Textbook Review Answers
for the REMIC Mortgage Agent Textbook

The main difference is that a mortgage broker can also be the chief compliance officer, known as the principal broker, of a brokerage.

In addition a broker is able to supervise a group of mortgage agents.

1. Brokering a new mortgage, collateral mortgage, line of credit, or other type of loan secured by real property (which is land and whatever is affixed to it)
2. Refinancing of an existing mortgage
3. Arranging investing in a mortgage by one or more individuals
4. Providing mortgage advice and counsel, including about renewal options

Institutional Lender
The Lender is the cornerstone of the mortgage industry. Lenders are generally grouped into two main categories: institutional and private. Institutional Lenders represent the majority of Lenders in Ontario, but private Lenders have always been and will most likely always be a necessary provider of funds for Borrowers who don’t qualify through institutional Lenders. Institutional Lenders consist of Schedule 1, 2 and 3 banks, credit unions, loan and trust companies, finance companies or other corporations constructed to lend money on real estate. Any Lender may also be referred to as the mortgagee.

Private Lender
A Private Lender is typically an individual investor with funds who would like to invest in mortgages. This individual will usually invest through his or her Lawyer who may have clients requiring mortgage financing or a Mortgage Broker. His or her purpose may vary but normally an investor will invest in 2nd mortgages due to their higher rate of return when compared to 1st mortgages and other potential types of investments such as GICs or bonds. Any Private Lender may also be referred to as the mortgagee.

Borrower
The Borrower is called the mortgagor and is the individual or individuals who are taking the mortgage loan and pledging their property as security.

Institutional Mortgage Originators
Several financial institutions now have their own Mortgage Origination teams, often referred to as Road Warriors, who actively seek Borrowers for them. These Originators are compensated by their institution and are not considered to be Brokering a mortgage transaction since they are using only one Lender. The major differentiating factor between an Institutional Mortgage Originator and a Mortgage Broker is that, while both are dedicated to providing the best solutions to their clients, Institutional Mortgage Originators can only place their clients with the Lender by whom they are employed and therefore do not have access to all of the different products available in the market.

Real Estate Agents
The Real Estate Agent is the individual who Brokers the purchase and sale transaction between a vendor (seller) and the purchaser. This individual is employed by a licensed Real Estate Broker, has met licensing guidelines and is a member of a local Real Estate Board. Real Estate Agents are a vital link in the process of purchasing and selling real estate and are therefore of considerable importance to the Mortgage Broker in regards to obtaining clients. More information on Real Estate Agents can be found through the Ontario Real Estate Association (OREA) at www.orea.com.

Real Estate Appraiser
The Real Estate Appraiser also plays a vital role in the real estate process, especially from the standpoint of the Mortgage Broker. The Appraiser determines, in the case of financing, the market value of the property to be mortgaged. Real Estate Appraisers do not have to be licensed in Ontario, but unless they have a professional designation, no Lender will accept their appraisal for financing purposes. There are several methods used to determine the market value of a property, as well as several methods of completing an appraisal. These topics will be covered in the Chapter 14: Application Analysis – The Property.

Home Inspectors
Home Inspections began as a consumer service in the 1970s and have grown in popularity since then. A qualified Home Inspector will advise the home purchaser / homeowner in regards to the condition of the home and advise regarding issues surrounding its condition. The condition of the home naturally affects the market value. More information on Home Inspectors in Ontario can be found through the Ontario Association of Home Inspectors (OAHI) at www.oahi.ca.

Mortgage Default Insurer
The Mortgage Default Insurer provides mortgage default insurance policies to Lenders typically offering high ratio mortgages, although default insurance can be provided on a mortgage loan of any Loan to Value. The main insurers in the Ontario market include the government insurer, the Canada Mortgage and Housing Corporation (CMHC) and the two private insurers, Sagen  and Canada Guaranty.

Lawyer
A Real Estate Lawyer is the professional involved in a real estate transaction who performs the following tasks:

Negotiating and drafting Agreements of Purchase and Sale

Acting for buyers or sellers on new home, condominium or re-sale home purchases or sales

Acting for Borrowers or Lenders on mortgage transactions, including preparing documents and registering documents

Mortgage Creditor Insurer
A mortgage creditor insurer is an insurer that provides a policy to the mortgage Borrower so that upon a claim (in the case of death; there are additional creditor insurance policies available) the mortgage loan is paid by a one time lump sum payment to the Lender. This insurance is specific to the mortgage loan.

Title Insurer
A Title Insurer is an insurer that provides a policy which provides coverage for the insured’s title. It can compensate the insured for real losses associated with covered issues found in the terms of the policy. For example, if there is an old mortgage on title that was never discharged and this prevents the property from being conveyed to the purchasers, the title insurance policy will take steps to remedy this situation. It also assists in streamlining the closing process (the process of the Lawyer closing the mortgage transaction), protects against fraud and forgery and is available on purchases, refinances and to homeowners who did not obtain a title insurance policy on either of those occasions.

Mortgage Administrators
A Mortgage Administrator is a person or entity that services a mortgage loan on behalf of another. For example, a Mortgage Administrator may process payments, renewals and discharges, provide correspondence and act to collect mortgage arrears for a Lender that has contracted them. Under the Mortgage Brokerages, Lenders and Administrators Act, 2006, Mortgage Administrators are licensed in Ontario. Regulation 406/07 of this legislation defines a Mortgage Administrator as one who is “Taking steps, on behalf of another person or entity, to enforce payment by a Borrower under a mortgage”.

In 1954 the Bank Act was changed to allow banks to lend on residential mortgages; however there was a limit to the amount of interest that they could charge. This limit was set at 6%. Unfortunately the market at the time saw interest rates at such a point that it was unprofitable for banks to lend based on that constraint, so the market remained dominated by life insurance companies until that cap was removed. That occurred in 1967 when the Bank Act was once again amended. This amendment removed the 6% cap and virtually overnight the banks became the predominant source of mortgage funds in Ontario. Today banks account for approximately 61% of all mortgages held in Canada and have a virtual lock on mortgage lending.

A market for Borrowers who do not qualify for traditional lending products

Several sub-prime lenders have scaled back on their programs or cancelled them altogether due to a lack of investors to purchase sub-prime mortgage pools. Several other sub-prime lenders have been forced to close their operations.

Institutional lenders, specifically Banks.

27%.

They are the property, appraisal, environmental assessment, income, lenders and timing.

85% LTV, although this may decrease if the credit market continues to face difficulties.

I would suggest that he or she understand the risks involved, particularly since the market has seen a downturn in housing prices. In other words, the return is not guaranteed. In addition it can take several months to get the money back since you cannot sell a mortgage as easily as a stock, in other words it is not a liquid asset. The investor must also be confident in the value of the property, knowing how to read an appraisal and must be able to interpret a credit report and determine if income documentation is accurate. The investor must also know that he or she should have an administration company or a lawyer administer the mortgage, all of which can reduce the overall return on investment. It can be a very high rate of return but there is risk!

