I recently read an article in Forbes that really shocked me. The article was about how aware we are about what we spend each week. These expenses could be anything – gas, utilities, groceries, meals out, movies, junk food… They asked three people to estimate how much their weekly expenses were and much to my surprise, they all underestimated by 30% – 40%. The results of this article are a neon billboard for the necessity and importance of a budget starting with a weekly expenses sheet, and a wakeup call to everyone still spending money without a budget and a plan.
Weekly expenses sheet: How many Canadians use a budget?
Only 40% of Canadians use a budget; however 90% of Canadians say that they have more debt today than they did five years ago (Practical Money Skills).
Weekly expenses sheet: Why are so many people reluctant to use a budget?
People think that using a budget will force them to cut out many of the things that they love to spend money on. And they work on the belief that better times are ahead – they’ll be making more money and some even believe that they are destined for a lottery win. Ignoring the realities of accumulating debt can spell financial disaster. People don’t want to face the harsh reality that they are spending more than they earn. A proper budget, which includes a weekly expenses sheet, would force those who overspend to deal with their debt reality.
Weekly expenses sheet: What can a budget do for you?
Budgeting can greatly improve your life and help you take control of your financial future. It will:
Calculate your monthly expenses – once you know what your monthly expenses are you can allocate money for those expenses
Prepare for the unexpected – budget for unforeseen expenses like an unexpected car repair bill or dental bill
Improve your credit score – sticking to your budget means that your bills will be paid on time, which means that your credit score will improve
Get out of debt/Stay out of debt – a budget will align your income with your expenses. Sticking to your budget will allow you to pay down your debts and/or stay out of debt
Weekly expenses sheet: What to do if you have too much debt?
Advantages and disadvantages of consumer proposals: Introduction
In this vlog, we answer the question “What are the advantages and disadvantages of consumer proposals?”.
Advantages and disadvantages of consumer proposals: Who is it for?
A Consumer proposal is a part of the Bankruptcy and Insolvency Act (BIA) found in Part III Division 2 of the BIA. It is available for people who do not owe more than $250,000 to their creditors, NOT including any mortgages or other loans registered against a principal residence.
The first test is being insolvent? What I mean by that is:
are your financial obligations greater than the worth of your property?
if you sold your assets you would not have enough funds to settle your financial commitments totally
you are having problems making the total required payments to pay off in full each of your financial commitments monthly
Advantages and disadvantages of consumer proposals: The Advantages
Pay your creditors part of what you owe them over a period not greater than 60 months.
Broaden the time you can use to pay off your financial debts.
Stop the interest clock.
Make monthly payments to the LIT for the benefit of your creditors that you can afford within your budget.
If successful, you get to keep your assets.
If successful, the cost of your consumer proposal can be thought of as being free. The BIA sets the fee of the LIT. The amount of payments you must promise to make to get your creditors to vote in favour ignores the fee of the LIT in performing that calculation.
You should think of a consumer proposal as obtaining an interest-free loan to combine your debts, pay only a part to get rid of them all. Your interest-free loan can have a term of no longer than 5 years.
Advantages and disadvantages of consumer proposals: The Disadvantages
There are not many disadvantages to a consumer proposal. The only one I can think of is that it is an insolvency proceeding under the BIA, so it will be and stay on your credit record for some time. But if you have so much debt you don’t know where to turn and you can’t pay it off, then your credit score has probably already taken a hit.
Our method is to set up an outcome for you where Starting Over, Starting Now becomes a reality, beginning the minute you walk through our door. You’re simply one telephone call away from leading a healthy, balanced and stress-free life again.
All hell broke loose when the CBC’s Go Public exposed a wide-spread banking problem – bank staff sales targets. The report stated that tellers try to meet their bank staff sales goals by signing customers up for products and/or services that they may not need.
Bank staff sales targets: It isn’t just one bank!
Although this article focused on the employees of one Canadian Chartered Bank who initially came forward to Go Public, the problem caused by bank teller sales goals is rampant across the banking industry and has been for some time. And, in fact it’s a badly kept secret that this is a common practice at every bank.
