Is this what they mean by Freedom 55?

Why you should get that mortgage off your books

Garry Marr, Financial Post Published: Saturday, July 19, 2008

Thank goodness the federal government stepped in this month and banned mortgages with a 40-year amortization.

To read the rest of the article that this is taken from go here, http://www.financialpost.com/story.html?id=665065

The article goes on the say that the writer is glad that 40 year am’s are gone as he does not want to still be making a mortgage payment in his retirement years. They also say to pay off your mortgage sooner you have to make bi-weekly payments instead of monthly. Although that will get you paid off sooner, I think that he is really missing the boat.

What my firm does is show families how to pay off their mortgage, all their debt and retire richer sooner. Now isn’t that the whole idea. I don’t want my house paid off at 50 with nothing in the bank. I showed a guy recently how to pay off his 25 year mortgage, his line of credit and all his credit cards in less than 9 years with out changing his current outgoing expenses. The kicker is that he can still retire in 20 years with a mid 6 figure retirement savings account. Now every situation is different and some may do better or others may take longer. The bottom line is that there is a better way, and it has been staring at us in the face for years. Contact my firm today so we can show you how to live freely with out debt.

Cheers,

Pat

 

Relationship Advice, with a twist!

 I read this from my friend John’s blog. I hope you enjoy it as much as I did, your can read his blog here www.humanpotentialglobal.com/blog/?p=10 . Enjoy.

 

Sub-prime lender Wells Fargo beats expectations!

Reuters

July 16, 2008 at 8:27 AM EDT

NEW YORK — — Wells Fargo & Co. [WFC-N], the fifth-largest U.S. bank, reported better-than-expected quarterly results on Wednesday and raised its dividend despite a 23 per cent decline in profit caused by deteriorating credit.

You may be wondering why is this important? Well let me tell you. Wells Fargo is largely an Alt-A or Sub prime lender here in Canada. We need options and Wells Fargo provides that. I have been a broker for over 5 years and many sub prime and Alt-A lenders have come and gone. Wells Fargo has stayed the course. “A” lenders are a dime a dozen, and many offer similar products. 

Let me give you some examples, say you have less than perfect credit, we can most likely find something for you at Wells Fargo, well what if you are self employed and can’t prove your income the traditional way, well there is a program for you at Wells Fargo, want a longer amortization ( they still have 40 year amortization’s), have higher debt load( over 40TDS%) or have no down payment (they will do 100% financing)  then Well Fargo again. 

So let me end by saying having options are good, and Wells Fargo gives us options as not everyone fits the same mold. If it’s good for Warren Buffett of Berkshire Hathaway ( he own’s 8.8% of the company) then it is good enough for me.

Cheers,

Pat

 

 

Mortgage insurers push to keep zero-down loans!

Garry Marr, Financial Post Published: Tuesday, July 15, 2008

Private mortgage insurers are pushing for ways to keep no-money-down mortgages alive and are set to meet with Department of Finance officials in the next two weeks to discuss possible options, sources indicate.

The move comes after Ottawa cracked down on mortgage practices that allowed consumers to enter the housing market with no money down and amortize their loans over 40 years. New rules that come into effect on Oct. 15 would demand a 5% repayment and shorten the length of amortization from 40 years to 35 years.

Sources indicate the country’s major private insurers, which control about 30% of the market, have told mortgage brokers they are working on a solution which would keep the zero-down option alive and even the 40-year amortization.

One insurer, PMI Canada, which has been in the market for about a year, indicated it hopes to come up with some alternatives.

“PMI Canada is still in the process of reviewing and analyzing the new mortgage insurance measures for industry and market impact. PMI Canada looks forward to meeting with the Department of Finance at the end of the month to better understand the new measures, after which we will be better able to make an informed strategic business decision as to whether or not we are able to continue to offer the 40-year mortgage insurance option,” said Janet Martin, chief executive of PMI Canada, in an email to the Financial Post.

An industry source said the private mortgage insurers are looking into creating a product in which the first 95% of a mortgage is backed by the government with the last 5% securitized independently by the private mortgage insurers.

The new rules from finance appear aimed as much at Canada Mortgage and Housing Corp., a Crown corporation that controls 70% of the mortgage insurance market, as its private sector competitors.

