Home Trust to offer traditional mortgages!

Alternative lender believes competing with banks will lower risk, allow it to pick up more business

LORI MCLEOD

 

00:00 EDT Wednesday, August 06, 2008

Alternative lender Home Trust Co. is launching a line of traditional mortgage products that will compete directly with those offered by the banks.

The Toronto-based lender hasn’t been pushed out of lending to riskier borrowers, a problem encountered by some of its competitors as a result of the U.S. subprime crisis.

Instead, the company, which uses a deposit-based funding model, believes the move will help fuel the growth of its core alternative-loan business and its relationships with mortgage brokers.

“What we can offer is a one-stop shop, particularly for brokers where time is of the essence for their clients,” said Gerald Soloway, chief executive officer of Home Trust’s parent, holding company Home Capital Group Inc.

To get the rest of this story from the source click here other wise here is my take on this. I want to start by saying that I love Home Trust. They have been great to my clients in the past, and I intend on doing business with them again. However that being said I don’t like the fact that they are getting into the “A” business at the expense of their core non traditional or sub prime equity lending background. Yes they are still doing some equity deals but they have pulled and or changed products in that line of business. With many players already leaving that market you would figure that they would be able to take more of the market instead of staging a retreat. Anyway since they do not sell ABCP to raise funds they should be able to come back to those products if the market demands. Only time will tell.

Cheers,

Pat

 

Home Capital hikes dividend!

The Canadian Press

August 5, 2008 at 7:18 AM EDT

TORONTO — Home Capital Group Inc. profit was $26.6-million in the second quarter, an increase of 20.6 per cent over $22-million in the same period last year. Basic earnings per share were 77 cents, up from 64 cents for the second quarter of 2007.

Return on equity was 27.7 per cent for the second quarter, compared to 28.9 per cent for the second quarter of 2007. Total mortgage originations were $886.9-million during the second quarter, an increase of 42.5 per cent over the $622.6-million advanced during the same period in 2007.

Home Capital’s board has approved an increase in the quarterly dividend to 13 cents per share on the outstanding common shares of the company, which is equivalent to an annual dividend of 52 cents per share.

Great for the investors, now how about getting back into the sub prime alt-a market again. I am pleased as punch that you are doing well but don’t take away options from borrowers. Honestly I love Home Trust, I just think that going after the “A” business when they are traditionally not an “A” lender is not the best move for them.  

Cheers,

Pat

HSBC posts steep profit drop!

The Associated Press

August 4, 2008 at 8:39 AM EDT

LONDON — — HSBC Holdings PLC [HBC-N], Europe’s largest bank by market value, reported Monday its steepest fall in profit since 2001 as costs for bad U.S. mortgage loans mounted.

Net profit for the first half of the year plunged 29 per cent to $7.7-billion (U.S.) from $10.9-billion in profit in the January to June period of last year.

“The first half of 2008 saw the most difficult financial markets for several decades, marked by significant declines in profitability throughout much of our industry,” said HSBC chairman Stephen Green. “HSBC was not immune from the turmoil.”

The biggest losses came from the North American market, which HSBC depends on for a quarter of its revenue. Operations there posted a first-half loss of $2.9-billion, compared with profit of $2.4-billion a year ago.

Part of the blame lies with Illinois-based Household International Inc., a lender HSBC purchased in 2003 that elevated the British bank to the unenviable position of biggest U.S. subprime mortgage lender.

Still, HSBC has weathered the global financial storm with better than some others. In May, the bank reported that first-quarter 2008 profit was actually better than the same period last year, despite a $3.2-billion writedown on subprime mortgage assets in the United States.

If you have read this far you may be wondering why this could be important to you? The answer is quite simple really. The Canadian market is relatively small, we are about 10% of the US population. So if a bank is a having a hard time in the US market, it slowly but surely trickles down to us here in Canada. Here is an example, Accredited Home Lender’s closed their US operations last fall, at that time they left their Canadian operations open as we were still profitable. However come spring time they were forced to close their Canadian operations. This is because banks are having a harder time selling their “ABCP” to investors. If I just lost you there don’t feel bad, ABCP is asset backed commercial paper, or in other words they are selling your mortgage to investors. So because of the instability in the market investors are loosing their appetite for ABCP from sup prime lenders. So what can you do to protect your self? Ask your broker or banker how exposed they are to the US sub prime market. The rest of the players left in the Canadian market are relatively stable, for sub prime Wells Fargo is a good pick as they do not sell their ABCP on the open market, and on the “A” side First National is a good pick as they are Canada’s largest non bank mortgage lender. 

Fee free to contact me if you have any questions or concerns.