After the story broke, employees from all five of Canada’s big banks came forward to Go Public with stories of how they are required to up sell, trick and even lie to customers to meet unrealistic sales targets and keep their jobs.
Bank staff sales targets: Meet the sales goals or get written up, or worse
This isn’t just hearsay or a smear campaign against the banking industry; documents obtained by Go Public show tellers who fail to reach their sales goals are called “underperformers” and placed on a “Performance Improvement Plan”. This Plan involves daily coaching and monitoring by managers.
If sales performance doesn’t improve, warnings are given to underperforming employees that “employment could be terminated.” Approximately 1,000 emails from RBC, BMO, CIBC, TD and Scotiabank employees described the pressures they were under to meet sales revenue targets while being monitored weekly, daily or hourly. The message was loud and clear – it doesn’t matter how you hit your numbers as long as you do.
Bank staff sales targets: Who is most at risk from these sales tactics?
Unfortunately, as with most financial schemes, the most vulnerable are the ones most at risk from these bank teller sales targets. Seniors and new immigrants are most likely to believe advice from their bank without further analysis. However, in our increasing common sales culture, we’re all at risk. After all, if you can’t trust your own bank to manage your money, who can you trust?
Bank staff sales targets: What should consumers do to protect themselves?
The sad truth is that you can no longer assume that your bank is your trusted financial advisor and has your best interests at heart. Consumers need to be vigilant. If a teller or a financial services advisor recommends a product or service ask questions:
How much does it cost?
What are the fees?
Why do I need it?
What will the financial benefit be to me?
Bank staff sales targets: Just say no
Very importantly, consumers need to learn how to say no. Don’t be bullied into signing up for products and/or services that you don’t need because of bank staff sales targets. Clearly there needs to be more regulation in the banking industry and hopefully there is an investigation underway.
If you are experiencing debt issues for any reason please come to a professional trustee. We’re strictly licensed and we can’t profit from giving bad advice. The Ira Smith Team is here to help. Our commitment to you is to bring value added solutions that fit your unique issues and circumstances. Contact us today and Starting Over, Starting Now you can conquer debt.
According to Psychology Today, one of the causes of marital breakdown is dishonesty and betrayal. Dishonesty and betrayal can take many forms. It can include financial dishonesty in marriage. The purpose of this vlog is to look at this issue and how to get financial infidelity recovery in a marriage.
Financial infidelity recovery: Financial dishonesty in marriage
The first step is recognizing what financial infidelity meaning is. In its simplest form, financial infidelity is withholding from our partners about what we are doing with money that ultimately negatively affects the couple’s relationship. Examples of financial infidelity could be:
secret spending; perhaps as a result of an addiction;
incurring secret debt; again could be a result of an addiction
cashing in a life insurance policy to raise needed funds secretly; and
letting a life insurance policy lapse due either to lack of funds or wishing to divert those funds without telling our partner
It is a lack of transparency with our partners about money in the relationship.
Financial infidelity recovery: Signs of financial infidelity
Some of the more common signs of financial infidelity are that your spouse or partner:
wants to control all the finances and they don’t want any comments from you;
they also don’t want to share financial information with you;
you notice that there is a withdrawal from an investment account with no given explanation;
a lot of resistance to talking about money;
discovering the opening of new lines of credit or credit cards in your partner’s name, in your name or even jointly that you didn’t open yourself and had no knowledge of;
you find bills for items that you didn’t know about; and
your partner makes a big purchase without talking with you first
Such behaviour will most certainly erode trust in a relationship. This will create a huge blockage in every other aspect of the marriage, including intimacy.
In order to even attempt financial infidelity recovery, there has to be willingness by either spouses or partners. Both will have to overcome the shame, humiliation and rage that the financial infidelity causes. The couple needs to understand what the real reason for the financial infidelity is and be dedicated to fixing that. Is it the result of an addiction such as shopping, gambling, drugs or alcohol abuse? Is it a result of a business loss or failure in the spouse’s business?
