Tag Archives: mortgage

Mortgage Fraud Warning

May 4, 2012

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Courtesy of RECO’s “For the RECOrd” magazine

 

RECO investigators are all too familiar with mortgage fraud and the turmoil it causes for the victims who are left fighting to get their homes back. Unfortunately, in most cases, RECO only becomes aware of the mortgage fraud after the fact when a homeowner realizes they have been victimized. But on one recent afternoon, a tip from a brokerage helped RECO stop a fraudster in his tracks and save a senior from heartache.

“It had many signs of a mortgage fraud including someone misrepresenting themselves as a registrant in order to create the illusion of a legitimate transaction,” says RECO’s Deputy Registrar, Bruce Matthews. “But in this instance, we realized that we had an opportunity to act quickly and prevent a fraud from happening.”

It all started when a legal assistant at the Toronto law firm representing the supposed seller noticed irregularities in the real estate transaction. She inquired with Sutton Group All Po Realty, the brokerage that supposedly represented the seller. But Gail Fulton and Doug Lytle, staff members of the brokerage, were shocked to find that they had no record of such a deal. The pair quickly recognized the seriousness of the matter and immediately contacted RECO.

Within a few hours, the urgency of the investigation became clear as RECO’s Manager of Inspections & Investigations, Brian Prendergast, determined that the transaction was fraudulent and put a face to the fraud’s victim: an elderly minister who had no idea that a fraudster was trying to sell his house without his knowledge.

“Naturally he was shocked and alarmed,” says Prendergast. “We realized that this kind man could have his life turned upside down if he was forced to go through the exhaustive process of rectifying the title to the home he had lived in for over 30 years. Knowing what was at stake left us even more determined to do everything we could.”

Fortunately, it was not too late. Prendergast worked with representatives from Service Ontario’s Policy and Regulatory Services Branch to determine that the Land Transfer Office had indeed received and processed an application to transfer the title of the house and to register a $600,000 mortgage against the property. But, crucially, they had not yet certified the transfer. Once RECO informed them of the fraud they halted the transfer process immediately.

With RECO’s help, the homeowner returned the title to his name. He can now rest easy knowing his home is safe.

“I was surprised and shocked, but even in that first call Brian said everything would be okay,” says the homeowner, who has asked to keep his identity private. “Just an hour and a half later he phoned again to say everything was straightened out.”

While RECO’s quick work played a key role in preventing the fraud, numerous individuals from the brokerage, law firm and Service Ontario also deserve kudos for the roles they played.

“We owe a great deal of thanks to these individuals,” says Matthews. “They paid attention to their instincts and reacted quickly, allowing us to protect this gentleman from fraud.”

This potential fraud has a happy ending, exemplifying one of the ways RECO fulfills its mission to uphold the integrity of real estate transactions.

While RECO’s efforts prevented the fraudsters from making off with over half a million dollars, they remain at large. York Regional Police continue to investigate.

Tips to Avoid Mortgage Fraud:

Avoid being an unwitting participant in mortgage fraud. Be suspicious of situations where you are:

  • Asked to inflate (overstate) your income on a mortgage application, indicate you plan to live in a property being purchased as a rental property or provide other false statements.
  • Asked to sign documents that contain blanks or asked not to complete certain sections of a form or document.
  • Offered a fee for the use of your name and credit information.
  • Discouraged from visiting the property, having the property appraised or inspecting the property you are purchasing.

IF IT SOUNDS TOO GOOD TO BE TRUE, IT PROBABLY IS!

Laura

Laura Keller of Century 21 B.J. Roth Realty is a real estate agent with a business philosophy of nurturing relationships with her clients. She will walk you through the process of buying, selling, or investing step-by-step so there are no surprises at the end of your transaction.

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Wouldn’t it be nice…

April 4, 2012

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Many of us have seen the commercial: happy elderly people paying for renovations, trips and university education for their grandchildren through a reverse mortgage. I came across this excellent post from the Retire Happy blog, which details the pros and cons of a reverse mortgage. There are many advantages to these plans: income is tax-free, there are no monthly payments, and the repayment will never be higher than the value of your home, to name a few. However, there are some distinct negatives as well. Interest rapidly accumulates, for one, as you are not paying it regularly. There are only two companies doing reverse mortgages in Canada, and interest rates are correspondingly high, at least partly because of a lack of competition.

The bottom line? Always get advice from a third party, whether that is a financial planner, accountant or lawyer, or even all of the above. A reverse mortgage may be right for you, but it could also seriously harm your financial health in the long term.

Cesia

Cesia is a real estate lawyer at Wall-Armstrong and Green, a boutique law firm in Barrie focusing on real estate and estates. When she’s not online, she can usually be found in her garden.

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Access to 1000 Lenders

August 22, 2011

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Canadian Mortgage Lenders CollageOne of the most common selling features you’ll see a lot of mortgage brokers and brokerages boast is how many lenders they “have access to.”  But what does that mean, exactly?