Cheers,

Pat

 

 

A zero-down mortgage by any other name?

LORI MCLEOD

Globe and Mail Update

July 31, 2008 at 7:49 AM EDT

As the financial industry sits down with Ottawa this week to assess tighter mortgage rules, another lending product could find its way into the spotlight – cash-back mortgages.

Keen to avoid a U.S.-style housing bubble, the federal government recently cracked down on lenders and insurers through a series of reforms. Major changes already announced include a planned withdrawal of government guarantees for mortgage loans where the down payment is less than 5 per cent of the home’s value, and for those with amortizations of more than 35 years.

Yet while lenders are phasing out so-called zero-down mortgages, many are still offering buyers a similar option through the use of cash-back incentives in lieu of a down payment. This practice will be up for discussion this week, said Finance Department spokesman Jack Aubry.

Cash-back mortgages could be more contentious if lenders start using them to attract leveraged home buyers who otherwise cannot afford to buy – filling a void created with the loss of zero-down-payment.

This week, Toronto-Dominion Bank rebranded its No Down Payment Mortgage as the CashBack Down Payment Mortgage.

In an e-mail to brokers, TD Canada Trust said the product’s terms and conditions hadn’t changed.

Canada Mortgage and Housing Corp. (CMHC) has also said it will continue to offer a similar product, CMHC Flex Down. In fact, most major lenders have some type of cash-back or “flexible” down payment mortgage option.

In essence, the products aren’t much different than a 100-per-cent mortgage loan. The difference is that they allow buyers 95-per-cent financing through their mortgage, and the remaining 5 per cent down is paid by the bank in exchange for the borrower taking on a much higher rate. That’s usually the posted mortgage rate instead of the discounted rate available to most home buyers, which can mean a cost difference of 1.5 percentage points.

Since the mortgage loan itself meets the new 95-per-cent loan-to-value maximum, all but the 5 per cent in funds borrowed for the down payment is eligible for government backing, which protects the lender against the risk of default by the home buyer, Mr. Aubry said.

Cash-back products were available before the government changes and aren’t a new product emerging to fill a niche, said Joan Dal Bianco, vice-president of real estate secured lending at TD Canada Trust.

In fact, with more clarity from the government regarding the changes, which also include new credit score requirements and loan documentation standards, TD Canada Trust will reassess the CashBack Down Payment product to decide whether it is still appropriate, Ms. Dal Bianco added.

“For this particular product, I will be revisiting whether we keep it in the market or not once we have clarified things. We may pull this particular one, where it goes to the lawyer specifically for the down payment …”

Mortgage broker John Panagakos said he plans to steer his clients clear of cash-back mortgages.

The monthly payments and interest costs are higher than those of traditional mortgages in the early years, meaning little financial flexibility for stretched buyers, he said.

Instead, it’s worth it to wait and save the down payment or borrow it from a family member, he added.

“To me, this basically looks like no money down, but wearing a new suit,” Mr. Panagakos said.

 

Here is my take on this. Currently you can qualify for 100% financing with a 680 or higher beacon score amortize it over 40 years and also get a discounted rate of around 5.65%. However with the new rules your rate will be 7.15% and you are limited to 35 years. Say you buy a house for 200K with the current program your carrying costs will be 1,043.08 per month and with the new financing rules your carrying costs will be 1,284.14 per month. This adds 241.06 more per month to your debt service load. Sure you pay more in interest over the life of the loan, but if the consumer does not feel it over a monthly basis then what is the risk. Anyway options will still be available to consumers with good credit who want zero down, they just will have to pay out more to exercise those options. Thanks but no thanks!

Cheers,

Pat 

First National profit rises 28 per cent

The Canadian Press

July 30, 2008 at 10:53 AM EDT

TORONTO — First National Financial Income Fund reported “record profitability” in the second quarter, with revenue rising 23 per cent to $76.9-million from a year earlier and net income up 28 per cent at $30.1 million.

Canada’s largest non-bank originator and underwriter of mortgages raised its monthly distribution to 11.25 cents per unit, or $1.35 annualized, up eight per cent from $1.25.

First National Financial said Wednesday its mortgages under administration increased 28 per cent year-over-year to $36.6-billion at June 30, as originations grew 14 per cent to $3.2-billion.

This growth was attributed to a rising market share in the single-family residential mortgage broker channel and a strengthened position in commercial mortgages.

“First National reached new heights of profitability in the second quarter of 2008, driven by strong volume growth in mortgages under administration and originations, the revitalization of our NHA-MBS program and higher margins on our core mortgage solutions,” stated chairman and president Stephen Smith.