In the hotly competitive mortgage insurance market, CMHC has often been the aggressor in the marketplace. For years, the entire market was CMHC and Genworth Financial Canada which has controlled the other 30% of the multi-billion mortgage industry. In the last two years AIG United Guaranty, a subsidiary of American International Group Inc., and PMI have been trying to crack the market.

CMHC and Genworth both responded to the intrusion by insuring products with longer amortizations. CMHC’s decision to insure mortgages with zero money down ended up incurring the wrath of former Bank of Canada governor David Dodge two years ago.

Mr. Dodge feared interest-only mortgages were fueling the housing market and demanded a meeting with CMHC. Some industry observers say new rules put in place last week are the long awaited response to Mr. Dodge’s concerns, coming after months of consultation.

Now, the private sector is suggesting it wants to be excluded from the new rules. “It’s still a little early. We know the government won’t back the 100% program but will the private insurers do it themselves,” said Gary Siegle, Calgary regional manager with Invis Inc., a mortgage consultant firm.

“The [private firms] are looking at trying to do the 100% insurance themselves. Brokers have been told to wait a week for more news before they can find out how to proceed.”

BoC remains on hold as inflation fears rise

BREAKING NEWS FROM THE GLOBE AND MAIL

KEVIN CARMICHAEL

 

Tuesday, July 15, 2008

OTTAWA — The Bank of Canada left its benchmark interest rate at 3 per cent and predicted raging oil and food prices would cause inflation to surge past 4 per cent by early next year.

Governor Mark Carney and his five deputies on the governing council also cut their estimate for economic growth for 2008 to 1 per cent, which would be the weakest in almost two decades, citing “protracted weakness” in the U.S. economy and “ongoing turbulence” in financial markets.

The central bank’s decision to leave borrowing costs unchanged suggests Mr. Carney’s biggest concern is keeping a lid on Canadians’ expectations about prices. Policy makers raise and lower interest rates to keep inflation advancing at an annual rate of 2 per cent and are uncomfortable with prices advancing any faster than 3 per cent.

“Commodity prices are continuing to outstrip earlier expectations,” the Bank of Canada said in its statement today in Ottawa. “This has led to further increases in Canada’s terms of trade and real national income, and has altered the outlook for global and domestic inflation.”

There was little immediate reaction in financial markets as most investors and economists were expecting the Bank of Canada to leave interest rates unchanged. In the flurry of research notes that followed the central bank’s decision, economists said Mr. Carney is handcuffed by weaker growth and bubbling inflation, leaving him little choice but to stand pat.

“Overall inflation is growing concern for the Bank of Canada, but the bank’s growth worries will keep a hold on rates for the time being,” said Meny Grauman, an economist a CIBC World Markets in Toronto.

Win Thin, a currency strategist at Brown Brothers Harriman & Co. in New York, said the futures market for Overnights Index Swaps, where values are based on the underlying interest rate, suggests investors expect the Bank of Canada to lift borrowing costs by no more than a quarter point over the next 12 months, compared with expectations of a three-quarter point increase as recently as mid-June.

In its statement, the central bank called the risks to its outlook “balanced.”

The Bank of Canada also left its benchmark interest rate – the target it sets for overnight loans between banks – unchanged at 3 per cent at its last policy meeting in June, a move that surprised market players.

Before that announcement five weeks ago, policy makers had slashed their key rate by 1½ points over four decisions dating back to December, a campaign aimed at offsetting slumping U.S. demand for exports and the global credit crunch.

The priority now is persuading Canadian business owners and workers that their central bank will keep inflation from burning out of control.

One of the biggest worries at the central bank is that companies will start charging higher prices to compensate for higher commodity prices and workers will demand higher wages, sparking an inflation spiral.

There is some evidence this might already be happening. The central bank’s July survey of businesses showed 36 per cent of the companies expected inflation will climb above 3 per cent, compared with 17 per cent in April.

Policy makers stressed in their statement today that total inflation’s burst to 4 per cent in the first quarter of 2009 will be temporary. They predicted energy prices will stabilize, allowing inflation to ease back to 2 per cent by the second half of next year.

Canada’s economy hasn’t grown slower than 1 per cent since it advanced 0.9 per cent in 1992, one year after a recession, according to International Monetary Fund data.

