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AuthorSteve Garganis

As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.
Posted 1 Comment on Major Mortgage Fraud charges from BMO Mortgage News

Major Mortgage Fraud charges from BMO

Yesterday, the CBC reported that the Bank of Montreal was suing several hundred people in an alleged mortgage fraud scam that might well be the largest of its kind ever reported in Canada….

Here are the highlights or lowlights…

  • $140 million involved in this scheme.
  • $70 million of which was phony mortgage money.
  • BMO may lose $30 million.
  • it is alleged that lawyers, mortgage brokers and even some BMO employees took part in this massive fraud.

LOOK AT THE APPRAISAL PROCESS

What’s interesting is that they mention the ‘desktop appraisal services’ in the article… this stood out for me… an appraisal has always been part of the credit underwriting process.. Lenders want to know their security or collateral is of good, marketable quality in case of default….  But with the goal of trying to do more with less, several Banks started offering clients so-called FREE APPRAISALS… that wasn’t entirely true…

Banks must demonstrate to their shareholders that they perform proper due diligence before granting credit.  Rather than pay the $250 or $300 for a standard appraisal, we saw the introduction of a desktop appraisal…  Imagine trying to look at a computer screen and try to determine the value of a property in downtown Toronto, Vancouver, Calgary, Edmonton or any other city where house prices vary from block to block… it’s almost impossible without visiting the property personally…

Hopefully, the senior management at the Banks and other mortgage lending institutions will review their credit adjudication process and realize that it’s worth paying $300 to get that peace of mind…

Playing devil’s advocate, the crooks can employ the services of a corrupt appraiser but most Lenders have an ‘Approved Appraiser’ list…. it’s more difficult to get a bad appraisal this way… ..

MORTGAGE FRAUD IS NOTHING NEW

Mortgage Fraud occurs regularly…  it just doesn’t get reported often…that’s because the banks don’t want the bad publicity.   It would be helpful to know if fraud is growing or slowing….  This latest report doesn’t sound like it’s slowing…

Posted Mortgage News

Bank hikes are questioned by the media

Just can’t leave this one alone…

The Globe and Mail ran a great article about the recent mortgage rate hikes by the Big Banks…..Seems like more of us are questioning the latest round of fixed rate increases….

The article gave some great stats that I wanted to share… First, we should point out that Fixed rates are affected by the Bond Market for the most part but Banks also raise money through GICs… Variable rates are affected by the Bank of Canada Key Lending Rate…. with that in mind…. here are the stats from the article….

10 YEAR AVERAGE…

  • 5 yr Bond 4.05%
  • Big Bank 5 yr posted fixed rate 6.75%
  • Big Bank 5 yr GIC 3.31%

THIS WEEK’S NUMBERS…

  • 5 yr Bond 3.02%
  • Big Bank 5 yr posted fixed rate 6.25%
  • Big Bank 5 yr GIC 2% to 2.1%

Has to make you wonder…?

Posted Mortgage Rates

Bond Market down but RBC increases rates again?

Yes, it’s true….yesterday, RBC lead the way with another interest rate hike on their 5 year  fixed mortgage… followed by TD and Laurentian Bank….  It was a 0.15% increase for a new 5 year Bank Posted rate of 6.25%.   This marks the 3rd increase in a month.

This latest rate increase is leaving many puzzled as the Bond Market has remained somewhat flat… the 5 yr Bond yield is currently 3.07%.   A fully discounted 5 year fixed rate at TD can be had for around 4.79%.. that’s giving a huge spread of 1.72%… well above the 1.20% to 1.30% that Banks normally seek….

Okay, so why would the Banks increase the fixed rates?   Sometimes Banks price themselves out of the market when they achieve their market share… and sometimes it’s just profit taking…. But don’t settle for these rates if you are looking for a Fixed rate.. the Broker Market is still offering much lower rates and the Variable rate mortgage can be had for around 1.70%….

Posted Mortgage Trends

Lower inflation figures mean less pressure to raise rates…

Latest figures show inflation is not a problem…. The latest 12 month figures show inflation running at about 1.7% which is within  the Bank of Canada’s 2% target rate….

Inflation is one of the biggest factors that affects the Bank of Canada’s key rate (the rate that affects Bank’s Prime rate)…..this is good news for Canadian borrowers as there has been a large amount of media coverage regarding the much-anticipated interest rates hikes…

Oh, and by the way… the Bank Prime rate still 2.25% (an all time low)…  Why not just enjoy the low rates and not worry about what might happen in a few years?

Posted Mortgage News

Independent Mortgage Brokers Association annual conference

I attended IMBA’s annual Mortgage Broker conference yesterday.   IMBA is Ontario’s Mortgage Broker association.  It was a good conference but it seemed to be a smaller crowd than in years past…..a result of the recession, I’m sure.

Nevertheless, it’s a great place to see all the Lenders and industry businesses in one location.  I noticed a lot of smaller lenders were popping up and that’s a great sign for Borrowers as more competition is always good.

There were also lenders capitalizing on the new Mortgage Rules as CMHC tightened their lending policies earlier this week…. The smaller lenders fill a growing void for Canadians that want to buy an investment property or are self-employed and cannot provide traditional income verification.  These lenders also signal improved confidence in the Canadian real estate market.