“Although credit markets continued to show volatility, First National’s performance has continued to thrive because of our diversity in funding and revenue sources.”

April-June distributable cash was calculated at $5.3-million or 43 cents per unit. Net income compared with $23.5-million a year earlier, when revenue was $62.6-million.

First National also said it is suspending its distribution reinvestment program. The program raised capital of $10.5-million during the second quarter. “However, it became clear as the quarter progressed that additional capital was not required,” the company said.

Why is this important to you? First National is an “A” lender and has the best support and service in the industry. They get all my “A” business because of this. All their underwriting is done on their fantastic Merlin system, which means if you have a question it is answered quickly. After your mortgage closes you are given access to the system to keep tabs on your mortgage, so you can make extra payments if needed, change payment dates, go from a variable to a fixed or change the account it is coming out of all at a touch of a button. These are just some of the reason why they are my choice for my clients mortgage. To sum it up they just make it easy to do business with them.

Cheers,

Pat

GE Money Pulls up stakes!

GE exits Canadian mortgage business

LORI MCLEOD

REAL ESTATE REPORTER

July 30, 2008

The global credit crisis has claimed another victim in the Canadian mortgage industry asGeneral Electric Co. winds up its mortgage operations here.

After three years in the business, GE Money Canada said it will stop taking new mortgage applications tomorrow. It’s the latest in a string of alternative lenders that have decided to scale back operations or close shop amid the credit crunch.

Lenders who relied on bundling and selling loans to fund new mortgages have run into trouble as the securitization market went dry.

GE uses its own capital to fund mortgages, and in its case the decision is part of a broader corporate strategy to shift away from consumer financing, said Stephen Motta, chief executive officer of GE Money Canada.

“This was precipitated by the credit market turmoil, and the need to deploy capital more effectively,” Mr. Motta said.

The business is worth less than $1-billion and has 50 employees, some of whom will find new jobs within GE.

GE exited its U.S. subprime lending business in July, 2007, and has been scaling back its mortgage operations around the world. Last week the company said it was realigning its operations to focus on its core business areas: infrastructure, media and finance.

The company is also considering strategic options for its credit card operations, including GE Money Canada’s business primarily consisting of private label cards, Mr. Motta said. However it will continue to focus on expanding a division that provides loans for power sports equipment and other big-ticket items.

Other foreign-based lenders that have recently departed the Canadian mortgage lending market include HSBC Financial Corp. Ltd. and Accredited Home Lenders.

“This is the one major, direct impact on the Canadian mortgage market from what’s happened in the U.S.,” said Jim Murphy, president of Canadian Association of Accredited Mortgage Professionals. “My concern is that fewer mortgage providers means less choice and options for Canadian borrowers.”

GE Money Canada will finish processing current mortgage applications, and will hold existing mortgages on its books until their terms conclude.

This is what I was sent as one of their brokers:

 To our broker partners,
 
GE Money wishes to advise that, effective at the close of business this coming Thursday, July 31, we will no longer be accepting mortgage applications. This difficult decision to wind down our mortgage business in Canada comes as a result of a lengthy analysis of our global business, as GE and GE Money continue to apply investment capital in areas providing the best potential return for our shareholders.  

Though we will stop taking mortgage applications as of Thursday, we will fund our outstanding commitments. 

We are grateful to our employees, and to our many broker and business partners who assisted in the development and launch of our mortgage products across Canada. Our first priority today is to assist the members of our talented team who have been impacted by the announcement with the transition to the next steps in their careers.

  
Best regards,  

Joe Veckerelli

President, GE Money-Mortgages 

This is my take, another one bites the dust.  For those of  you who are keeping track here is a list of lenders who have pulled Alt-A or Sub Prime products or left the market all together. If I have left anybody out please let me know. Accredited Home Lenders, Abode Mortgage, GE Money, GMAC-RFC, Money Connect, myNext Mortgage Company, N-Brook, ResMor Trust, Street Capital, Interbay and Xceed. At this point I must give a shout out to Wells Fargo for sticking it out and hanging in with us. Thank You. 

Cheers,

Pat

 

U.S. to post record $490-billion budget deficit!

WASHINGTON — A Bush administration official said Monday the next government will inherit a record federal budget deficit for next year that approaches $490-billion (U.S.).

The official said the deficit was being driven to record levels by the sagging economy and the stimulus payments being made to 130 million households in an effort to keep the country from falling into a deep recession. A deficit approaching $490-billion would easily surpass the record deficit of $413-billion set in 2004.

