19 Dec

CMHC CHANGES TO ASSIST SELF-EMPLOYED BORROWERS

Bank Industry News

Posted by: Ron Price

As a self-employed person myself, I was happy to hear that CMHC is willing to make some changes that will make it easier for us to qualify for a mortgage.
In an announcement on July 19, 2018, the CMHC has said “Self-employed Canadians represent a significant part of the Canadian workforce. These policy changes respond to that reality by making it easier for self-employed borrowers to obtain CMHC mortgage loan insurance and benefit from competitive interest rates.” — Romy Bowers, Chief Commercial Officer, Canada Mortgage and Housing Corporation. These policy changes are to take effect Oct. 1, 2018.

Traditionally self-employed borrowers will write as many expenses as they can to minimize the income tax they pay each year. While this is a good tax-saving technique it means that often a realistic annual income can not be established high enough to meet mortgage qualification guidelines.
Plain speak, we don’t look good on paper.

Normally CMHC wants to see two years established business history to be able to determine an average income. But the agency said it will now make allowances for people who acquire existing businesses, can demonstrate sufficient cash reserves, who will be expecting predictable earnings and have previous training and education.
Take for example a borrower that has been an interior designer with a firm for the past eight years and in the same industry for the past 30 years, but just struck out on his own last year. His main work contract is with the firm he used to work for, but now he has the ability to pick up additional contracts from the industry in which he has vast connections.
Where previously he would have had to entertain a mortgage with an interest rate at least 1% higher than the best on the market and have to pay a fee, now he would be able to meet insurance requirements and get preferred rates.

The other change that CMHC has made is to allow for more flexible documentation of income and the ability to look at Statements of Business Professional Activity from a sole-proprietor’s income tax submission to support Add Backs of certain write-offs to support a grossing-up of income. Basically, recognizing that many write-offs are simply for tax-saving purposes and are not a reduction of actual income. This could mean a significant increase in income and buying power.

It is refreshing after years of government claw-backs and conservative policy changes to finally see the swing back in the other direction. Self-employed Canadians have taken on the burden of an often fluctuating income and responsible income tax management all for the ability to work for themselves. These measures will help them with the reward of being able to own their own home as well.

9 May

SURPRISE – WE ARE IN A REVOLUTION

Bank Industry News

Posted by: Ron Price

The pace of (technological) change is so fast now that it is considered to be of revolutionary proportion.

Much of what we have learned in our lives is about to become obsolete. In fact, much of it already has.

For example, our schools teach us to get an education, get a good job, get promoted and earn a higher salary, all without teaching us about financial literacy. Then we are told to save part of our pay, to put that into a savings account with interest rates less than inflation (which gets taxed…lol), to invest in RRSP’s, RESP’s etc., supposedly to grow into a retirement nest egg.

The problem is with fees and taxes, unless one invests in the stock market (risky) or real estate (less risky) it is impossible to become financially secure, let alone wealthy.

Some believe that the ‘system’ is designed to keep most people poor, or at least working hard their entire lives just to keep their heads above water. We are seeing this more and more and more.

From a technological standpoint, the advent of (ro) bots and artificial intelligence are about to disrupt our lives in every way possible in the years ahead. Driverless cars? How can this be possible? What is certain however is that bots will result in the elimination of tens of thousands of jobs as we know them, even entire industries.

More and more our lives are affected by the so-called ‘internet of things’. Everything is gravitating towards the Internet. The validity of getting a college or university degree (to get ahead) is being challenged like never before. In short, disruption of the status quo will become the norm.

Much of this coming change will force humans to think and act differently than we do today. However, it is within the internet that lies promise of a more prosperous future for many, in fact for everyone that embraces it because it is ‘levelling the playing field’ like never before.

The truth is that we are seeing more and more people becoming wealthy online. Starting an online business takes less effort, less capital and less time than a conventional grass roots start up. Money, lots of money is being made faster than ever before.

The internet also gives us the opportunity to educate and become informed in a more savvy, meaningful way, and the key is for us to forget what we’ve been taught about making money in the past. We need to learn how to educate ourselves, create our own jobs and make our own money moving forward. Growth in recent years in self employment has accelerated dramatically and will only continue to rise.

Undeniably, personal financial security and wealth creation is largely dependent upon how we view and understand today’s big bank culture and business practices, much of which has been chronicled in the media in a less than favourable light; such that it appears things have gotten ‘out of hand’ and in need pullback. Trust and transparency used to be the pillars of our financial system. Unfortunately, this is no longer the case. As politicians, governments and school systems have become outdated and less trusted, so have our banks.