The next step is to have a team approach. Spouses or partners need to have complete access jointly to all accounts. One spouse should not be allowed to withdraw funds without the other one’s cooperation. The team has to set a realistic budget together, follow it and watch the cash flow plan. One of the cornerstones of the budget has to be to work towards being debt free. Finally, constant and open communication is key.
It may be that you will need a financial counselor for credit counselling to increase the couple’s financial knowledge. The counselor can also make sure that the recovery plan is realistic and implemented. Financial infidelity recovery is neither simple nor easy, but, it is possible if both partners are willing and committed.
Financial infidelity recovery: What to do if you cannot overcome your debts
The debt created by financial infidelity is more emotionally troubling than normal debt. The reason is one of the spouses had nothing to do with incurring that debt, yet they may be just as liable for its repayment. This creates extra challenges in attempting to resolve that debt.
Although the challenges are enormous, they are not insurmountable. If you and your spouse have too much debt because of financial infidelity or for any other reason, you need to contact a licensed insolvency trustee (LIT) now. Through financial counselling, a LIT can aid in getting the resources you need to fix the root causes of the financial infidelity and to deal with the debt that you and your spouse cannot repay.
You need the Ira Smith Team. We’re experts in dealing with debt. No matter how you got into difficulty we can help return you to financial well-being. Contact us today and free yourself of debt Starting Over, Starting Now.
Prepare yourself for divorce financially: Introduction
There is nothing good about divorce yet Canadians continue to engage in the practice in record numbers. The divorce statistics are staggering. According to Statistics Canada:
In Canada, 48% of marriages end in divorce (Ontario’s rate of divorce is 42.1%)
The average length of a marriage nationally is 14 years
According to the Vanier Institute of the Family, the divorce rate for second marriages is even higher at over 50%.
Prepare yourself for divorce financially: Not just emotionally
We all know how emotionally gut-wrenching divorce can be on couples and their children. But, how many couples are financially ready for divorce? Unless you’re like Gwyneth Paltrow and Chris Martin (each mega-millionaires in their own right) who “consciously uncoupled” or like the rich and famous with iron-clad prenuptial agreements, do you have any idea of what a divorce can cost?
Prepare yourself for divorce financially: Cost of divorce in Canada
According to the results of Canadian Lawyer’s 2015 Legal Fees Survey:
$1,353 – the national average cost for an uncontested divorce
$31,330 – national average cost of a two-day trial
$56,439 – national average cost of a five-day trial
$81,958 – the national average cost of a seven-day trial
Prepare yourself for divorce financially: It costs more for two to live separately than together
Now the shock is about to set in… How are you going to manage your finances separately? Do you know what your monthly expenses are? Do you have a budget? If not, you’re going to need one now.
In all likelihood, you aren’t going to be able to maintain your former lifestyle. If you do, you may land up in a situation where you are bleeding money and accumulating mountains of debt. Are you carrying over debt from your marriage and trying to maintain your old lifestyle?
Prepare yourself for divorce financially: What should you do if you have too much debt?
This is a difficult time but burying your head in the sand isn’t the answer. The best option is to deal with debt with the help of a professional trustee. This is especially true in a separation or divorce situation as one of the very few situations that are NOT stopped by an insolvency filing stay of proceedings are family law proceedings.
Many divorce lawyers do not understand the relationship between provincial family law and the federal Bankruptcy and Insolvency Act (Canada). You are best to consult with a licensed insolvency trustee before taking any action. You need to financially prepare for divorce.
Although your particular situation may seem catastrophic, we offer peace of mind that you will get through this and you will be able to start over. ContactIra Smith Trustee & Receiver Inc. today. Starting Over, Starting Now you can take back control of your life and be debt-free.
Licensed Insolvency Trustee In Toronto Ontario: Introduction
I think the most important thing is you choose the lawyer and licensed insolvency trustee (best Toronto bankruptcy trustee) in Toronto Ontario or the GTA, that you feel is right for you. There’s a lot of friends and family out there giving free advice. “Go to this person because they can get you this.”
