Tag Archive for: sub prime mortgages

Recession over? You tell me!

Last year this time, I found myself heaping praise on Wells Fargo for being basically the lone survivor in the Canadian Sub Prime or Alternative mortgage market. Now as of yesterday they are no more, they have thrown in the towel and hitched up their wagon and left town, just like all the others. See the note below. However there is one silver lining to this story, as I believe that we live in a vacuum, as one leaves another arrives. Earlier this week we received an announcement that Toronto Dominion bank has their own alternative lender ( called VFC)  now open for business. So now even if your credit is less than perfect, or you are self employed and can only qualify for a stated income mortgage ( because you make 150K but only claim 25K for example) there are still options available for you. If you have any questions please feel free to contact my office.

Cheers,

Pat

Wells Fargo Financial Corporation Canada discontinues residential real estate lending

Effective July 30th, 2009, Wells Fargo Financial Corporation Canada will no longer be accepting residential mortgage loan applications through its consumer branch and indirect broker network channels.

Please treat this writing as notification of immediate cancellation of any Mortgage Broker Origination Agreement or other real estate lending agreements you may have with Wells Fargo Financial Corporation Canada or Wells Fargo Financial Corporation Canada HomePlan Mortgage.

To the extent Wells Fargo Financial Corporation Canada HomePlan Mortgage has issued a valid fully executed mortgage commitment, provided the applicant or applicants fulfill all of the terms and conditions of the mortgage commitment (including any time specified for closing or expiration of the mortgage commitment), we will honour those commitments.

Current customers and/or brokers with questions about a Wells Fargo Financial mortgage can contact our Corporate Customer Relations team at 1-800-461-8794.

We thank all of our broker partners, vendors and customers for their business and support over the years.

Sincerely,

Rick Valade
President
Wells Fargo Financial Corporation Canada

Wells Fargo Financial Corporation Canada is associated with Wells Fargo & Company, a company that is not regulated in Canada as a financial institution, a bank holding company or an insurance holding company.

Wells Fargo Financial Corporation Canada operates in Quebec as Société financière Wells Fargo Canada.

TM,Trademark Wells Fargo Financial Corporation Canada.
P.O. Box 250, Stn. A, Mississauga, ON L5A 3A1
Ontario Brokerage License Number: 10239

© 2009 Wells Fargo Financial Corporation Canada. All rights reserved.

Setting the record straight!

This post is in response to an article in the business section of today’s Chronicle Herald newspaper. While I admire and respect the broker quoted in the story, I believe that some of the message can easily be taken out of context and I just want to set the record straight. 

I have been a mortgage broker for just over 6 years now. During this time a lot has happened and a lot has changed in the Canadian mortgage market. Canada started off with only one true sub prime mortgage lender, several had entered the market and now we are back to only one again. With the advent of rampant sub prime lending here in Canada; we were introduced to 100% financing, stated income products, interest only mortgages and products for clients with less than perfect credit. While 95% of Canadian mortgage holders are unaffected, the 5% who have a mortgage from a sub prime lender should have a game plan (to prepare them) for renewal time. 

The main reason that I place clients with sub prime or alternative lenders is to get them financing until such a time that they could qualify for a main stream insured lender. I look at the sub prime lender as a bridge lender, who will give the clients time to improve their credit and or pay off debt before qualifying for better rates and terms. It would be a disservice if I expected any client to renew their mortgage with their sub prime lender. 

Would I tell all my clients who hold mortgages with sub prime lenders to sell their properties? No I would not. We would have to look at the reasons why they are with these lenders, how much time before renewal and help them develop the proper exit strategy. I do plenty of private loans and this is not any different. Just as with any private loan, you should also know your exit strategy. 

If you are someone who has a mortgage with a sub prime lender (such as Xceed, and others), don’t panic! There are still things that can be done prior to your renewal time. Please call my office so we can look at your options. 

Cheers,

Pat

 

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What is money anyway?

As all the world’s financial markets are losing trillion’s of dollars almost daily, I am having to think “What is money anyway?”

It is more than pieces of paper with pictures of deceased notables on it as Anthony Robbins says. Some say that it is financial currency for the value placed on the exchange of service from one party to another. But it is more than that as well. Below is the definition that I like the best. 