Still, the central bank said little has happened to change its longer term growth outlook. Higher prices for exports, relatively low interest rates and a “gradual recovery” in the U.S. will spark a Canadian rebound starting early next year, the Bank of Canada said.

The central bank shaved its growth estimate for 2009 to 2.3 per cent from 2.4 per cent and left its projection for 2010 unchanged at 3.3 per cent.

The Bank of Canada will expand on its current thinking on the economy when it releases an updated policy report on Thursday. The central bank next meets to consider its benchmark interest rate on Sept. 3.

Glad you're not affected by the USA mortgage meltdown? Think again!!

Are you worried because of all the instability in the U.S banking system? The sub prime melt down, foreclosures and the long list of banks closing their doors. Do you think that we are immune up here in Canada? Well we are and we aren’t, let me explain. 

Well thanks to the fact that our banks have large national branch networks, rather than where our American neighbor’s banks are mostly regional focused. We have deposit insurance (provided by CDIC) as do our American friend’s (FDIC), however that will not help the over 10,000 clients of Indy Mac Bank who have deposits or investments in excess of the insured limits. Our strength truly lies in our limited number of charted banks and our national network. 

Have there been effects here in Canada, yes there have. Just in the past year alone, several of our key alternative or sub prime lenders have either scaled back, pulled out or shut down entirely. Here is a short list and it is by no means complete, GMAC, Accredited Home Lenders, Money Connect, Xceed and just recently the involvement of our federal government pulling 40 amortization’s and dropping the 100% financing.

Now have we ever had a bank failure here in Canada? Yes we have had many, CDIC’s own website list’s at least 43 examples since 1970 but none since 1986! Even during the great depression when most of the U.S banks were closing their doors our banking institutions remained mostly intact. 


O.K, Here are the 3 things you must do to protect yourself financially!

1) Know how much CDIC will insure you for in the event of a failure? Don’t get caught not knowing!

2) If you bank with one of the big 5 charted banks, your chance of experiencing a failure is fairly slim to none. 

3) If you mortgage bank fails, keep making your mortgage payments. The loans that are on the books will be bought by another lender. Just because the above lender is no longer lending does not mean that you can get off scott free.

The fact is we’re living in a crisis, right now, and there will be both winners and losers.  Those who take action – prudently, immediately – can protect themselves.  Those who lose are most likely going to be those who thought they were safe. 

Honestly, the situation is likely to be unfolding rapidly over the next few months, and anyone who claims to have all the answers is either misguided or misleading you.  As a professional I am closely monitoring the situation – and I want to hear from you.  What are your questions?  What do you want to know? 

Ask your question by posting a comment on this blog, and I will research and reply shortly on this blog.  Everyone needs to know the answers.

Cheers,
Pat

 

Say goodbye to 40-year mortgages!

ELLEN ROSEMAN 
The 40-year mortgage, launched just over two years ago, will probably expire in October.

Back in April 2006, Genworth Financial Canada was the first to insure residential mortgages in Ontario that were paid back over 40 years.

Soon, all of Canada’s mortgage insurers will have to underwrite mortgages paid back over 35 years at most. Ottawa is not killing the long-payback loan because it sees a U.S.-style housing bust coming to Canada.

Canadian financial institutions have been conservative in their lending, says a finance department background paper.

And subprime mortgages make up less than 5 per cent of new loans issued in recent years.

A more urgent reason is to protect taxpayers – you and me – from possible losses if too many stretched borrowers default on their 40-year mortgages.

The federal government is on the hook financially because it guarantees 100 per cent of the mortgage insurance claims paid by Canada Mortgage and Housing Corp., a Crown corporation.

It also stands behind the claims paid by CMHC’s private-sector rivals, such as Genworth.

Ottawa backstops 90 per cent of private mortgage insurers’ claims to make it possible for them to compete effectively with CMHC.

Mortgage insurance is a lucrative business. Residential buyers with less than a 20 per cent down payment must buy a policy, which protects lenders against default.

The average Canadian will pay only $55 a month more by taking out a 35-year mortgage instead of a 40-year loan, estimates Pascal Gauthier, an economist with TD Bank Financial Group.

“It’s just optics,” he says.

But other rules unveiled Wednesday could make it harder for first-time buyers to qualify for government-insured mortgages.

Borrowers will have to make a 5 per cent down payment instead of financing the entire house price.

