Brokers make a Difference

While many people will go to their bank to obtain a mortgage or line of credit they often feel betrayed by their favourite bank if their application is rejected. One big advantage that we have over banks is that we can send underwriter notes along with the application. Our questions and speaking at length with the borrower give us insight that the underwriter will never get from the facts and figures on the application.

 A while ago, I had an application at a lender for a young man who wanted to buy his first home.

He worked in the construction trades and his income history was up and down over the past 3 years. He needed overtime to support his application and the two year average wasn’t there.

I went back with 3 years of Notices of Assessments, his recent pay stubs and pleaded the case for my client. The underwriter finally asked for an exception based on my confidence in the client. She trusted my judgement and the mortgage was approved.

     This leads me to the idea that underwriter notes are very important and can mean the difference between an approval and a decline. If you have a chance, ask your underwriter how they like their notes; in point form or in paragraphs . Do they prefer emails or phone calls?

   When a successful mortgage broker writes notes they start by stating what product they are asking for and giving their contact information. I put my contact info at the top of the notes and at the bottom so they don’t have to go searching for it if they have a question or need clarification.  I then state what my client is trying to do; purchase their first home, refinance, a renewal or if it’s’ a switch, that they want to benefit from lower interest rates.

I then list the areas I want to highlight: Income, Credit, Property , Down payment and start with it their weakest link first and explain their situation. I had a client who had her down payment in a joint account with her father in Japan. I started with that knowing that a paper trail would be important. If the credit score is low, is it due to a past illness, divorce or job loss? I tell the underwriter right away. As  a result, underwriters trust me and have given my clients a second look or asked for an exception.  Finally, I finish up by summarizing the strong points in the file and thanking them for their consideration of my file. 

     I never yell or give my underwriters a blast if they decline a file. I will , however, ask why the file was declined so that I can better prepare my client for the disappointment and plan on how we can remedy the situation.  Just as a FYI,  a manager at a major bank told me that at one bank he worked for after hitting the send key he received a simple message back – either APPROVED or DECLINED with no explanation.  Now who do you think mortgage clients should deal with? A bank or a broker? 
 Contact David Cooke at http://davidcooke.ca 

Brokers make a Difference

While many people will go to their bank to obtain a mortgage or line of credit they often feel betrayed by their favourite bank if their application is rejected. One big advantage that we have over banks is that we can send underwriter notes along with the application. Our questions and speaking at length with the borrower give us insight that the underwriter will never get from the facts and figures on the application.

 A while ago, I had an application at a lender for a young man who wanted to buy his first home.

He worked in the construction trades and his income history was up and down over the past 3 years. He needed overtime to support his application and the two year average wasn’t there.

I went back with 3 years of Notices of Assessments, his recent pay stubs and pleaded the case for my client. The underwriter finally asked for an exception based on my confidence in the client. She trusted my judgement and the mortgage was approved.

     This leads me to the idea that underwriter notes are very important and can mean the difference between an approval and a decline. If you have a chance, ask your underwriter how they like their notes; in point form or in paragraphs . Do they prefer emails or phone calls?

   When a successful mortgage broker writes notes they start by stating what product they are asking for and giving their contact information. I put my contact info at the top of the notes and at the bottom so they don’t have to go searching for it if they have a question or need clarification.  I then state what my client is trying to do; purchase their first home, refinance, a renewal or if it’s’ a switch, that they want to benefit from lower interest rates.

I then list the areas I want to highlight: Income, Credit, Property , Down payment and start with it their weakest link first and explain their situation. I had a client who had her down payment in a joint account with her father in Japan. I started with that knowing that a paper trail would be important. If the credit score is low, is it due to a past illness, divorce or job loss? I tell the underwriter right away. As  a result, underwriters trust me and have given my clients a second look or asked for an exception.  Finally, I finish up by summarizing the strong points in the file and thanking them for their consideration of my file. 

     I never yell or give my underwriters a blast if they decline a file. I will , however, ask why the file was declined so that I can better prepare my client for the disappointment and plan on how we can remedy the situation.  Just as a FYI,  a manager at a major bank told me that at one bank he worked for after hitting the send key he received a simple message back – either APPROVED or DECLINED with no explanation.  Now who do you think mortgage clients should deal with? A bank or a broker?
for more information visit my website at http://davidcooke.ca 

The Bank of Canada maintains its Interest Rate

More good news today for people who have variable rate mortgages or lines of credit tied to the Bank of Canada rate. The rate will stay firm once again. 

Here’s the statement from the Bank of Canada rate decision on Wednesday, July 13:

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/2 per cent. The Bank Rate is correspondingly 3/4 per cent and the deposit rate is 1/4 per cent.

The Bank of Canada kept its key interest rate today at 0.5 per cent. 

Inflation in Canada is on track to return to 2 per cent in 2017 as the complex adjustment underway in Canada’s economy proceeds. The fundamentals remain in place for a pickup in growth over the projection horizon, albeit in a climate of heightened uncertainty.