But each case is different. You will need to have a good working relationship. This is an emotional and difficult time. If you feel like you’re sitting with a person you can’t talk to and you don’t feel comfortable then that’s not going to help you. Also, you need a firm that has the ability in-house and has avenues to instruct other experts such as your accountant.
Licensed Insolvency Trustee In Toronto Ontario: You must feel that you can work together
You must choose a cost-conscious lawyer or licensed insolvency trustee. Look for professionals that offer their realistic budget to be monitored by.
As I’ve said, it’s important you feel you can work with the person. The lawyer and licensed insolvency trustee that you choose must be separated from the emotion. However, you want them to also show you compassion. After all, this is YOUR life they are dealing with.
It’s important that you choose a lawyer and a licensed insolvency trustee that can guide you through the process and strip away the emotion.
Licensed Insolvency Trustee In Toronto Ontario: My 5 point checklist
Here is my checklist of the 5 things I believe are most important.
For a bankruptcy lawyer, check with your local Bar association.
Meet more than one
After you’ve identified a few lawyers and licensed insolvency trustees you’d like to explore further, view their websites. They should contain clearly written educational information and downloadable financial forms that you can fill out that to help you.
Then, start to schedule some appointments. Most lawyers and licensed insolvency trustees will give a free consultation. It’s helpful to go to see more than one. Not to price shop, but to gauge how comfortable you are with them and to see how their advice seems to you. This will also help you find the best Toronto bankruptcy trustee for your needs.
Passion
Look for their passion. Are they passionate about their practice? Do you feel the empathy they have for you? Do you feel they “get” you? This is how you gauge passion. A passionate professional will make sure that you are given the best advice and service. This is another way to find the best Toronto bankruptcy trustee for you.
A fee commensurate with service
Lawyers and licensed insolvency trustees are not free. The cost can vary depending on how complex your situation is and where in the country you live. If you go for the cut-rate price, you probably will not be happy with the service you will receive once you sign up. To make a reasonable amount of money in a year, the bargain basement priced shops must do a high volume. That means they cannot spend a lot of time with you.
On the other hand, don’t assume that you get the best service and result from the most expensive firm. They are the most expensive because their overhead costs are the most. It does not mean they are the best.
If it was me, I would look for the in-between price. It means they are fair to both you and themselves!
You may not need a lawyer and you will want options
Look for a licensed insolvency trustee that will discuss bankruptcy alternatives with you, even if some are not right for you. You do not want someone who just automatically tries to put you into bankruptcy.
Licensed Insolvency Trustee In Toronto Ontario: What to do if you have too much debt
I hope that you have found this vlog helpful. If you’re looking for ways to end your financial debtcallIra Smith Trustee & Receiver Inc. Our strategy for every single person is to develop a result where Starting Over, Starting Now comes true, starting the minute you stroll in the door. You’re just one call away from taking the necessary actions to get back on the road to leading a healthy and stress-free life.
Everyday we’re inundated with stories in the newspapers, on television and online about the average home prices in Toronto and in the rest of Canada. Many are left wondering what they can possibly do to get into this very hot market. Unfortunately as a result there’s been a surge in mortgage fraud.
Average home prices Toronto: What is mortgage fraud Canada?
Mortgage fraud takes place when fraudulent information is used to qualify for a mortgage. A classic example of mortgage fraud is a prospective home buyer submitting fake or altered employment letters, bank statements or tax returns to qualify for a large mortgage.
Average home prices Toronto: How prevalent is mortgage fraud Canada?
The number of mortgage applications flagged as potentially fraudulent has risen 52% since 2013
About 90% of all mortgage applications flagged for potential fraud have come from banks and not other types of mortgage lenders, largely because banks have become better at spotting fraud attempts
13% of Canadians told Equifax it was okay to tell “little white lies” on their mortgage applications
Roughly 67% of mortgage applications flagged for fraud came from Ontario
Approximately 12% of suspected mortgage fraud came from British Columbia
Only 8% admitted to actually falsifying information on their own credit applications
Average home prices Toronto: Why are typically law-abiding Canadians being driven to commit mortgage fraud in Canada?