“It is the physical representation of value that rises and falls in ourselves, within us. Not within ‘things’ outside of us, but within us. For without us, what can the value of a thing, such as a car, be to us? Nothing, at least not to us. In other words, it is we, the observers, that place value in things, but this value is really value in us – we give value to the material things. The material things have no ‘money’ value in themselves – we give that to them. So, money is the external physical representation of a particular section of our internal value, within us, within you.That is why a house or a block of shares valued at $1 million today can fall to a valuation of half a million dollars tomorrow when fear is introduced into the hearts of those involved. The fear kills a portion of the internal values of the participants and that is reflected by the paper money, the ‘body’ of value.”*

So how does this all apply to our current financial crisis? Let’s think of the sub prime mess that we are currently still suffering through. Lenders were creative with their borrowing requirements, and as a result lots of people who otherwise would not have been able to afford a home now had one. These same lenders then sold their books of mortgages to investors for the value that they put on them. Everything was working fine until people were not able to make their payments, thus changing the value of the book of mortgages. As a result investment firms and banks who bought these books of mortgages (or still have them on their books) are now unable to find investors to buy them and are now suffering massive losses.  As these banks and investment firms are dropping like flies, it is unraveling our confidence in the financial system as a whole.  Of course, panic in the market does not mean that you should panic yourself! In this environment it is vital to be clear about what does, and what does not, need you to respond.  Those who are strongest financially stand to gain enormously, as perfectly sound assets are sold off at fire-sale prices. 

To minimize the effects of this financial meltdown personally, then you must make sure that you are in the best financial shape possible. That means paying off your debt as quickly as possible and having cash available in your portfolio to invest in the market as the buying opportunities present themselves. Contact my office now and leave a message, if you are interested in checking out a new way to pay off your debt quickly so you can then have more cash available to take advantage of the buying opportunities.

Cheers,

Pat

* Taken from David Cameron Gikandi’s “Happy pocket full of Money“.

Court turns down ABCP appeal!

The Supreme Court of Canada has denied an appeal of the plan to rescue $32-billion of stranded asset-backed commercial paper, clearing the way for thousands of individuals and companies to start reclaiming investments that have been frozen for 13 months.

A group of Canadian companies holding about $600-million of notes had challenged the ABCP bailout on the grounds that it was legally flawed. The businesses, which include Domtar Inc., Ivanhoe Mines Ltd. and Jean Coutu Group (PJC) Inc., opposed the plan because it includes a sweeping legal immunity that shields financial players from potential lawsuits relating to their controversial role in the ABCP meltdown.

By refusing to consider the appeal, the Supreme Court has endorsed a precedent that some legal experts say will allow other troubled entities to seek similar shields that deny investors and other parties the right to seek damages for alleged improprieties.

Holders of the ABCP have been unable to cash in or trade the paper since August, 2007, when a global panic about shaky U.S. mortgages shut down a large segment of Canada’s ABCP market. Canadian notes issued by non-banks proved to be more vulnerable than ABCP issued in other countries because they were backed with unreliable emergency lines of credit.

The ABCP collapse has left scores of individual investors stranded without savings that had been earmarked for home purchases, retirement plans and other expenditures. Under a plan approved by the Ontario Superior Court, most of the estimated 2,000 individual investors saddled with ABCP are entitled to receive cash for their notes.

Those investors each holding more than $1-million of notes will be entitled to receive a new class of long-term notes that can either be sold or held until maturities that extend up to nine years.

According to sources, the committee of financial players overseeing the restructuring hopes to start paying cash or other longer term notes in exchange for ABCP by October.

By denying the appeal, the Supreme Court has effectively eliminated the last major hurdle standing in the way of a massive restructuring that many critics said couldn’t be done.

Ever since veteran Toronto lawyer Purdy Crawford agreed a year ago to chair a committee of pension funds, banks and other players seeking to salvage the notes, critics said the bailout would never work.

The restructuring attempt was the largest in Canadian history and it was brought to the brink many times by market and credit panics in the past year.

Canaccord Capital Inc., a Vancouver brokerage that sold ABCP to many of its clients, said the Supreme Court’s ruling paves the way for it to proceed with its plan to reimburse much of its customers’ losses.