They can still borrow the 5 per cent with a line of credit, but “it will not be insured under the new guarantee framework,” the finance department says.

Requiring buyers to put down 5 per cent of the purchase price in cash will have a bigger impact than the vanishing 40-year mortgage, says Jim Murphy, president of the Canadian Association of Accredited Mortgage Professionals.

Borrowers will also need a minimum credit score of 620 to qualify for a government-insured mortgage.

A credit score – also called a Beacon score or a FICO score (after Fair Isaac Corp. ) – is a numerical value that measures a borrower’s risk based on a statistical evaluation of information in their record.

The minimum credit score now used for government-insured mortgages is less than than 620, says a Toronto mortgage broker.

“The lender looks at all the circumstances, and getting a deal approved with a credit score of 580 has been pretty standard,” says John Cocomile of Greedy Mortgage. “This, of course, is assuming solid employment, a strong co-signer or other factors that make the deal sensible.”

Mortgage broker Jim Rawson, Toronto regional manager of Invis Inc., is glad to see tougher rules coming into force.

“It’s the right thing to do,” he says. “Our business won’t be affected that much.

“If you can’t afford to pay an extra $50 or $60 a month, you probably shouldn’t be buying a house.”

Bank of Canada urged to raise interest rates

The Canadian Press

July 10, 2008 at 4:04 PM EDT

OTTAWA — The Bank of Canada should move to head off inflation in the country by raising interest rates next week for the first time in a year, says a consensus view by a deeply divided panel of nine economists associated with the C.D. Howe Institute.

A closer look suggests the economic think tank’s monetary policy council was almost evenly divided 5-4 between those favouring a rate increase and those who thought the central bank should leave the rate unchanged.

Four members were in favour of the central bank leaving its overnight interest rate unchanged at 3.0 per cent next Tuesday, four others advocated a quarter-point increase and one wanted a half-point increase.

The overnight rate is a benchmark that is used by commercial banks when they set various other lending rates, including for shorter-term mortgages.

“Notwithstanding the division in opinion regarding the Bank of Canada’s July 15 decision, the main theme of the group’s discussion was concern about rising inflation and rising inflation expectations,” the institute said in a release.

“Several members argued that the Bank of Canada should act aggressively to prevent expectations of higher inflation becoming more pronounced and affecting price and wage setting.”

The economists cited high oil prices, the increased likelihood inflation will move above the upper end of the bank’s target range of one to three per cent, rising wages and a recent Bank of Canada business survey that found 42 per cent of firms planned to increase prices for their products.

The private-sector think thank said economists who favoured no action said they were concerned about the slumping economy, but even in this group, most saw the rate going to at least 3.25 per cent in the next six to 12 months.

The Bank of Canada uses monetary policy to keep inflation in check. Raising rates increases borrowing costs, thereby slowing down economic activity and growth.

The central bank began trimming the overnight rate from the then 4.5 per cent level in December as the economy began showing signs of slowing and perhaps contracting.

But after slicing 150 basis point from the overnight rate, following the lead of the United States, the Bank of Canada halted its easing policy last month, saying that inflation was beginning to re-emerge in Canada.

The bank last raised the overnight rate in July 2007.

Ottawa tightens mortgage rules to avoid 'bubble'

 

I just finished reading this on the Globe and Mail site. I am putting it here because I do not agree with it. Please feel free to send me your comments.

Thanks

Pat 

LORI MCLEOD AND KEVIN CARMICHAEL

From Thursday’s Globe and Mail

July 9, 2008 at 8:16 PM EDT

 

 

OTTAWA — The federal government is cracking down on the mortgage industry in a move that could help protect against a U.S.-style housing bubble, but will also make it tougher to borrow money to buy a home.

The Finance Department said Wednesday it will stop backing mortgages with amortization periods longer than 35 years as of Oct. 15.

It will also start demanding a down payment equal to at least 5 per cent of the home’s value, rather than guaranteeing mortgages where they buyer has borrowed the total amount.

“Today’s announcement marks a responsible and measured approach by the government to ensure Canada’s housing market remains strong, and to reduce the risk of a U.S.-style housing bubble developing in Canada,” the Finance Department said in a statement.

Existing 40-year mortgages will be grandfathered, a Finance Department spokesman said.

