHC Self-Employed mortgage insurance program a little harder to access.

What exactly does Stated Income mean?

Stated Income means exactly that. When a mortgage application is created, for a self-employed or commissioned applicant, and the entire income amount is not verifiable in traditional documents, for example a Notice of Assessment, the applicant may apply under the Stated Income program to allow an income adjustment to help qualify them for a home purchase or re-finance. A real example might look something like this: Mr.Thomas works as a Systems Analyst in Toronto. He is purchasing a house based on his earnings alone as his wife is currently not working. He earns $77,000 gross annually and his employment status is considered self-employed as he works as an independent contractor and bills the company directly for his time. He is not on payroll. He has worked in various departments for this same government organization, as a Systems Analyst, for the last two years. To buy the home they want, this couple would need an income of $85,000 to qualify for the purchase. On a traditional mortgage application, the couple would be declined and would not be able to purchase the home. However, by utilizing the Stated Income program, the couple can qualify to buy this home with a 5% down payment and the income placed on the application would be “stated” on the application at a higher amount. The couple has no other savings or funds available to them. The income to qualify the applicants, would be entered at the amount of $85,000 instead of his actual income of $77,000, in order to qualify the buyers.

Here is an outline of the changes that will be implemented on any applications called Stated Income applications which pass through CMHC as an “insured” mortgage AFTER April 9, 2010 and how these changes would affect the particular applicants described above:

1. Downpayment: those who are purchasing a home, and who have applications classified as a Stated Income application, will be required to put down 10% rather than the 5% minimum required today.

Mr.Thomas and his wife, after April 9, 2010 must have a down payment equal to 10% of the purchase price, along with enough funds to cover closing costs.

2. Tenure: those who have been working in the same business for greater than three years, would not be eligible for the Stated Income program and therefore those in this category would have to provide proof of their income, for example, a Notice of Assessment.

Because Mr.Thomas had only been working as a Systems Analyst for the past two years in total, they could still apply under the Stated Income program and be eligible. Had Mr.Thomas been working three years and 6 months, as a Systems Analyst, they could not qualify for the home they wanted.

3. Documents: documents will be requested and viewed by the lender to help determine the length of self-employed which are not always requested today. The documents a lender may ask for: a business license, proof of GST registration, articles of incorporation (if incorporated).

4. Commission: those who are collecting commission would no longer be eligible for the Self-Employed program.

Mr.Thomas is not paid on a commission basis, therefore, after April 9, 2010, he could still utilize the Stated Income program.

5. Limits: a re-finance will be limited to 85% loan-to-value instead of the current limit of 90% used today.

If Mr.Thomas decides to re-finance his home, in the coming years, while he is within the insured status range and assuming self-employed income is still their primary income, they will only be able to re-finance up to 85% of the value of their property.

It is important to mention that these program changes only affect those mortgages that are “insured” by the lender therefore, those mortgages that are not insured, could be reviewed differently from lender to lender and each lender would specify their underwriting criteria on a case-by-case basis.

© 2010 This article was written by Elizabeth Blair at Mortgage Edge on March 11, 2010. Elizabeth Blair services mortgage clients primarily in Mississauga and all over the Greater Toronto area

You can contact Elizabeth directly by phone at (905) 510-5785 by email at eblair@mortgageedge.ca or you visit her website at: www.missmortgage.ca Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) www.imba.ca Lic # M08005880 / Brokerage Lic # 10680. Head Office: Park Place Corporate Centre, 15 Wertheim Court, Suite 210, Richmond Hill, ON, L4B 3H7, Canada.

The evil IRD Penalty. The IRD penalty (Interest Rate Differential) has become a very hot topic in the last year. With the recent plunge in interest rates, many fixed rate mortgage holders, have contacted their banks to find out what it would cost to break their mortgage term in pursuit of today’s much lower mortgage rates. Many are shocked to find out that the IRD penalty is so high, that breaking their mortgage has even become impossible for some as it would eat up any small amount of equity that they managed to build. If you are selling a home outright, add to this penalty amount, the real estate fees to sell, and many are completely trapped and unable to find the extra cash they need, in their home equity, to move away from the mortgage obligation. The IRD penalties are often huge and in most cases are absolutely outrageous.