“We commend the Supreme Court’s decision,” said Paul Reynolds, president and chief executive officer. “We are eager to complete our relief program and restore funds to our clients, who have been negatively impacted by this market disruption.”

In conference call, Mr. Crawford said he was pleased by the court’s decision, particularly during such a tumultuous week in global markets.

“We think it is a major, significant step forward to getting this deal done. We think Canada is a land of tranquility in a sea of storm.”

Howard Shapray, a Vancouver lawyer who represented Ivanhoe Mines, said he is disappointed that the Supreme Court allowed “a plan that is so flawed from a legal point of view.” Despite his disappointment, he said he is pleased that investors will soon be able to start recovering their savings.

“I have tremendous respect for Purdy Crawford, for his industry and determination. They pulled a rabbit out of a hat,” he said.

James Woods, a Montreal lawyer who represented a group of Quebec-based companies, said that the Supreme Court has left a “very confusing legal landscape” in the insolvency practice because Ontario court rulings that approved the ABCP plan are in conflict with decisions from Quebec courts. He also said he hopes the federal government and market regulators continue with ongoing investigations into the market collapse that left so many Canadians stranded.

“There has to be a very close look at what took place,” he said.

Debt outpaces home value for one-third of new owners!

BOB IVRY

Bloomberg News

August 13, 2008

Almost one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth, according to Zillow.com, an Internet provider of home valuations.

Home prices fell 9.9 per cent in the second quarter from a year earlier, giving 29 per cent of owners negative equity, said Zillow, the Seattle-based service that offers values for more than 80 million homes. For those who bought at the 2006 peak of the housing market, 45 per cent are now under water, Zillow said.

Negative equity and declining prices contribute to the foreclosure rate because some homeowners don’t have the cash to pay off the mortgage and end up surrendering their homes to the bank that holds the loan, said Stan Humphries, Zillow’s vice-president of data and analytics.

“For homeowners who need to sell, this is a gravely serious situation,” Mr. Humphries said. “It can also be harmful to communities where the number of unsold homes adds more to inventory and puts downward pressure on prices.”

Almost one-quarter of U.S. homes sold in the past year were for a loss, Zillow said.

In a regulatory filing late Monday, Countrywide Financial Corp. said thousands of borrowers with $25.4-billion in adjustable-rate mortgages (ARMs) owe almost as much as their homes are worth.

As of June 30, the typical Countrywide borrower owed 95 per cent of the value of his home, up from 76 per cent when the loan was made, the company said.

Seventy-two per cent of its borrowers were making less than full interest payments, and 12.4 per cent were at least 90 days delinquent.

According to Zillow, the highest percentages of homeowners with negative equity were located in California. In four of the state’s metropolitan areas – Stockton, Modesto, Merced and Vallejo-Fairfield – the number of homeowners whose mortgage debts exceeded the values of their properties topped 90 per cent, Zillow said.

In five more California areas – the Inland Empire (Riverside-San Bernardino), Bakersfield, Yuba City, El Centro and Madera – more than 80 per cent of mortgages topped values.

In Stockton and Modesto, more than half the sales in the second quarter were of foreclosed homes, Zillow said. Almost 15 per cent of sales nationwide were foreclosures, the company said.

Prices fell on a year-over-year basis in 140 out of 165 markets, Zillow said.

The 9.9-per-cent decline in home values was the largest on a year-over-year basis in at least 12 years, Zillow said. The median home price of $206,919 (U.S.) was the lowest since the fourth quarter of 2004, the company said.

“Sellers are starting to adjust their expectations,” said Zillow chief financial officer Spencer Rascoff. “More sellers accepting a loss is actually a sign of optimism. It means that the transactions might start happening. There are so many sales contingent upon the buyer selling their home.”

 

Even though this article is about the US market, it just goes to show the state of the over all market. I have sold many 100% loans to clients in the past. Now our market is more stable in most places and still increasing in all but a few locations, but this does not mean that Canadian consumers do more owe more than the value of their principal residence. Many do when you take in to consideration their mortgage, line of credit, credit cards, car loans and other debts. We have morphed into a live for today spending society. We need to realize that there are consequences. For the economies to improve we must first improve our own finances. How can we expect the government to balance the books if we can not balance our own. 

Cheers,

Pat