In this context, the forecast for the global economy has been marked down slightly from the Bank’s April Monetary Policy Report (MPR). Global GDP growth is projected to be 2.9 per cent in 2016, 3.3 per cent in 2017, and 3.5 per cent in 2018. In particular, after a weak start to 2016 the US economy is showing signs of a rebound, with a healthy labour market and solid consumption growth. In the wake of Brexit, global markets have materially re-priced a number of asset classes. Financial conditions, already accommodative, have become even more so.

In Canada, the quarterly pattern of growth has been uneven. Real GDP grew by 2.4 per cent in the first quarter but is estimated to have contracted by 1 per cent in the second quarter, pulled down by volatile trade flows, uneven consumer spending, and the Alberta wildfires. A pick-up to 3 1/2 per cent is expected in the third quarter as oil production resumes and rebuilding begins in Fort McMurray. Consumer spending will also get a boost from the Canada Child Benefit.

While the fundamental elements of the Bank’s projection are similar to those presented in April, the forecast has been revised down in light of a weaker outlook for business investment and a lower profile for exports, reflecting a downward adjustment to US investment spending. Real GDP is expected to grow by 1.3 per cent in 2016, 2.2 per cent in 2017, and 2.1 per cent in 2018. The Bank projects above-potential growth from the second half of 2016, lifted by rising US demand and supported by accommodative monetary and financial conditions. Federal infrastructure spending and other fiscal measures announced in the March budget will also contribute to growth.  Despite recent volatility, the Bank expects the underlying trend of export growth to continue, leading to a pick-up in business investment. Higher global oil prices are helping to stabilize Canada’s energy sector and household spending is expected to increase moderately.

The Bank forecasts that the output gap will close somewhat later than estimated in April, towards the end of 2017. Underlying this judgement is the downward revision to business investment, which lowers the profile for both real GDP and, to a lesser extent, potential output.  

While inflation has recently been a little higher than anticipated, largely due to higher consumer energy prices, it is still in the lower half of the Bank’s inflation-control range. Most measures of core inflation remain close to 2 per cent but would be lower without the impact of past exchange rate depreciation. The temporary effects of exchange-rate pass-through and past declines in consumer energy prices are expected to dissipate in late 2016, and the Bank projects that inflation will average close to 2 per cent throughout 2017 as the output gap narrows.

Overall, the risks to the profile for inflation are roughly balanced, although the implications of the Brexit vote are highly uncertain and difficult to forecast. At the same time, financial vulnerabilities are elevated and rising, particularly in the greater Vancouver and Toronto areas. The Bank’s Governing Council judges that the overall balance of risks remains within the zone for which the current stance of monetary policy is appropriate, and the target for the overnight rate remains at 1/2 per cent.

What People Think and How they Act can be Very Different

A new survey for the Chartered Professional Accountants of Canada suggests Canadians may harbour false notions about their financial savvy and security. 

The CPA assessed attitudes from before and after the recent drop in oil prices and interest rates. The accountants say, that while Canadians rank themselves highly for financial discipline, few households are planning for potential changes to the economy.

According to the survey 79% of respondents say they are staying on top of their payments, while 59% say they are living comfortably and are doing alright financially. This may sound great but further questioning reveals another story. 

The CPA survey indicates: 

 - 53% of households do not save on a regular basis.

- 51% say they do not have an emergency reserve fund apart from their "regular savings".

- 60% (which the CPA characterizes as "only") of households say they pay off a portion of their debt on a regular basis.

- 41% of households with a HELOC (Home Equity Line of Credit) in other words a line of credit secured on their home's equity,  did not make regular interest and principal payments to repay their outstanding balance. 

 “It may be a matter of perception,” explains Kevin Dancey, FCPA, FCA, president and CEO, CPA Canada. “Factors such as lower interest rates, cheaper gas and a strengthening U.S. economy may have some people thinking things are just fine. However, no matter what happens with the economy over the coming months many households remain vulnerable because of high debt levels.”

 Key economic indicators reinforce the financial vulnerability of many Canadian households:

• total household debt reached a record high of $1.82 trillion as of Q4 2014
• the debt-to-income ratio reached an all-time high of 163 per cent in Q4 2014, meaning that for every dollar of income, Canadians carried $1.63 in debt

“Canadians should be taking steps now to build their nest eggs and improve their ability to service debt obligations in the event of future economic shocks,” says Joy Thomas, FCPA, FCMA, executive vice president, CPA Canada. “Economic uncertainty lingers and borrowing rates will rise at some point. Canadians should be planning ahead and be prepared for what tomorrow brings.”

   If you work in the oil patch or a related industry; or if you are feeling financially vulnerable the best thing to do now is to speak with a mortgage broker about lowering your mortgage payments or moving your high interest debt into a lower interest product to make paying it off easier if your situation changes.

Source: https://www.cpacanada.ca/en/connecting-and-news/news/professional-news/2015/March/Household-finances-Canadians-at-risk