It’s no secret that home prices are continuing to rise. The latest federal legislation has made it more difficult to qualify for an insured mortgage. Many Canadians are realizing that home ownership is beyond their reach. In fact according to an online survey by Equifax, 84% of Canadians felt the country’s housing market had become too expensive for first-time buyers. Of those who didn’t own a home, 20% said they worried they may never be able to save enough for a down payment. Clearly desperate times are calling for desperate measures and a surge in mortgage fraud is the result.
Average home prices Toronto: What should you do if you have too much debt?
Committing a crime is never the answer. And make no mistake, mortgage fraud is a crime. It can be punishable by hefty fines and/or jail. If your goal is to buy a house, we can’t do anything about the real estate prices, but the Ira Smith Team can help you get your debt issues under control so that home ownership may be in your future. Give us a call today so that Starting Over, Starting Now you can conquer debt and start saving for your future.
I have read recently several articles on will Canadian housing bubble burst? I was curious about all the so-called experts calling for a real estate market crash in Toronto. What piqued my curiosity was I vaguely remembered having written a couple of blogs on the subject a while ago in response to such articles. So, I thought it would be interesting to go back and see how far back “experts” were predicting a Canadian real estate bubble. Especially a Vancouver and Toronto housing bubble.
Will Canadian housing bubble burst? “Experts” predicting Canada’s real estate market crash since 2013
The first time these articles caught my attention was in mid-2013. Many articles written were just like the one that appeared in the Toronto Star on Sunday, July 14, 2013 titled Canadian housing bubble looks ripe for popping.
I first wrote the blog FINANCIAL CRISIS IN CANADA: CAN REAL ESTATE PRICES TRIGGER ONE? posted on May 13, 2014. In that blog, I pointed out some issues that led to the US housing crisis in 2007 and what issues we should look at in Canada as indicators to avoid the same fate for the Canadian real estate market. Back then:
7.5% of the Canadian workforce is in the construction industry, while 7% of the Canadian economy depends on residential construction – both record highs;
the unemployment rate rose from 6.9% to 7.2%;
the Canadian debt-to-income ratio has soared to a record 164% which is above levels experienced in the U.S. before the financial crisis; and
70% of all household debt in Canada is made up of residential mortgage debt.
It is interesting to note that at the end of 2016:
the percentage of the Canadian workforce in the construction industry, and the percentage of the Canadian economy based on residential construction – both record highs then – is roughly the same at the end of 2016;
the unemployment rate was 7.2% and today is roughly 6.6%;
the Canadian debt-to-income ratio of 164% at the end of 2016 rose further to 167%; and
71% of all household debt in Canada is made up of residential mortgage debt.
So not a lot has changed in the Canadian economy in the last three years.
Will Canadian housing bubble burst? Canadian real estate bubble 2014
Such articles motivated me to immediately follow-up with the blog CANADIAN REAL ESTATE BUBBLE BURST: WHEN? posted on June 12, 2014. You can read that blog again. In it, I provided somewhat of a contrarian view with evidence about why other experts were taking the view that there was not a Canadian real estate market crash looming. I wrote that we should rightly be worried about the average Canadian debt level.
Will Canadian housing bubble burst? What starts a housing bubble?
I believe the causes of a housing bubble are a rapid increase in housing prices fueled by demand, speculation and irrational exuberance. That is certainly what happened in Toronto in the late 1980’s and can also be said about the more recent US housing crash (in addition to mortgage fraud covered up with the bundled subprime mortgages financial product).
This time around, it seems that in Canada, and specifically Toronto, the increase in housing prices is fueled by demand. Unlike the late 1980’s, I don’t hear about people who cannot afford to purchase a home purchasing many homes to never take possession but merely to flip the contracts for a profit. Today we just have the simple economics of supply and demand. The reality is that the GTA represents over 70% of the Ontario population and the GTA expects to grow by over 100,000 people annually through to and including 2019.