They can invest in a MIC, which is still risky but since it is an investment in a pool of mortgages it is less risky than a direct investment in a single mortgage, or they can invest in mortgage backed securities, which are much safer.

A mortgage is a loan secured by real property while a car loan is a loan secured by registering a loan against the car under the Personal Property Security Act.The difference is the security.

The mortgage registered on the property on March 17th is classified as a 1st mortgage since it was registered first.

The total amount of the new mortgage would be $202,500 ($190,000 + $12,500). By dividing this amount into the property value of $250,000 ($202,500/$250,000) the Loan to Value would equal 81%.  Jonathan would be obtaining a high ratio mortgage since this type of mortgage is considered an amount in excess of 80% Loan to Value

The Charge/Mortgage is a document that illustrates the charge registered against the property.A Borrower receives a copy of this document on closing and it is proof that a loan has been made using his or her property as security.

When a Borrower pledges his or her real property as security for a loan by placing a mortgage on that property, he or she has several basic obligations:

• Repay the loan

  The Borrower agrees to repay the loan based on the payment schedule outlined in the contract.Failure to do so results in the Borrower deemed to be in default or in contravention of the terms of the mortgage contract.

• Insure the property

  The Borrower agrees to keep adequate property insurance on the property to protect the Lender from losing his or her security due to a fire or other covered risks.If the Borrower fails to keep insurance on their property, the Lender will consider him or her in default.

• Maintain the property

  The Borrower agrees to keep the property in good saleable condition including repairing any portion of the property that requires it. Failure to do so will result in the Lender considering the Borrower to be in default.

• Not to commit waste

  Waste is a legal term which includes actions or conduct that could result in damage to the property or a loss of property value. Committing waste will result in the Lender considering the Borrower to be in default.

• Pay the property taxes and, if applicable, condo maintenance fees

  Failure to pay these items may result in the Lender considering the Borrower to be in default.

• Follow the terms of the Standard Charge Terms

  The Standard Charge Terms is a document that makes up the bulk of the mortgage contract.It is vital to understand that the Borrower, while at the Lawyer’s signing the final documentation to register the mortgage, signs acceptance of the Standard Charge Terms. What many Borrowers fail to realize is that they have Standard Charge Terms on their mortgage and that they outline the rights and responsibilities of the Borrower.Contravention of the terms of this document is considered default and the Lender can exercise its rights, which the Borrower agrees to, that are found in this document.

The Standard Charge Terms make up the bulk of the mortgage contract. They contain detailed information on the Borrower’s obligations and the remedies available to the Lender if the Borrower does not meet these obligations.This document is completed by the Lender and must be registered with the Director of Titles under the Land Titles Act.

Many Lenders’ Standard Charge Terms can be viewed at www.teraview.ca/ereg/ereg_fidocs.html

A fully open mortgage option.

The difference between these two options revolves around how the payment is increased. In an accelerated mortgage the payment is calculated by divided the regular monthly mortgage payment by the required payment frequency and this is typically done prior to closing. Conversely, the Increased Payment Option allows the Borrower to increase his or her payment, in many cases up to 100% of the original payment amount, during the term of the mortgage. Both options offer the Borrower savings over the life of his or her mortgage.

An open mortgage can be repaid at any time while a closed mortgage may only be fully repaid at the end of the term or if the homeowner sells the property.

The terminology used in the mortgage industry regarding these options is not standard. Many lenders refer to an open mortgage with prepayment penalties as a fixed rate mortgage instead of an open mortgage, while others refer to this type of mortgage as a closed mortgage. Consumers and Mortgage Agents must be aware of how each Lender describes its prepayment options.

If the mortgage contract allows full prepayment of the mortgage with either a 3 month interest penalty or the interest rate differential penalty.

Typically, if the Borrower is prepaying the entire outstanding balance of the mortgage and the current rate charged by the Lender is more than what the Borrower is paying.

Typically, if the Borrower is prepaying the entire outstanding balance of the mortgage and the current rate charged by the Lender is less than what the Borrower is paying.

A bundled mortgage is a mortgage that combines a line of credit and a standard mortgage. Scotiabank has its STEP mortgage and Manulife also offers a bundled mortgage.

The partially amortized, blended constant payment mortgage with a fixed rate is the most common type of mortgage repayment plan in Ontario.

Obtain a fully open mortgage. This will allow the Borrower to repay all or part of his or her mortgage at any time without penalty or notice.

Accelerate the mortgage. This will save considerable amounts over the life of the mortgage, as long as the Borrower can afford the larger payment.

Increase the payment. If the Borrower’s cash flow increases he or she may decide to increase the size of the mortgage payment, thereby reducing the amount paid in interest over time.

Make lump sum payments. If the Borrower can save money during the term he or she can apply this amount directly to the principal. This would be beneficial if the Borrower has paid down other higher interest debt, such as credit cards.

Real property can be defined as the land and everything affixed to it. It is in a fixed location and is permanent, remaining, to one extent or another, long after the current owners have relinquished their rights to it. Personal property is defined as everything that is not real property. That includes chattels and other goods. Personal property is typically not fixed in its location and normally has a shorter useful life expectancy than real property.

The current owner of a piece of real property actually owns rights to use the land, and not the land itself.

The owner of this estate is in control of the real property for as long as he or she has it, subject to paying the property taxes and other municipal obligations and subject to any interests in the property that may be registered against the property’s title. This individual may transfer his or her interest in the property during his or her lifetime or dictate who will inherit the fee simple interest upon his or her death, mortgage the interest, and so on.

If the fee simple owner dies without a will and there are no heirs, the fee simple interest is terminated and the property will escheat or revert back to the Crown.

The Leasehold Estate, commonly referred to as a lease, is an interest in land created by a landlord and tenant, most commonly by a lease. This interest in land is created for a fixed period of time, such as a month, year, or more. There is no limit on the time that a leasehold estate may be in effect.

A leasehold estate provides the owner of this estate the right to exclusive use and possession of the property, subject to contractual limits contained in the terms of the lease.

Condominiums combine fee simple ownership of individual units, referred to as strata lots, including all of the rights attached to that ownership, with a combined ownership of common areas, referred to as common elements.

An encumbrance is an interest in property that has the effect of limiting the rights of fee simple ownership of real property

Easements are rights acquired for the benefit of real property, granting rights to use another property. An easement is an interest in land that passes from one owner to another or as is commonly referred to, “runs with the land”.

A restrictive covenant is a restriction of use placed on title of the servient tenement for the benefit of the dominant tenement. As with an easement, a restrictive covenant runs with the land and can only be extinguished through the agreement of both current owners of the dominant and servient tenements.

A building scheme is a group of restrictive covenants registered against several properties in a development plan that is binding on all purchasers of a property within that development while a restrictive covenant is on a single property.