To read the rest of the article from the source click here, other wise here is my take. The Canadian national debt is roughly 725 Billion, click here for the running tally. It works out to just over 22K per average Canadian. Now compare that to our American neighbors, 9.5 Trillion or just over 31K per American.  Should we break out the check book now and pay off our share? Heck no. If you really think about it what comes to mind is what kind of fiscal lesson are our so called parents trying to teach us. If we need more money we will just print more. To stimulate the economy we will just send out cheques cause they think that we are just going to spend it any way. Our saving’s rates are at all time low’s, what are we going to do if this economy really does tank and quickly. Ask for a goverment bail out? They are worse off than we are! We have to change our habits and do it quickly, as we can not look at our national leaders for the right direction to go. Sure we as Canadians have whittled away at our national debt at a faster rate this past decade, but on average the regular Canadian is carrying far too much debt. All it takes is a little knowledge and a push in the right direction to get you on the right track to debt freedom. Contact us to see how we can help. Use the chat box above, or leave a posting below, if you’d like to brainstorm some specific ideas about your own situation or ask for a free debt analysis to see how we could help you personally.

Cheers,

Pat

Economic woes hit U.S. credit card business!

JONATHAN STEMPEL

Reuters

July 27, 2008 at 9:00 AM EDT

NEW YORK — Even as Washington Mutual Inc. lost billions of dollars from risky mortgages, the largest U.S. savings and loan could rely on its credit card business to turn a profit. No longer.

The thrift’s $175-million (U.S.) second-quarter loss from its card unit stemmed from higher delinquencies and an inability to sell some card debt to investors because of illiquid markets. It was Washington Mutual’s first card loss since it entered the business in 2005 when it bought Providian Financial Corp.

Washington Mutual is not alone. American Express Co., Bank of America Corp., Capital One Financial Corp., Citigroup Inc. and JPMorgan Chase & Co. face pressure as falling home prices, $4-a-gallon gas and rising food costs leave more cardholders struggling to pay their bills and force even wealthy customers to spend less.

 

To read the rest of the article from the source where I found it click here. Otherwise here is my take, This is a sure sign that people are robbing Peter to pay Paul. Here is the easy solution “Stop living on your credit cards”! It is the highest cost to borrowing that we have available to us, well that is if you don’t include you local loan shark! There is a better way. My company has helped many people who where drowning in debt to reduce their overall expenses and showed them the road to becoming totally debt free. Put that plastic on ice and call our office to see if we can help.

Cheers,

Pat 

The worst is over? Think again

As taken from the Globe & Mail. See my comments below.

The stock market would have you believe that the worst of the financial mess is over, and that it’s time again to buy, buy, buy. But Barry Ritholtz, who writes The Big Picture Blog, thinks the buying frenzy of the past week is a head fake that will end badly.

“The anticipated bear market bounce in financials has led to the usual fools’ chorus that the worst is behind us, the economy is on the mend, and a recession is avoided,” he said. “How’s the economy doing? You tell me.”

He then goes on to list (and it’s a long list) the problems that continue to plague the U.S. economy. For one, General Motors Corp. and Ford Motor Co. are suffering, but so is mighty Toyota Motor Corp., a sign that this isn’t an isolated slowdown affecting a couple of troubled names.

The nay-sayers are at it again. So there is no time better than the present to take control of you finances. The so called professional’s are not doing so hot at it. This is what I mean by that comment, I want you to take control of your finances so that the banks, credit card companies or any one you may owe money to is not in control over you. So that when the economy tanks, and no one is giving out credit any more ( well they are, but they are making it harder to get) and people still need it. I want you to be in a position where you can fund you own life style. Where you will not have to go hat in hand to the local bank or broker so you can rob Peter to pay Paul. Please contact my office so we can show you how to take back control and get back in the driver’s seat toward your own financial freedom.

Cheers,

Pat

Investors sue CIBC over subprime exposure

 

A group of investors has become the first to launch a class-action lawsuit againstCanadian Imperial Bank of Commerce, alleging misrepresentations about the bank’s exposure to the American subprime mortgage market. The claim alleges that the bank misrepresented its total exposure to U.S. subprime loans by saying it “was ‘not a major issue’ when, in fact, the bank had exposure to billions of dollars of losses.” The suit was filed with the Ontario Superior Court by Toronto’s Rochon Genova LLP. Lawyer Joel Rochon said that CIBC “ignored its legally required disclosure obligations to the detriment of the investing public.” CIBC denied the allegations. “CIBC is confident that, at all times, its conduct was appropriate and that its disclosure met applicable requirements,” spokesman Rob McLeod wrote in an e-mail. CM (TSX) rose $3.17 to $63.29. CP