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Will Canadian housing bubble burst? Toronto is a magnet
The reality is that Toronto, on a net basis, has an increasing population every year because Toronto is a magnet for the world of people looking for better opportunities. These people must live somewhere and the normal life cycle calls for renting first and then buying real estate when you are more established and can afford to.
Is it any wonder? For a second year in a row, Canada ranked second in the annual “Best Countries” survey from the U.S. News & World Report, with Young & Rubicam BAV Consulting and the Wharton School of the University of Pennsylvania.
So, the economy has not shrunk, mortgage rates have remained low and demand is outstripping supply. Once could argue that it is only for the first time in 2017, that affordable housing options are drying up as the average Toronto home selling price is now roughly $875,983, per the Toronto Real Estate Board.
Will Canadian housing bubble burst? The Chicken Little prize
Then of course there is Garth Turner; Canadian author, speaker and lecturer on macroeconomics, the housing market and investment techniques, member of the Canadian Parliament for nine years and broadcaster. Who in 2008 published his book Greater Fool: The Troubled Future of Real Estate. Mr. Turner has predicted a Canada housing crash coming for many years.
I think like everything in life, moderation is the key. Prepare an honest family budget, only take on the debt you can truly afford, look at home buying and the related mortgage debt and other expenses carefully. Once you have purchased your home, don’t spend more than you earn and stick to your budget.
If you did this over the last 5 years in Toronto, you were living in a home you love and have watched it grow in value increasing your net worth, if you have not mortgaged up along the way. I am glad that I did not listen to Mr. Turner.
Will Canadian housing bubble burst? Nothing lasts forever
If you have stuck to your family budget and not overspent, even if house prices fall, it means nothing to you. However, if you have overstretched, taken on more debt than you can afford, spend more than you earn so that you have other non-mortgage debt, this will eventually catch up with you.
Perhaps an increase in mortgage rates when it is time to renew your mortgage will be the tipping point, or as interest rates increase and consumption decreases, negatively affecting the Canadian economy, companies will decrease their number of employees. If your household requires both spouses working full-time to afford all your debt, and one loses his or her job, perhaps that will be your tipping point.
Will Canadian housing bubble burst? What to do if you have too much debt
Have you gotten in over your head in the housing market to the point where you could not come up with $2000 in an emergency? Ira Smith Trustee & Receiver Inc. can help with your serious debt issues. Contact us today for a consultation. We approach every file with the attitude that corporate or personal financial problems can be solved given immediate action and the right plan. Starting Over, Starting Now you can take the first step towards living a debt free life.
Top scams in Canada: March is fraud prevention month
March is Fraud Prevention Month so we thought this would be a great time to bring you some of the top scams in Canada. These are the most popular and enduring scams we want to bring to your attention.
Top scams in Canada: Our Canadian Scam Hall of Fame list
Online Dating Scams: Are you looking for love online? If so, you’re vulnerable. According to the RCMP, in 2016, 748 victims lost over $17 million to scammers pretending to be in love. We’re sure that the number is actually greater than $17 million but most people are too embarrassed to report the crime. Scammers create fake profiles and in short order start professing their love. Most of them say they are out of the country for some reason and have an emergency that requires money. E.g. a robbery occurred and they can’t get back home. There are many ruses to get you to part with your money. Never send money to anyone you don’t know!
Canada Revenue Agency (CRA) Scams: Tax season is upon us so no doubt the CRA scammers have kicked it into high gear. According to the Canadian Anti-Fraud Centre here are two variations of the CRA Scam currently circulating:
You get a call from someone impersonating the CRA, claiming a recent audit has identified discrepancies from past filed taxes. They demand repayment immediately or they threaten you with extra fees and/or jail time or deportation.
You get an email that says a refund is pending from the CRA. The email includes a link that takes you to a website that looks like the CRA site. Here’s the catch; before you can get your refund you have to give your personal information – Social Insurance Number (SIN), Date of Birth, banking information, etc. Now they can steal your identity.