A joint tenancy is a type of co-ownership of real property typically used by spouses purchasing a matrimonial home. Unlike a tenancy in common, where each owner owns a divided share of the property, joint tenants own an undivided interest in the property.

A judgment, as it relates to a debt, is a judge’s decision that a debt is owed by a debtor to a creditor. Most Lenders will not lend on a property until this debt is paid, unless, with certain Lenders, the debt is being paid from the proceeds.

An individual must take and pass a licensing course approved by FSRA, such as REMIC’s RMAC course.

The differences are that a Mortgage Broker has taken additional education and has been a licensed Agent for at least two years. In addition a Mortgage Broker can hold the position of Principal Broker and can manage Agents.

This individual is responsible for all aspects of the brokerage’s compliance.

The MBLAA empowers the Superintendent to impose administrative penalties to promote compliance with the MBLAA up to a maximum of $25,000 for a brokerage or Administrator, up to $10,000 for a Broker or Agent and up to $25,000 for anyone else. If the Superintendent proposes to impose an administrative penalty the licensee has the right to appeal this proposal to the Tribunal within 15 days of receiving it. If the penalty is not paid, it is considered a debt to the Crown and can be enforced as such.

Administrative penalties are either “general” or “summary” and are covered in detail in Regulation 192/08 sections 1 – 6 while anyone who contravenes any of the sections as listed in section 48 of the MBLAA is considered to be guilty of an offence.

A Broker will be deemed unsuitable for a license if:

• the individual’s past conduct affords reasonable grounds for belief that he or she will not deal or trade in mortgage in accordance with the law and with integrity and honesty
• the individual is carrying on activities that contravene or will contravene the MBLAA or its Regulations
• the individual has made a false statement in his or her application for a license

The brokerage must have a complaints process so that if an individual makes a complaint to the brokerage in writing, the brokerage must respond in writing, also indicating that if the complainant believes that the brokerage has contravened the MBLAA he or she may refer the complaint to the Superintendent. All complaints must be documented and handled by one or more authorized individuals.

A brokerage must use its authorized name when conducting any business, and as of January 1, 2009, it must prominently include its authorized name and license number in all of its public relations materials. If the brokerage is a franchise, it must state that it is independently owned and operated.

If an individual’s name is included in the material, his or her title (i.e., Broker or Agent) must be included. For example, if Bob Smith is a Mortgage Broker and his name is used in an advertisement, he must include the words, “Mortgage Broker” or “Broker” beside his name, resulting in “Bob Smith, Mortgage Broker,” or “Bob Smith, Broker.” Abbreviations may also be used.

The brokerage must inform the borrower, lender or investor, in writing, as to the “material risks of each mortgage or investment in a mortgage that the brokerage presents for the consideration of the borrower, lender or investor,” and obtain written acknowledgment that this disclosure has been made. Other disclosure obligations include disclosure of the brokerage’s relationships, potential conflicts of interest, mortgages previously in default and of the cost of borrowing, the latter disclosure being very explicit. Disclosure requirements are discussed in detail in Chapter 11: Consumer Protection: Disclosure.

Errors and Omissions insurance must be a minimum of $1 million of coverage per year, and a minimum of $500,000 of coverage per occurrence. It must also include a provision for loss resulting from fraudulent acts.

A brokerage must retain all records as follows:

• That relate to a mortgage or mortgage renewal agreement, as the case may be, for at least six years after the expiry of the term of the mortgage or renewal or other expiry of the mortgage transaction
• All records that relate to a purchase, sale or trade in a mortgage for at least six years after the trade completion date or other expiry of the transaction O. Reg. 188/08, s. 48 (2)
• For at least six years all other records that are required by subsection 46 (1) or that the brokerage is otherwise required to create or maintain under the Act. O. Reg. 188/08, s. 48 (3)

Any funds payable to another party in the transaction or that are a deposit against a broker fee.

All information that is necessary to ensure that the proposed mortgage is suitable for the investor having regard to the needs and circumstances of the investor.

The MBLAA restricts the use of the titles “mortgage brokerage,” “mortgage broker,” “mortgage agent,” “Mortgage Administrator” and their French equivalents to persons and entities licensed as such under the MBLAA. This prohibition includes using abbreviations such as mtg. broker, or their equivalents in another language. Therefore, if an individual is licensed he or she must use either broker or agent as his or her title (or the other options previously listed, including abbrevations). Unlicensed individuals cannot use those titles.

• Provide Borrowers who are suitable for the Lender
• Provide appropriate protection against fraud
• Facilitate the transaction to its successful completion (funding).

These three assumptions form the cornerstone of the relationship between the Lender and the Brokerage community. The best way to ensure that these assumptions are consistently met is to adopt them as core values or philosophies that are applied to every transaction. To meet these assumptions they must first be explained.

Providing Borrowers that are suitable for the Lender
The Lender’s first assumption is that the Mortgage Agent will only send an application on behalf of a Borrower that fits the Lender’s lending criteria. Lending criteria include such things as income and employment requirements, property requirements, credit requirements and so on. This means that the Mortgage Agent must know and understand the Lender’s lending criteria and be able to accurately assess the Borrower to determine if they meet those criteria. Unfortunately, a typical Lender complaint is that some Mortgage Agents send them applications for products that they do not have. This type of error can erode the confidence that Lenders have in the Brokerage community.

Providing appropriate protection against fraud
Lenders have been suffering from an increase in mortgage fraud over the past several years. Although not technically a Mortgage Agent’s legal responsibility, it is a Mortgage Agent’s ethical and moral responsibility to make reasonable attempts to protect the Lender from fraud. In many Brokerage’s set of Best Practices it is deemed necessary for the Mortgage Agent to review all documentation received from the Borrower for accuracy and consistency. This means identifying any signs of potential fraud, such as poorly written or typed income verification as well as verifying income and identity.

Facilitating the transaction to its successful completion
A Lender expects that a Mortgage Agent has submitted an application to that Lender because he or she has determined that Lender to be the most appropriate for the Borrower. In addition, the Lender expects that, if approved, the mortgage transaction will close. That requires the Mortgage Agent to ensure that the Borrower is committed to completing the transaction and understands what is required of him or her to conclude it. A Lender also expects that a Mortgage Agent will be available to assist in ensuring the transaction closes if there is anything that the Mortgage Agent is required to accomplish such as meeting outstanding conditions.

• Act in the Borrower’s best interests
• Completely analyze the Borrower’s needs
• Make appropriate recommendations based on the Borrower’s needs
• Facilitate the transaction to its successful completion (funding).

These four assumptions form the cornerstone of the transaction. By ensuring that these assumptions are met, the Mortgage Agent will develop a strong relationship with the Borrower and ensure that the industry as a whole is well represented.

The amount is calculated by multiplying the mortgage amount by the finder’s fee.

.0085 x 350,000 = $2,975.00

Pros: can assist in determining the affordability of a mortgage thereby ensuring that the mortgage is suitable for the Borrower, a requirement of the MBLAA.