In 2006, the maximum amortization period was extended to 40 years from 25, and longer-term mortgage products have become increasingly popular with buyers looking for lower monthly payments as the price of Canadian homes soared.

Last year, 37 per cent of new mortgages were for terms of longer than 25 years, according to the Canadian Association of Accredited Mortgage Professionals (CAAMP).

But while longer amortizations stretch out monthly payments, they also greatly increase the cost of a mortgage over its lifetime.

For example, the total interest on a $300,000 mortgage can soar from $286,161 over the life of a 25-year mortgage to $498,416 over a 40-year amortization period – adding more than $200,000 to the cost of the home.

This, combined with the fact that these mortgages are often combined with little or no equity, raised alarm bells with policy makers looking at the turmoil that took place in the U.S. when house prices started to fall.

“We’ve seen an inclination now, a trend, toward longer-term amortizations and smaller down payments, and that is a matter of some concern,” Finance Minister Jim Flaherty said in a speech in May. Mr. Flaherty was not available for comment Wednesday.

Jim Murphy, president and chief executive of CAAMP, said in talks with him the government expressed concern about the risky lending products that collapsed the U.S. housing market.

The Finance Department was also worried about the future impact of competition between mortgage insurers, which led to the introduction of 40-year mortgage in 2006, Mr. Murphy said.

“I think you have a clear case of the government sitting down and looking at its risk exposure and wanting to review that. They have financial guarantees in place for the CMHC and private insurers, and they were saying, ‘What is our risk, and what is the risk to the Canadian taxpayer?’ ” he said.

Reaction from the industry was mixed.

“CMHC supports the new parameters … . We also support their efforts to maintain the strong Canadian housing market,” said spokesperson Stephanie Rubec, adding CMHC will stop insuring 40-year and zero down payment mortgages in October.

“It’s the right move,” said Nick Kyprianou, president of Home Capital Group Inc., whose principal subsidiary, Home Trust Co., provides alternative mortgages. “Why get people overextended? Nobody wins by getting people right to the end of the cliff.”

Others, however, say home buyers and banks have been prudent with their finances, and are being punished for the more lax approach south of the border.

“Things here are not like they are in the U.S. where they had those NINJA loans, no income, no job, no assets. … It’s only going to hurt the consumer,” said John Panagakos, owner of Toronto brokerage Mortgage Centre.

The move actually comes at a time when the housing market has moved on to other concerns, the most pressing of which is chilling consumer sentiment due to high fuel prices, said Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc.

“It’s a bit like closing the barn door after the horse has already run down the road.”

 

Why you will not see mortgage rates on this site!

At least two-dozen times a week we have people call us and ask, “What’s your rate on a 5 year fixed rate?” Most times when we try to get additional information from the potential borrower. Unfortunately, for both the caller, and us they don’t want to tell us anything. “I already know what I want, just give me a rate,” is the usual response.

Now, I’m not encouraging you not to shop-around for the best rate.

But, asking for a rate without giving more information is a bad idea. Why? Because frankly, anybody can give you any rate quote they want to over the phone, there is no way you can hold them to that rate. You see, there are two kinds of mortgage companies out there, those that are only interested in you as a loan customer and those that look at you as a client for life.

Those companies that want a fast buck know that they can quote you anything they want to just to get you in the door, then they can use whatever excuse to “convert” you to a different loan with a different rate.

Those companies that want you as a client for life, will take the time to ask for as much information as possible, up-front, so they can not only give you the best rate possible, but they can also quote you the best loan program for your situation.

Additionally, far too many people think they already know what loan program is best for them.

You may think you already know what you what, but unless you know all of the options in the marketplace you may miss an opportunity for a better loan program or situation that you didn’t know existed.

Let me ask you, have you ever gone into a store to buy a specific product, but came out with something entirely different?  If you did it was probably because you didn’t know the new product even existed or a knowledgeable person in the store gave your new information that helped you make a better decision.

That’s they job of a competent loan officer, to use their years of expertise to help you select the best option for your situation.

Please, don’t assume you know what’s best for you.

Now, I’m not saying that you shouldn’t make the final decision. After all, it is your money, your home and your financial future. However, there is no harm at all in letting a competent, well trained mortgage professional give you several options, then you select which you believe is best for you.

Cheers,

Pat