Yet we continue to deposit our paychecks giving the banks free money with which to profit. The banks take fees in an instant while holding our cheque deposits for days (more free money) even when we have more than sufficient funds to clear the cheque. Lending practices including mortgages have in fact become predatory with (potentially harmful) terms and features that are not disclosed to the borrower, which is not only unfair, but not right. Bank mortgage penalties have been systematically manipulated such that when a mortgage is paid out prior to maturity, the lesser of 3 month’s interest somehow no longer applies. Rather the greater of, or the IRD interest rate adjustment factor does, costing Canadians often (tens of) thousands more. Many agree that today’s reality is that the banks’ quest for ever increasing profit at the expense of and on the backs of unsuspecting Canadians is unconscionable.

Just as Fintech (new financial technologies) have begun to revolutionize banking and financial services, we need to revolutionize the way we think about and treat our money. Those in the know pay no annual fees on credit cards, use online bank institutions who charge less or no fees, pay more interest, and they are more likely to obtain the services of a trusted and transparent independent mortgage (broker) professional.

We are reminded from time to time that many people still believe that to use our services means having to pay a fee. This could not be further from the truth since our services are free for arranging prime mortgages (OAC) on approved credit where we are paid a finder’s fee from the lender. Only more difficult, more time consuming mortgages and private mortgages require a fee from the borrower since that is the only way we can be compensated for our services.

Most importantly, we always put you the customer (your interests) first and foremost. We are all about helping you find the most advantageous, cost effective financing possible and our professional advice is invaluable.

If you have relied on the banks until now, perhaps it’s time to become more protective of your money and investigate the mortgage broker option.

Our industry has grown significantly, particularly over the past decade, and there is a growing awareness of the validity and value of our services. But we still have a long way to go before we are thought of as (mainstream) the better option when it comes to mortgage financing.

For your next mortgage need, be part of the revolution and call us first, or at the very least, get a second opinion and experience the positive difference.

15 Mar

THE TRUTH IS OUT – TRUST LOST WITH LATEST TD BANK FIASCO

Bank Industry News

Posted by: Ron Price

The Financial Post reported that TD Bank stock has been downgraded after CBC News reported allegations of aggressive sales tactics and admissions of law-breaking by bank employees last week.

Admissions of high pressure sales tactics and unethical practices including “breaking the law with practices such as increasing lines of credit, overdraft protection and credit card limits without customers’ knowledge.”

If anyone thinks this issue is with one bank only, then they are either kidding themselves or have something to hide. We believe there is little doubt that all our big banks have similar practices. Will they be sued? This remains to be seen suffice to say that this could become “A Wells Fargo moment”.

Wells Fargo was fined US $185 Million on Sept 8, 2016 by U.S. regulators when ‘abusive’ sales practices by the bank were uncovered. That bank was fined for opening hundreds of thousands of retail bank accounts without client approval according to the Associated Press.

One Canadian analyst suggested that the reported revelations could inflict damage that may have a “material impact on the (TD) bank’s reputation” and earnings and valuation.

Is this just the tip of the proverbial iceberg? Only time will tell but this isn’t going away anytime soon and will likely be news for some time. Are other banks involved in the same type of practices? Is there more to the story, meaning other practices not yet uncovered? When will it be deemed more than just unethical? When is it deemed that they’ve crossed the line and broken the law? Canadians deserve to have such questions answered.

On the mortgage front, we have being informing our readership about the perils of bank Collateral Mortgages now for over five years. For example this type of mortgage product gives the banks the ability to secure previously unsecured debt instruments, thus giving them the power to ultimately force the sale of a property without any missed mortgage payments whatsoever, charge higher interest ‘at will’ etc. While the mortgage product itself is legal, they don’t disclose to consumers the general nature of the new product. Isn’t the act of omission, by not mentioning to the customer that they are signing a Collateral Mortgage, in and of itself illegal?

As your trusted mortgage advisors, we suggest that the lack of disclosure practised by our big banks, which has become commonplace, should perhaps be investigated and challenged to establish whether it is in fact breaking the law. If so, then the potential damages could become astronomical.

The value the mortgage brokerage industry brings consumers has never been more clear. We also keep the banks competitive. Without us, Canadians would be paying much more.

Please understand that obtaining a mortgage is much more than about ‘Rate’. It’s about the ‘Terms’ of the mortgage and the ‘Trust’ you have in the supplier. Call us to discuss.

8 Mar

WHY ARE WE CANADIANS, SEEN AS “PREY” TO BANKS?

Bank Industry News

Posted by: Ron Price

Finally bank greed has been exposed mainstream. We can only hope this is just the beginning because the pendulum has swung way way too far in the banks’ favour and it’s high time it be stopped. This time it is not just an isolated incident that a bank can sweep under the rug, it’s much much bigger.