Cons: time consuming and the Borrower may not wish to go into as much detail as is required to complete a budget

The initial consultation is extremely important in identifying your client’s needs, however this is an opinion based question. As long as you can back up your decision with valid points there is no right or wrong answer.

Allows the Lender to make loans in excess of 80% Loan to Value and recover insured losses by making a claim to the insurer. Allows the Borrower to receive a high ratio mortgage with favourable terms and a favourable interest rate.

CMHC, Sagen and Canada Guaranty.

a) The borrower: Allows the Borrower to obtain a higher LTV mortgage at competitive rates from chartered banks

b) The lender: Pays the lender on successful claims if the Borrower defaults

Both CMHC and Sagen provide mortgage default management programs that are designed to assist Borrowers who get into financial difficulty and have trouble making their scheduled mortgage payments.

Typically, these programs are provided through the Lender in conjunction with the insurer and are designed to provide a solution.

These options can include:

Special Payment Arrangements
A Lender may make arrangements with the Borrower to recover payment arrears over the shortest period, as long as it is within the Borrower’s financial ability. For example, with a CMHC policy a Lender may do this with amounts up to $10,000 without CMHC’s prior approval.

Reamortization
A Lender may increase the amortization of a mortgage when the default is due to the payments no longer being affordable for the Borrower.

Capitalization
This procedure allows the Lender to add the amount of arrears to the loan amount. For example with a CMHC policy, a Lender may increase the loan amount up to $20,000 one time during the Borrower’s ownership without CMHC’s prior approval.

Other options
Lenders may have additional options that can be approved by the insurer before implementation.

a) The borrower: Provides coverage against fraud and forgery from the time the policy is in force.

b) The lender: Provides coverage against title defects and items that occurred before closing that may make the property unmarketable

c) The real estate lawyer: Reduces the amount of work required to close a mortgage transaction

Contents insurance since the master policy only covers the unit, not the contents.

The first title insurance company, the Law Property Assurance and Trust Society, was formed in Pennsylvania in 1853. Title Insurance was developed in the United States and until the early 1990s was not available in Canada. Virtually all real estate transactions in the United States currently carry title insurance, while its popularity is continuing to grow in Canada.

• Stewart Title
• First Canadian Title
• LawPro
• Chicago Title Insurance Company
• First American Title Insurance Company
• Lawyers Title Insurance
• Travelers Guaranty Company of Canada

Errors and Omissions insurance is an insurance policy that covers the professional from claims made against him or her due to negligence in the form of errors committed in a transaction. Insurance policies prior to 2008 did not have a fraud provision. Therefore, if the Mortgage Broker were to commit fraud and the Borrower suffer a loss he or she could not receive compensation from the Broker’s errors and omissions policy.

To be able to answer this question we must convert both rates to the same frequency to compare. We will convert to their J1 rates.

6 SHIFT NOM%

2 SHIFT P/YR

SHIFT EFF% 6.09

5.93 SHIFT NOM%

12 SHIFT P/YR

SHIFT EFF% 6.09385708045

Therefore 6% compounded semi-annually is lower than 5.93% compounded monthly.

a. J12 = 7%. What is the J4 equivalent?
b. J4 = 3.2%. What is the J12 equivalent?
c. J12 = 3%. What is the J2 equivalent?
d. J365 = 18%. What is the J1 equivalent?

a) J12 = 7%. What is the J4 equivalent?

7 SHIFT NOM%

12 SHIFT P/YR

SHIFT EFF% 7.22900808562

4 SHIFT P/YR

SHIFT NOM% 7.04091273148

b) 4 = 3.2%. What is the J12 equivalent?

3.2 SHIFT NOM%

4 SHIFT P/YR

SHIFT EFF% 3.2386052096

12 SHIFT P/YR

SHIFT NOM% 3.1915043915

c) J12 = 3%. What is the J2 equivalent?

3 SHIFT NOM%

12 SHIFT P/YR

SHIFT EFF% 3.04159569135

2 SHIFT P/YR

SHIFT NOM% 3.0188126173

d) J365 = 18%. What is the J1 equivalent?

18 SHIFT NOM%

365 SHIFT P/YR

SHIFT EFF% 19.7164244993

In this instance the EFF% rate is the J1 rate so no further conversion is required.

4.25 SHIFT NOM%

2 SHIFT P/YR

SHIFT EFF% 4.29515625

52 SHIFT P/YR

SHIFT NOM% 4.20717447453

295,500 +/- PV

0 FV

52 x 35 N

PMT 310.287166469

Therefore the weekly payment is $310.29 (remember to always round the payment up to the next highest cent)

a) $470,0000 mortgage, 25 year amortization, monthly payments, 3 year term, J2=6%

6 SHIFT NOM%

2 SHIFT P/YR

SHIFT EFF% 6.09

12 SHIFT P/YR

SHIFT NOM% 5.92634643744

470,000 +/- PV

0 FV

25 x 12 N

PMT 3,007.09113128

Therefore the payment is $3,007.10

b) $350,000 mortgage, 40 year amortization, bi-weekly payments, 5 year term, J2=5.57%

5.57 SHIFT NOM%

2 SHIFT P/YR

SHIFT EFF% 5.64756225

26 SHIFT P/YR

SHIFT NOM% 5.49965679023

350,000 +/- PV

0 FV

26 x 40 N

PMT 832.847950311

Therefore the payment is $832.85

c) $20,000 second mortgage, 15 year amortization, monthly payments, 15 year term, J2=14%

14 SHIFT NOM%

2 SHIFT P/YR

SHIFT EFF% 14.49

12 SHIFT P/YR

SHIFT NOM% 13.6083121618

20,000 +/- PV

0 FV

12 x 15 N

PMT 261.105936899

Therefore the payment is $261.11

d) $1,250,000 mortgage, 35 year amortization, weekly payments, 5 year term, J2=3.75%

3.75 SHIFT NOM%

2 SHIFT P/YR

SHIFT EFF% 3.78515625

52 SHIFT P/YR

SHIFT NOM% 3.71660466959

1,250,000 +/- PV

0 FV

52 x 35 N

PMT 1227.95535668

Therefore the payment is $1,227.96

The following question is being added to the 8th Edition. If you are working with the 7th Edition this will be a bonus question for you.

(Hint: the present value and the future value are the same because there is no principal being repaid)

13 SHIFT NOM%

2 SHIFT P/YR

SHIFT EFF% 13.4225

12 SHIFT P/YR

SHIFT NOM% 12.661288776413

34,500 +/- PV (the PV is a negative number)

34,500 FV (the FV is a positive number)

12 N

PMT 364.0120523224

Therefore the payment is $364.02 (mortgage payments are always rounded UP to the next highest cent)

A bait and switch is an advertisement that misrepresents the consumer’s opportunity to purchase the goods and services at the terms presented.

The Code promotes truth, honesty, fairness, and accuracy in advertising and is comprised of fourteen clauses that set the criteria for acceptable advertising.