I have experienced the same feedback from my own clients, who have made these calls. A recent client discovered their penalty would be $20,000……..I compare this kind of penalty charge to a form of predatory lending…….perhaps similar to the behavior of a loan shark? Is that too strong a term to use? Maybe not when you consider that while the bank won’t break your legs, or threaten your family’s safety, their imposed IRD penalties could very well “cripple you financially” …..now you know why I compare it to loan sharking.

In difficult times, when many home owners are already struggling to make ends meet because of lost jobs, pay cuts, ex-spouses no longer receiving child support, others struggling to maintain support payments, and others with unexpected requirements to move a family out of a house, would it not make sense for banks to re-visit their IRD penalty policy and agree to settle for a 3-month interest only? Everyone else has been expected to reduce their expectations, so why are the banks not doing the same for their customers, especially in light of the current financial devastation, being faced by many individuals and families today?!

Consumers and industry professionals need to stand up against the IRD penalty as it is quietly eroding and undermining the financial stability of many households who have decided to re-finance or to get out of a current fixed rate mortgage. Here also, is a link to a website where there has been much lively discussion, about the IRD penalty, sponsored by Ms. Ellen Roseman, of the Toronto Star. You will see many shocking personal stories of mortgage holders who have faced the reality of the IRD penalty. It is even more shocking to see that our own government has done nothing to protect consumers, even after many have already written their personal stories to organizations like “Ombudsman Ontario”.

Here is the link: http://www.ellenroseman.com/?p=414

I believe that there will be great negative fallout, for many home owners down the road, unless home owners are given the option to freely re-finance their mortgages to obtain lower rates now as rates remain low. Once mortgage rates climb, those who are very new home owners, who took out 35-year amortizations 5 years ago, have accumulated little equity and at the same time increased their household debt-load, their ability to carry a mortgage renewal, at a higher mortgage rate, will be a huge challenge. Government must step in and force banks to change the rules. The IRD Penalty should be illegal and banks should be limited to charge only the standard "3-month interest penalty" instead of the IRD penalty being used today.

I already see it choking many mortgage holders, today, who are simply looking to move out of a higher mortgage rate into a lower mortgage rate, or perhaps even get out of a mortgage obligation due to current financial pressures, for example, a lost job. I just returned from visiting the States and read an article in the USA Today. It discusses how Texas banks have held a strong position, based on their tight regulations, even when many other banks around them failed. An especially interesting point, in this article, is that the state of Texas prohibits banks from charging high mortgage penalties …… Canadian banks should also be prohibited from using the IRD penalty calculation.

You can read the article in the USA Today, at the following link:

http://www.usatoday.com/money/economy/2009-12-28-texas-banks_N.htm

Ottawa is presently reviewing Canadian mortgage rules and may change financing rules to increase minimum down payments and decrease the extended amortization of mortgages (currently at 35 years) – these would be very positive moves to make. Texas banks have done well and their tough guidelines governing the mortgage financing industry have been the very reason why a housing fallout there has been minimal.

If you want to express your concern about the IRD penalty, and you live in Mississauga or Streetsville, you should write to the Honourable Bonnie Crombie, Member of Parliament, for Mississauga and Streetsville areas, to request that the Government work to remove the IRD penalty, in use today, by our banks. Her email address is: crombie.b@parl.gc.ca

This post was written by Elizabeth Blair on January 1, 2010. Elizabeth Blair is a licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario.

Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area. You can contact Elizabeth directly by phone at (905) 510-5785 by email at eblair@mortgageedge.ca or you visit her website at: www.missmortgage.ca

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) www.imba.ca Lic # M08005880 Brokerage Lic # 10680 Head office is located at: 15 Wertheim Court, Suite 210, Richmond Hill, Ontario, Canada.