CBC investigative news unit this week broke a huge story about TD Bank’s efforts to extract as much as they can from unsuspecting customers. TD bank tellers were interviewed and agreed to cooperate with CBC because they were assured they could do so anonymously.

When customers enter their PIN at a teller counter, a gold star informs the teller of ‘opportunities’ to sell the customer products. (CBC)

It actually all started with three TD bank tellers approaching CBC’s GO PUBLIC unit with their story because they couldn’t take it anymore. Since then retired bank employees, laid off employee and some managers have also joined into the fray.

Here are a few of the quotes. One said “We are under incredible pressure to sign clients up for products they don’t need.” “When I come to work I have to put ethics aside and not do what’s right for the customer.” Another said “Customers are prey to me. I do everything I can to make my (sales) goal.”

Elderly customers who trust the bank the most are the most vulnerable the news article points out. One employee said “Here I am setting them up with all these service fees and they don’t have a clue what’s going on.”

CBC also spoke to branch managers who are under the same pressures. No surprise there because this greed is corporate culture. “We’re told that our job is to make them (the tellers) understand that if they don’t achieve their sales ‘goals’ that they are no longer right for this job. I feel bad what they are making me do.”

When (good) managers expressed concerns to their supervisors, they were asked to consider whether they were still “a good fit” for the job, implying that their job might be in jeopardy.

Dear reader, ever time you put your PIN in you are a target to be upsold. That is sales. It’s not new. The problem is that big bank culture today has become sinister. It is one designed to extract every nickle, dime and dollar (in the thousands) out of you.

No doubt all big banks have similar or same business cultures and practices.

This evil juggernaut must be stopped so that we can trust our banks again because we need them. We need to rely on them to look out for their customers’ interests.

We have a long way to go folks. One can only hope that this is the beginning of the end to the invisible tyranny the banks deliver to Canadians one at a time, every second, minute, hour, week, month of the year.

Our voice as consumer (mortgage) advocate for the little guy and all Canadians for the last 12 years has finally been validated by national news.

We speak the truth. We care about you. We look after your best interests always. We get it. We need banks. When it comes to mortgages, it’s time to check your misguided loyalty and explore your options. We are here to help, guide and protect you.

7 Mar

BIG BANK ‘MILKING’ FINALLY EXPOSED!!!

Bank Industry News

Posted by: Ron Price

Finally bank greed has been exposed mainstream. We can only hope this is just the beginning because the pendulum has swung way way too far in the banks’ favour and it’s high time it be stopped. This time it is not just an isolated incident that a bank can sweep under the rug, it’s much much bigger.

CBC investigative news unit this week broke a huge story about TD Bank’s efforts to extract as much as they can from unsuspecting customers. TD bank tellers were interviewed and agreed to cooperate with CBC because they were assured they could do so anonymously.

It actually all started with three TD bank tellers approaching CBC’s GO PUBLIC unit with their story because they couldn’t take it anymore. Since then retired bank employees, laid off employee and some managers have also joined into the fray.

Here are a few of the quotes. One said “We are under incredible pressure to sign clients up for products they don’t need.” “When I come to work I have to put ethics aside and not do what’s right for the customer.” Another said “Customers are prey to me. I do everything I can to make my (sales) goal.”

Elderly customers who trust the bank the most are the most vulnerable the news article points out. One employee said “Here I am setting them up with all these service fees and they don’t have a clue what’s going on.”

CBC also spoke to branch managers who are under the same pressures. No surprise there because this greed is corporate culture. “We’re told that our job is to make them (the tellers) understand that if they don’t achieve their sales ‘goals’ that they are no longer right for this job. I feel bad what they are making me do.”

When (good) managers expressed concerns to their supervisors, they were asked to consider whether they were still “a good fit” for the job, implying that their job might be in jeopardy.

Dear reader, ever time you put your PIN in you are a target to be upsold. That is sales. It’s not new. The problem is that big bank culture today has become sinister. It is one designed to extract every nickle, dime and dollar (in the thousands) out of you.

No doubt all big banks have similar or same business cultures and practices.

This evil juggernaut must be stopped so that we can trust our banks again because we need them. We need to rely on them to look out for their customers’ interests.

We have a long way to go folks. One can only hope that this is the beginning of the end to the invisible tyranny the banks deliver to Canadians one at a time, every second, minute, hour, week, month of the year.

Our voice as consumer (mortgage) advocate for the little guy and all Canadians for the last 12 years has finally been validated by national news.

We speak the truth. We care about you. We look after your best interests always.
The choice where to obtain a safe, friendly mortgage has never been so obvious has it? Just saying.