Section 27 states that, “No person or entity shall authorize any advertisement for a mortgage which purports to contain information relating to the cost of borrowing or any other pre-scribed matter unless the advertisement contains such information as may be required by the regulations and is in such form and manner as may be prescribed.”

Typically, it is, “What is your best or current five year rate?”

Practice makes perfect
Remember to practice your script before you start getting calls. Like cold calling, ask your spouse or significant other (someone who will give you helpful advice on how you are performing) to be your incoming call or practise by recording yourself and listening to the conversation. In all cases, try to record yourself and review the tape after your calls. This way you can identify if you are sounding aggressive, defensive, or just right!

Use a mirror
Because a smile translates across a telephone line, you should ensure that you are always smiling when you cold call. A great way to ensure that you do is by having a small mirror in front of you so that you can watch your smile.

Write things down
Be sure to have pen and paper for each call. Write down the caller’s name as soon as you get it (there’s nothing more embarrassing then forgetting a caller’s name after they’ve just given it to you!), and any other details that might be helpful.

Make these words your own
Make sure you use words and phrases that are comfortable for you. In other words, rephrase the script to match how you normally speak. This will ensure that you do not sound like you are reading from a script, even when you are!

Do not be afraid
Remember that the phone can be your best friend. The more comfortable you are on the phone, the easier it will be to meet your objective: getting appointments with qualified clients.

It allows the Agent to remain focused on covering certain topics that he or she feels are necessary in the call and allows the Agent to refer to standard responses for typical questions. Professional Agents always use a script, whether in paper format or by committing the script to memory.

A cold call is an outgoing call made to someone who is not known to the Agent and who has not been referred to him or her.

The object of a cold call is to transform the “cold” individual into a “warm” prospect, or someone who is warm to the idea of doing business with the Agent. By following a script, the Agent has the best chances of success!

Who you are.

The benefit you will provide to him or her.

In developing a relationship you turn a potential client into an actual client who will likely close the deal and provide you with future business

• Employment Verification
• PIPEDA Consent
• Photo Identification
• Divorce/Separation Agreement (if applicable)
• Child Support Order/Agreement (if applicable)

• Financial Statements
• Business License
• Business Cheque.

• Purchase and Sale Agreement
• MLS Listing
• Proof of Downpayment
• Rental Letter (if applicable)
• Realtor Information.

• Current Mortgage Statement
• Charge/Mortgage
• Transfer/Deed
• Property Tax Statement
• Property Insurance Policy
• Mortgage Repayment History (if applicable).

A file checklist is a key component for ensuring that the required documentation is obtained on every transaction. This prevents the embarrassment of having to go back to a client for additional documentation in the future and provides a quick summary of what is in the file.

• The client’s home
• The Mortgage Agent’s office
• Another outside location.

Pros and cons are found in chapter 11.3

In today’s mortgage market, identity theft and impersonation are a significant concern, making it necessary for the Mortgage Agent to verify the identity of his or her client at the initial consultation.

A co-applicant will go on title with the primary borrower and is equally responsible for the debt. A guarantor, while equally responsible for the debt, is not registered on title.

By having the client’s signature on the application, the Mortgage Agent has consent to complete the necessary investigations to obtain a commitment from a Lender. Although verbal authorization is acceptable, some applicants may dispute providing authorization at some point in the future.

To determine the applicant’s needs, specific questions must be asked. Refer to the Needs Assessment form.

• T4: typically when a Borrower has salaried or hourly employment income
• T4A: typically when a Borrower has commission income
• Job Letter: typically when a Borrower’s income or position information is required
• Paystub: typically in addition to a Job Letter to confirm that the individual is still employed and that the YTD income matches the Job Letter
• NOA: typically to support income verification for a previous year and/or to confirm that there are no income taxes outstanding
• Agreement of Purchase and Sale: typically when a Borrower is purchasing a property
• Gift Letter: if the Borrower is using funds for his or her down payment that has been given to him or her by a family member
• Property Assessment: can be used by the Agent to support the Borrower’s value of his or her house. It is not used to confirm the value nor will the Lender accept this, but it can support the value.
• Property Tax Bill: used to confirm the amount of taxes payable and if any property taxes are outstanding
• Mortgage Statement: typically used to confirm the outstanding balance of a Borrower’s current mortgage when refinancing
• Status Certificate: required when financing a condominium unit

An MLS will provide details about the property, its sale price and Realtor information.

This document proves that an individual has been given advice by his or her lawyer with regards to the proposed mortgage. It is usually required when the proceeds of a refinance are being provided to a third party and not the Borrower or if the loan is a reverse mortgage.

This must be completed in every transaction, since part of the application is the waiver. If the Borrower(s) want the insurance the full application must be completed, if they do not they must complete the waiver section.

It should be on company letterhead, have the company address and contact information, list the Borrower’s position, income, how it is paid (i.e. salary or hourly), the frequency of payment (i.e. weekly), if the person is full or part-time and/or on probation, the start date and the writer’s information and contact information.

This is a tool that can be used for studying purposes.

a) What is the LTV of the 1st mortgage?

LTV = (255,000 / 550,000) x 100

LTV = 4.63636364E-1x 100

LTV = 46.36%

b) What is the LTV of the combined 1st and 2nd mortgages?

LTV = ((255,000 + $70,000) / $550,000) x 100

LTV = ($325,000 / $550,000) x 100

LTV = 0.590909090909 x 100

LTV = 59.09%

LTV = (262,500 / 350,000) x 100

LTV = 0.75 x 100

LTV = 75%

a) What is their GDS?

GDS = (PITH / INCOME) x 100

GDS = ([($667.43 x 52) + $2,100 + ($100 x 12)] / $126,966) x 100

GDS = [($34,706.36 + $2,100 + $1,200) / $126,966] x 100

GDS = ($38,006.36 / $126,966) x 100

GDS = 2.99342816E-1 x 100

GDS = 29.93%

b) What is their TDS?

TDS = [(PITH + Other Debts) / INCOME] x 100

TDS = ([$38,006.36 + ($385 x 12) + ($45 x 52) + ($510 x 12)] / $126,966) x 100

TDS = [($38,006.36 + $4,620 + $2,340 + $6,120) / $126,966] x 100

TDS = ($51,086.36 / $126,966) x 100

TDS = .40236252225

TDS = 40.24%

a) What is their GDS

GDS = (PITH / INCOME) x 100

GDS = ([($1,736.29 x 12) + $2,100 + ($100 x 12)] / $95,000) x 100

GDS = [($20,835.48 + $2,100 + $1,200) / $95,000] x 100

GDS = ($24,135.48 / $95,000) x 100

GDS = 2.54057684E-1 x 100

GDS = 25.41%

b) What is their TDS?