If Bob the Mortgage Broker (names changed to protect the innocent), has “access to” 35 lenders, and Melissa the Mortgage Broker has “access to” 120 lenders, doesn’t it make sense to use Melissa the Mortgage Broker?  I mean, Melissa has access to 85 more lenders than Bob, and more is better, right?  That’s one of the main reasons people use mortgage brokers – so the brokers can shop around for the best rates and options on behalf of their clients.

The truth is (and I apologize to the other mortgage brokers out there for letting the proverbial cat out of the bag here) that when brokers say they have “access to” ____ number of lenders, what they really mean is that they have the contact information for ____ number of lenders, and could, theoretically, place a mortgage with ____ number of lenders.  There are literally hundreds of lenders in Canada, but when it comes down to it, most mortgage brokers put the majority of their clients with 5-10 lenders.

But why only 5-10 lenders when there are 100’s to choose from?  Here are a couple good reasons:

  1. Many of the lenders specialize in certain types of mortgages (construction, rural farms, rentals, cottages, etc) – meaning that their rates and options are competitive for only certain unique properties.  Otherwise their options and rates just aren’t competitive with other lenders (usually referred to as “niche lenders”).
  2. Many lenders also specialize in certain types of customers (only good credit/salaried job or poor credit/job history or good credit/self employed, etc) – meaning that their rates, options, and lending guidelines will only be competitive (if they can do it at all) for certain types of customers.
  3. Usually brokers and brokerages have “special status” with certain lenders (they give us all sorts of cool names like “Elite Status” or “CEO Status” or “Wizard Status”) which gives us better service and/or rates and/or commissions (remember, for most mortgage transactions, the client doesn’t actually pay the broker for their services, but the lenders almost always pay the broker a “finders fee” – making their services usually free to the customer!).  Brokers and brokerages receive this “special status” from lenders based on the relationship the broker or brokerage has with the lender, how much business they do with them, and a medley of other metrics.
  4. Some lenders, for a variety of different reasons, will have certain types of mortgages and terms temporarily discounted (usually to increase the number of mortgages on their books, etc).  It’s kind of like a specific type of mortgage would be “on sale” for a limited time (“save .1% on a 4-year term off our already-low rates only until the end of the month!” etc).

 

There are always going to be certain lenders a mortgage broker works more closely with than others, so access to more lenders isn’t always necessarily better.  If I’m getting better service and better rates from certain lenders, obviously it’s in everyone’s best interest to place mortgages with those lenders – even if I have “access to” 80 or 100 lenders.

Tim

Tim is a mortgage agent in Barrie who specializes in helping first-time home buyers. He works with a variety of lenders and can help customize a mortgage with the best rates & options that fit the needs of each customer.

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Term vs. Amortization

August 8, 2011

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The mortgage industry has an abundance of buzz words, phrases and acronyms that can be a common source of confusion for prospective home buyers.  Hopefully as you read through this weekly “Mortgage Monday” column, I can help put these words and phrases in terms a little easier to understand.

The first couple of phrases you’ll probably hear are “term” and “amortization.”  Both phrases refer to a period of time in the life of your mortgage.  The term of a mortgage can be defined as:

The length of time you are committed to a mortgage rate, lender, and conditions set out by the lender.

The term will have a direct effect on your mortgage rate (generally, the shorter the term, the lower the rate).  And, of course, there are many instances where you can actually break the term of your mortgage (to pull equity out, to get a lower rate, etc), though there may be penalties involved (something we will discuss at a later date).  A typical mortgage term in Canada is 5-years, though they can range anywhere from 6-months to 10 years.

The amortization of a mortgage can be defined as:

The length of time it takes you to pay off your entire mortgage.

The longer the amortization period, the lower your monthly payments will be (as they’re being stretched out over a longer period of time).  That being said, the longer the amortization period is, the more interest you’ll pay over the life of the mortgage.  A typical amortization period for 1st-time home buyers in Canada is 25 or 30 years.

It comes down to this: “shorter term = smaller rate” and “shorter amortization = smaller paymentsbut “shorter amortization = more interest.”  If you can afford it, getting a shorter amortization period is preferred, as it will save you a lot of money over the life of your mortgage (you’ll have higher payments, but you’ll pay off your mortgage faster, and spend less money).  As for term, some people prefer to get a smaller rate over the short term, hoping that rates don’t go up, whereas others prefer to lock in a slightly higher rate for a longer term (which lightens the risk of the mortgage debt, as you know your interest rate will remain the same over the length of a longer period of time).

Think of it this way: the life of your entire mortgage (amortization) is broken up into a bunch of little chunks (terms).  The longer the life of your mortgage, the more you’ll pay in interest. The terms, however, are just a measure of how much risk you’re willing to endure.  The longer the term, the higher the rate, but the lower the risk (of rates jumping up).  The shorter the term, the lower the rate, but the risk of rates going up by the time your term is up increases.

Tim

Tim is a mortgage agent in Barrie who specializes in helping first-time home buyers. He works with a variety of lenders and can help customize a mortgage with the best rates & options that fit the needs of each customer.

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