28 Feb

MORTGAGE CHANGES = DIMINISHED PURCHASE POWER

Bank Industry News

Posted by: Ron Price

There may finally some progress being made with the Federal Government after Dominion Lending Centre’s Founder and CEO, Gary Mauris, presented to the Standing Committee on Finance in Ottawa on February 8th about the imbalance in the Government’s new mortgage rules.

In October 2016, the Federal Government made changes that are limiting and threatening to average Canadians and their ability to buy housing and access equity from their homes… Especially those of that live outside of major city centers.

How is purchase power affected? Let’s look at Barry & Louise’s situation. Combined, they earn $65,000/year. He works at a local factory and she at a grocery store. They have great beacon scores, a $400 car loan payment and minimal credit card debt. They have $16,500 saved for a down payment on their first home.

Before the changes, Barry & Louise would have been able afford to purchase a $330,000 home with 5% down, qualifying for a mortgage of $313,500, paying 2.89%.

Now, because they are forced to qualify under the “stress test” at a rate of 4.64%, they can only qualify for a $253,500 mortgage, lowering their affordability to $270,000. That’s a $60,000 difference in purchasing power. They are priced out of the market.

The bottom line as we see it, is this. There was no logical, ethical reason for the Federal Government to implement such rigid regulations so swiftly. The mortgage default rate in Canada is less than 1/3 of 1% … that’s only 0.003%!!! Mortgages are not the issue. High interest rate, easily accessible consumer debt products are.

Through the Mortgage Broker Channel, monoline lenders now account for 38% of all mortgage funding in Canada. This is great for Canadians! Competition is always beneficial for consumers. Look at airlines and cell phone companies. Lack of choice = monopoly, which means more expense and less flexibility for consumers. The same thing goes for mortgages.

The only mortgage institutions that don’t benefit from more choice are the big chartered banks. Banks make multi-billion dollars in profit, year over year. They are in the business of cross-selling multiple high interest rate products and charging massive penalties for early mortgage pre-payments.

The moment a bank has a new mortgage client, they start enticing them with great offers on lines of credit, credit cards etc. They have the power to lock you in and change the rates on the fly, making it difficult to go elsewhere. They often don’t approve clients for refinances for debt consolidation as they make their money on your consumer debt.
The government consulted with a few banks before making these rash changes. They did not consult with the broker channel or monoline lenders. There is something unjust about this and it favours the banks. We support choice, competition and what’s best for Canadians. Contact us and see how we can help protect you.

31 May

TIME FOR BANKS TO BE HELD ACCOUNTABLE

Bank Industry News

Posted by: Ron Price

An article in The Financial Post Saturday May 28th entitled, “THE FIXERS”, referred to the manipulation of the gold market worth trillions of dollars per year where bankers collude and conspire to manipulate the price of gold stock before they place buy and sell orders designed to maximize profit. Folks, we need to wake up and understand that as Canadians we need to stop living up to our stereotype as mild mannered, polite, law abiding, and naïve citizens who continue to put trust in our banks. We are the envy of much of the world, but more and more we get the short end of the stick. We are being taken advantage of in almost every way by our big powerful, self serving banks who too many of us continue to put on a pedestal and with blind faith continue to believe that they are good and to be respected.

Banks Profits Continue to Increase, Canadians Continue to Struggle

Let’s face it. The banks represent an ‘oligopoly’ which by definition is a small group with like interests who band together for maximum results. Canadians are being taken advantage of to the nth degree as the banks have acquired a permanent hunger for ever increasing – record setting – profits, year after year.  This is true with investing, lending and banking in general. It has gone too far and nothing is being done about it. Our federal government has no resolve in this matter.

What Can We Canadians Do to Help Our Financial Well-Being?

It would appear that class action lawsuits are the only thing that can work as a tool to force the banks to behave more responsibly and within limits that are just and fair. Three areas that should be brought to action by us Canadians and that will make a large impact to our financial well-being are: ‘Collateral Mortgages’ which we continue to warn about; ‘Mortgage Penalties’ which have become unconscionable; and ‘Life Insurance’ which is little more than a scam, all these are documented by CBC Marketplace. It takes awareness and anger for that matter, to muster up the energy to look for a resolution. Unfortunately, at times the only resolution is a class action lawsuit, and it all starts with a petition against such wrongdoing.

Having published articles weekly now for almost 12 years, we have taken on the role of consumer advocate. We are doing our best to expose and bring awareness to ‘the people’ about bank practices which we have witnessed the troubles encountered first-hand dealing with our clients. But it is not enough. The injustices we are seeing must be stopped and made right going forward for us Canadians so that we can rest assured that our hard earned dollar does not continue to be eroded by usurious fees and non-transparent banking practices.