TDS = [(PITH + Other Debts) / INCOME] x 100

TDS = ([($24,135.48) + ($275 x 12) + ($95 x 52) + ($300 x 12)] / $95,000) x 100

TDS = [($24,135.48 + $3,300 + $4,940 + $3,600) / $95,000] x 100

TDS = ($35,975.48 / $95,000) x 100

TDS = 3.78689263E-1 x 100

TDS = 37.87%

a) What is their GDS?

GDS = (PITH / INCOME) x 100

GDS = ([($1,512.75 x 26) + $2,100 + ($100 x 12) / $145,000) x 100

GDS = [($39,331.50 + $2,100 + $1,200) / $145,000] x 100

GDS = ($42,631.50 / $145,000) x 100

GDS = 2.94010345E-1 x 100

GDS = 29.40%

b) What is their TDS?

TDS = [(PITH + Other Debts) / INCOME] x 100

TDS = ([$42,631.50 + ($405 x 12) + ($55 x 52) + ($400 x12)] / $145,000) x 100

TDS = [($42,631.50 + $4,860 + $2,860 + $4,800) / $145,000] x 100

TDS = ($55,151.50 / $145,000) x 100

TDS = 3.80355172E-1 x 100

TDS = 38.04%

a) What is their GDS?

GDS = (PITH / INCOME) x 100

GDS = ([($1,558.46 x 12) + $2,100 + ($100 x 12) / $75,000) x 100

GDS = [($18,701.52 + $2,100 + $1,200) / $75,000] x 100

GDS = ($22,001.52 / $75,000) x 100

GDS = 0.2933536 x 100

GDS = 29.34%

b) What is their TDS?

TDS = [(PITH + Other Debts) / INCOME] x 100

TDS = ([$22,001.52 + ($405 x 12) + ($180 x 12) + ($400 x12)] / $75,000) x 100

TDS = [($22,001.52 + $4,860 + $2,160 + $4,800) / $75,000] x 100

TDS = ($33,821.52 / $75,000) x 100

TDS = 0.4509536 x 100

TDS = 45.10%

a) What is the LTV of the 1st mortgage?

LTV = ($220,000 / $350,000) x 100

LTV = 6.28571429E-1 x 100

LTV = 62.86%

b) What is the LTV of only the 2nd mortgage (excluding the 1st mortgage)?

LTV = ($30,000 / $350,000) x 100

LTV = 8.57142857E-2 x 100

LTV = 8.57%

c) What is the total LTV of the 2nd mortgage?

LTV = [($220,000 + $30,000) / $350,000] x 100

LTV = ($250,000 / $350,000) x 100

LTV = 7.14285714E-1 x 100

LTV = 71.43%

d) What is her GDS?

GDS = (PITH / INCOME) x 100

GDS = ([($433.66 x 12) + ($700 x 26) + $3,500 + ($100 x 12) / $78,000) x 100

GDS = [($5,203.92 + $18,200 + $3,500 + $1,200) / $78,000] x 100

GDS = ($28,103.92 / $78,000) x 100

GDS = 3.60306667E-1 x 100

GDS = 36.03

e) What is her TDS?

TDS = [(PITH + Other Debts) / INCOME] x 100

TDS = ([$28,103.92 + ($360 x 12)] / $78,000) x 100

TDS = [($28,103.92 + $4,320) / $78,000] x 100

TDS = ($32,423.92 / $78,000) x 100

TDS = 4.15691282E-1 x 100

TDS = 41.57%

a) What is their GDS?

GDS = (PITH / INCOME) x 100

GDS = ([($1,827.53 x 12) + $2,100 + ($100 x 12) + (418 x .50 x 12) / $117,000) x 100

GDS = [($21,930.36 + $2,100 + $1,200 + $2,508.00) / $117,000] x 100

GDS = ($27,738.36 / $117,000) x 100

GDS = 0.237080000 x 100

GDS = 23.71%

b) What is their TDS?

TDS = [(PITH + Other Debts) / INCOME] x 100

TDS = ([$27,738.36 + ($310 x 12) + ($80 x 52) + ($275 x 12)] / $117,000) x 100

TDS = [($27,738.36 + $3,720 + $4,160 + $3,300) / $117,000] x 100

TDS = ($38,918.36 / $117,000) x 100

TDS = 0.332635555556 x 100

TDS = 33.26%

a) What is the maximum monthly mortgage payment for which Asha qualifies based on a TDS of 42%?

Maximum Mortgage Payment (MMP) = ((Income x Max TDS / 100) – (Property Taxes + 1/2 Condo Maintenance Fee + Heat + Other Debts)) / 12

MMP = (($73,000 x 42% / 100) – (($2,900 + ($100 x 12) + ($275 x 12) + ($195 x 12) + ($300 x 12))) / 12

MMP = (($73,000 x.42) – ($2,900 + $1,200 + $3,300 + $2,340 + $3,600)) / 12

MMP = ($30,660 – $13,340) / 12

MMP = $17,320 / 12

MMP = $1,443.3333333333

MMP = $1,443.33

Therefore, the maximum mortgage payment for which Asha qualifies is $1,443.33.  If you then wanted to calculate the maximum mortgage amount you would use this payment, along with a specific interest rate, amortization period and $0 outstanding balance to calculate it.

Information on a debt, found in a credit report, that contains the date that the credit was granted, the balance, terms and repayment history

Payment History, Amounts Owed, Length of Credit History, New Credit and Inquiries, Types of Credit, and Number of Trades on File are all used to calculate a credit score.

Ensure that payments are always made on time; limit the number of credit inquiries; maintain balances below 30% of credit limits.

Public Records section.

This is a revolving account such as a credit card and it is 2 months in arrears.

The lower the credit score the higher the delinquency rate.

a) Equifax? 6 years

b) Transunion? 7 years

a) Equifax? 3 years.

b) Transunion? 2 years.

Contact the Credit Bureau to remove the item.

No, a Borrower must contact the Credit Bureau directly for this report.

• The cost to rebuild the home in case of damage, such as by fire (insurable value)
• A value so that a municipality can apply its property tax rate (taxation purposes)
• The price that a real estate investor would pay for a property based on his or her preferred rate of return (investment value)
• The amount that the property can obtain if sold (selling price)
• The future value of a property under construction (future price)
• The value of a property being expropriated by the Crown (expropriation value)
• The market value of a property for a Lender to decide on an appropriate loan amount for mortgage financing.

The appraiser is the accredited individual who completes the appraisal report.

The Appraisal Institute of Canada (AIC), Canadian National Association of Real Estate Appraisers (CNAREA), Ontario Real Estate Association and the Real Estate Institute of Canada.

The AACI, P.App, CRA, DAR, DAC, CMAR, CAR, MVA or FRI.

Price is what may be paid for a property while market value is The amount, in Canadian funds, for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms-length transaction after proper marketing, where the buyer and seller have each each acted knowledgably, prudently, and without pressure.