Online Shopping Scams: We’re all used to shopping online. It’s convenient and cost-effective. But, the rule here is if it seems too good to be true, it usually is. Only make purchases from trusted sites. Don’t give your credit card information to a company because they have unbelievable prices. And watch out for phishing emails advertising big bargains.
Fake Lottery Winnings Scam: You get a call telling you that you just won a big lottery! Here’s the catch; you have to pay a tax or insurance fee before claiming your winnings. Firstly, did you enter this lottery? FYI – You never have to pay anything to receive lottery winnings.
Pyramid Scams: Pyramid scams promise large financial returns for a very small investment. Sounds too good to be true? It is. Pyramid schemes can cost you a lot of money. After you make your investment you have to bring in other people to make their investment, and so on… There is no guarantee that you’ll ever see you investment back, let alone make a profit. And, in Canada it’s illegal to take part in a pyramid scheme.
Top scams in Canada: Things to remember
Every day fraudsters are coming up with new ways to scam you. Diligence is the key. Remember:
If it’s too good to be true, it usually is
Get rich quick schemes are a fast way to the poor house
Never send money to anyone you don’t know
Top scams in Canada: What to do if you have too much debt because of being scammed or otherwise
Some Canadians have lost everything to fraudsters. If you’re experiencing serious debt issues as a result of fraud, or for any reason, you need the Ira Smith Team. We’re experts in dealing with debt. No matter how you got into difficulty we can help return you to financial well-being. Contact us today and free yourself of debt Starting Over, Starting Now.
Bundled subprime loans. To bundle, or not to bundle; that is the question. Bundled mortgage loans have become a hot topic these days because they are a tactic used by sub-prime mortgage providers to “beat the system”.
Bundled subprime loans: How are mortgage lenders regulated in Canada?
Regulated lenders in Canada can’t lend more that 80% of a property’s value without obtaining a government-backed insurance
If the borrower has bad credit, lenders can’t lend more than 65% of a property’s value.
Insurance requires banks to run income stress tests on borrowers.
Bundled subprime loans: The bundled mortgage loans definition
Bundled home loans package a primary mortgage with a second offering from an unregulated group. It is a product offered by sub-prime mortgage providers.
Bundled subprime loans: How do they beat the system?
With a bundled loan the strict mortgage lending rules don’t apply. Borrowers can make down payments of only 10% instead of the 20% or 35% on mortgages not backed by government insurance.
Are bundled subprime loans legal?
At the moment bundled subprime loans are legal. However, the Office of the Superintendent of Financial Institutions (OSFI) assistant superintendent Carolyn Rogers warned mortgage providers under its jurisdiction against providing such products.
“They are rules. They are not guidelines, and they are not principles. We absolutely expect regulated entities to be adhering to them,” Rogers said. “Anytime a regulated entity is or appears to be designing a product or an approach that is, by its design, circumventing the rules we would take issue with that.”
The OSFI will be cracking down on bundled loans. Canada’s six biggest banks do not offer bundled loans for good reason.
In the United States, before December 2007, when banks bundled mortgage loans and sold the resulting mortgage-backed securities, the poor credit risk combined with the drop in US home prices, many say explained the global economic collapse & the world debt crisis complete with allegations of white-collar crime.
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Are bundled subprime loans worth the risk? Do you want another global economic collapse and world debt crisis?
Borrowers can be at risk if they load up on too much debt at high rates of interest. “I would suspect that at least 10% of homeowners who are taking out this type of product may find themselves in hot water within the first couple of years of home ownership,” said Scott Hannah, the head of Canada’s Credit Counseling Society, a charity that advises consumers on debt. The Credit Counseling Society’s Hannah urged regulators to ban the products.
Scott Hannah is absolutely right. Loading up on too much debt is never a good idea. Are you overwhelmed by debt? Don’t despair. Ira Smith Trustee & Receiver Inc. can help. We approach every file with the attitude that financial problems can be solved given immediate action and the right plan. Give us a call today and Starting Over, Starting Now you can be on your way to debt free living.
Weekly expenses sheet: Introduction
Average home prices Toronto: Introduction
Bundled subprime loans: Introduction