There are three approaches that appraisers use to calculate the value of a property:

Income Approach: this approach is typically used for commercial income producing properties, using the property’s income to determine the market value

Cost Approach: this approach uses the cost of rebuilding the property less depreciation plus the value of the property. This is most widely used to confirm the value determined by the direct comparison approach as well as being used to determine the replacement value of a building for insurance purposes

Direct Comparison Approach: This approach uses the theory of substitution, comparing similar properties that have recently sold to the property being appraised. The Direct Comparison Approach is the most appropriate for mortgage financing and is therefore relied heavily upon in the appraisal report

• If the comparable characteristic is superior to the subject, subtract from the comparable property’s value
• If the comparable characteristic is inferior to the subject, add to the comparable property’s value

AVMs can provide quick, basic property values, however they are prone to producing values that may or may not actually be representative of the subject property since an AVM cannot make adjustments for the physical condition of the property.

Considered to offer the most information and therefore the highest level of protection for the Lender, the Full Appraisal is the appraisal of choice for Lenders who rely heavily on the property as security and less on the personal covenant of the Borrower.

A prime Borrower is typically an individual who has excellent credit, provable income and stable employment. This type of lending is often referred to as “, “A lending” or “Prime lending”, while those falling outside of these guidelines are served by the sub-prime mortgage market.

The rates and fees for prime mortgages are typically lower than those of sub-prime mortgages. Sub-prime mortgages are typically easier to qualify for.

The typical sub-prime Borrower is an individual who may have a combination of the following characteristics:

• Current poor credit such as being behind in his or her payments on one or more credit cards, loans or other debts
• Less than two years at his or her current job
• Self-employed
• Has a previous bankruptcy
• Has previous poor credit with no re-established credit
• Requires high LTV financing.

A client requiring a private mortgage will generally not qualify through a prime or sub-prime Lender. This client will normally have equity in his or her property and be able to obtain financing to a maximum of 85% LTV, depending on the area in which the property is located.

The qualification requirements for each mortgage product.

The rates for each mortgage product as well as the necessary credit score and loan to value

Contact the Lender’s BDM for clarification.

• Loan to Value: Which lender(s) offer the ltv that the client requires?
• Income Verification: What income verification is required? Can the client provide the appropriate document(s)?
• Property Type: Does the client’s property type meet the lender’s requirements? I.e., if the client has a rental property, does the lender have a rental product?
• Credit Score: What are the lender’s requirements? Does the lender offer a different ltv based on credit scores? If so, does the client qualify?
• Terms: which Lender offers the best terms for the client suchProduct: which Lender offers the right product for the client?
• Rates: which Lender offers the best rate based on the product chosen for the client?
• Speed: which Lender provides the quickest response to an application submission?
• Service: which Lender provides the best service to both Mortgage Agents and clients?
• Reputation: which Lender has the best overall reputation in the mortgage industry?
• Brokerage Preference: does the Mortgage Brokerage have a preference for or dictate which Lender should be used under certain circumstances?
• Finder’s Fees: if everything else is equal and two or more Lenders are appropriate for the client, which of those Lenders, if any, pays the highest commission?
• Loyalty Program: if everything else is equal and two or more Lenders are appropriate for the client, which of those Lenders, if any, offers a loyalty or points program?

• Finder’s Fees: if everything else is equal and two or more Lenders are appropriate for the client, which of those Lenders, if any, pays the highest commission?
• Loyalty Program: if everything else is equal and two or more Lenders are appropriate for the client, which of those Lenders, if any, offers a loyalty or points program?

Most Lenders’ products have minimum credit score requirements and that must be met by the Borrower.

The areas to review is Credit, Property and Employment

Only one.

If a Mortgage Agent doesn’t have appropriate funding ratios Lenders may decide to stop doing business with him or her.

The lack of notes.

• Applicants’ Names
• Property Address (address of the security)
• Mortgage Amount
• Interest Rate
• Payment Amount
• Payment Frequency
• Term
• Closing Date
• Prepayment Privileges
• Conditions of approval
• Terms of the approved mortgage (such as fees, appraisal requirements, etc.).

a) An employed individual’s income?

Income and employment confirmation by way of recent pay stub or a letter from employer confirming income and length of employment on employer’s letterhead and the most recent income tax Notice of Assessment.

b) A self-employed individual’s income?

A copy of three (3) years income tax Assessments and Financial Statements;

Contact the Underwriter to understand why the application was declined

Contact the BDM if he or she disagrees with the decision

Submit the application to another Lender

• Fees and payments associated with the mortgage
• The nature of the relationship between the brokerage and lender under the proposed mortgage
• The role of the brokerage
• The number of lenders the brokerage represented during the previous year
• Any potential conflicts of interest
• The risks associated with the proposed mortgage
• The terms and conditions of the proposed mortgage
• Estimated costs
• The cost of borrowing

Disclosure must be provided to the borrower at least two business days before the borrower is required to make any payment or enter into the mortgage agreement; however, the two business days may be waived if the borrower consents in writing and the disclosure is still made before the borrower is required to make any payment or enter into the mortgage agreement

• Administrative charges including charges for services, transactions or any other activity in relation to the mortgage
• Lawyer’s fees, including disbursements, for a lawyer hired by the lender and paid by the borrower (the majority of cases)
• Insurance charges, excluding default insurance premiums for high-ratio mortgages
• Appraisal, inspection or survey costs payable by the borrower, when required by the lender

The cost of borrowing must be disclosed as an annual percentage rate, section 8.1 of Regulation 191/08 states that it must also be disclosed in dollars and cents over the course of the term for all fixed and variable rate mortgages.

If the brokerage does not require the borrower to pay for any of its services, including disbursements, transaction or other activities in relation to the mortgage, and the lender is a prescribed lender as found in section 1.2, and the lender provides its own disclosure that contains the information required by this disclosure, the brokerage is not required to provide the borrower with its own disclosure document.

Bob and Mary are purchasing a resale home for $420,000 and are putting 10% down. The CMHC premium is 2.40% or $9,072. The closing costs for this transaction may be approximately:

PST

• Automated title searching
• Write searching
• Subsearching
• Creation of drafts and documents ready to be registered
• Calculation and payment of land transfer taxes
• Electronic registration of documents, as well as other procedures.

This document allows the Lawyer to close the transaction electronically.

This document allows the Lawyers to handle the client’s documents and funds and by signing this document, both Lawyers agree to undertake their professional obligations as to the handling of these documents and funds.

The Lawyer.

The IAD is date that the interest adjustment payment is due.

28 (number of days in February) – 11 (date of advance) = 17 +1 (add the date of advance) = 18

5.4 SHIFT NOM%

2 SHIFT P/YR

SHIFT EFF% 5.4729

365 SHIFT P/YR

SHIFT NOM% 5.3287751356

350000 +/- PV

18 N

0 PMT

FV 350,920.903452

$350,920.90 – $350,000.00 = $920.903452

Therefore, the interest adjustment payment due on the interest adjustment date is $920.90 (this is not a periodic payment so the amount is rounded off)

Simply stated, a contract is a legally enforceable agreement made between two or more parties.

• The Offer: An offer is a promise made by one party to another to do something
• Acceptance of the Offer: Acceptance is a promise to accept the offer.
• Intention to Create a Legal Relationship: The parties entering into an agreement must intend to form a legally binding agreement.
• The Legal Capacity to Enter into a Contract: Parties must be approximately equivalent in bargaining power and must meet minimum standards in regards to maturity and intellect to be deemed to have the legal capacity to enter into a contract.
• Legality Requirements: Every contract must meet certain legality requirements. It must have a legal purpose. To be considered legal, this purpose cannot violate any law, statute, or public policy.
• Exchange of Consideration: Although there are exceptions, parties to a contract must agree to exchange something of value in return for their promises.

The contract may be rescinded, meaning that the contract will be cancelled and the parties will be returned to their pre-contract states.

Only the parties to a contract may enforce it.

A condition for financing which allows the Borrower to cancel the contract if he or she can not obtain mortgage financing.

The contract will be voided due to Frustration.

Abena may obtain an injunction to prevent the sale to Bob and sue for specific performance to force David to sell her the house.

This is an example of “discharge by right” which occurs when there is a clause written into a contract that provides one or both parties with the option to cancel the contract before performance. Such clauses include an option to terminate, a condition precedent and a condition subsequent.

No, there is no contract because there was no offer and acceptance before Dominic had cut the lawn. Mr. Malikson’s promise to pay was simply that: a promise, and not a contract.

Failure to perform his or her mortgage obligations, including any of the covenants contained in the Standard Charge Terms.

The Power of Sale process.

The Mortgages Act, R.S.O. 1990, c.M.40.

15 days.

• The Borrower defaults
• The Lender serves notice
• The Borrower has a redemption period
• The Lender takes possession of the property
• The Lender sells the property

In a Power of Sale the Borrower receives any profit from the sale and is liable for any shortfall. In a Foreclosure the Borrower’s rights and obligations to the property are terminated.

Power of Sale is used in Newfoundland and Labrador, New Brunswick, Prince Edward Island and Ontario.

The Lender must provide the Realtor with a Certificate of Power of Sale, proving that the Lender has the legal right to sell the property. A schedule must also be attached to the Agreement of Purchase and Sale, entitled the Seller Selling Under Power of Sale.

• In payment of all expenses involved in the sale of the property, including the Realtor’s fee, legal fees, etc.
• In payment of all interest and costs associated with the mortgage involved in the Power of Sale
• In payment of the principal balance outstanding on the mortgage involved in the Power of Sale
• In payment to any additional encumbrancers such as mortgage holders and others who had an interest in the property
• Payment of rental deposits made by any tenants, if applicable
• Any monies remaining must be paid to the mortgagor

While a Power of Sale is the most common remedy in Ontario and can be commenced after 15 days of default, most Lenders will not seek this remedy immediately. In most cases the process will begin with a letter sent from the Lender’s collection department advising the Borrower of the default and requesting that the missed payment be sent to the Lender immediately. The Lender may also require the Borrower to pay a non-sufficient funds (NSF) fee and may also require the Borrower to pay an administrative fee.

If this letter does not obtain the desired results, the Lender may then use a Demand Letter, which is a letter sent from the Lender’s Lawyer demanding the payment of the outstanding amount. If neither of these remedies is successful, the Lender will then proceed with the Power of Sale process.

Mortgage fraud is the deliberate omission of information, use of misstatements or misrepresentations to obtain, purchase, or fund a mortgage loan.

The increased usage of technology in the mortgage industry has allowed those committing mortgage fraud to take advantage of legitimate initiatives such as AVMs, Risk Assessment Tools, electronic registration of land titles documents and to communicate without face-to-face meetings. The mortgage market’s competitiveness is also a factor. There are more Lenders in today’s mortgage market than at any other time in Ontario’s history and those Lenders are competing for Borrowers. Due diligence is often sacrificed for faster approvals as Lenders cope with the potential of losing customers to other Lenders who provide faster service.

According to the Criminal Intelligence Service Canada (CISC), mortgage fraud may be committed to further other criminal activities such as the financing of marihuana grow operations, drug labs, and money laundering. Many crime organizations and individuals will commit mortgage fraud to obtain the proceeds of the mortgage without the intent to repay the loan.

Fraud for shelter is one of the most common forms of fraud in the mortgage industry. This type of fraud occurs when an individual wishes to purchase a home in which to reside with no intent to abscond with mortgage funds or fraudulently sell the property by misstating or misrepresenting his or her status. In most cases this type of fraud involves inflation of the purchaser’s income to obtain mortgage financing. This can be harmful to the Borrower since he or she may not be able to afford the mortgage, leading to financial hardship. It can harm the Lender due to mortgage arrears and defaulting loans, and the Mortgage Brokerage industry as a whole since Lenders may scale back these products if they show a high vulnerability to fraud.

Misstatements about liabilities, at 71%.

Psychological, reputational and economic.

The steps include identity verification, employment and income verification, occupancy verification, credit and property verification.

Identity
The applicant cannot provide any photo identification, or says that he or she will provide photo identification but consistently does not. In addition the quality of the identification must be considered, especially if it does not appear to be genuine.

If the applicants are not available to meet or if one applicant is never present.

Employment and Income
The applicant’s job letter contains inconsistencies or errors. For example, if it does not match pay stubs or what the applicant has disclosed about the amount of income, the time employed or his or her job title or has spelling or grammatical errors.

If, when verifying the applicant’s employment, the Mortgage Agent cannot find a directory listing for the business, or the business contact number (as provided or as stated on the job letter) is a residential number or cellular number. This information can be obtained by conducting a business phone number search or reverse directory lookup using www.canada411.com or other Internet services.

The position and/or income is inconsistent with the applicant’s age.

Assets
The applicant states that he or she has significant income but little or no assets.

Meeting Location
If the client insists on meeting at a location other than the location of the property to be mortgaged. This may simply be based on convenience, and if the Mortgage Agent’s process includes meeting in his or her office this may not be considered a warning sign. The Mortgage Agent should request a copy of a recent utility bill with the applicant’s address and name.

Contact Information
If the applicant only has a cellular phone for contact purposes (although more consumers are using cellular phones as their homes phone).

The LTAF is designed to compensate individuals who have suffered financial losses due to errors or omissions in the land registration system and real estate fraud.

Title Insurance
Consumers should obtain title insurance on every property that they buy and get a title insurance for any property that they currently own. This can protect against future acts of title or mortgage fraud.

Document Destruction
Consumers should destroy all bills and other personally identifiable documents by using a paper shredder instead of simply throwing them in the garbage. This can prevent criminals from obtaining this information by going through a consumer’s garbage. It is now common for criminals to take several containers of garbage from consumers’ homes to a different location to search for documents containing personal identity information which can then be used to impersonate the consumer.

Home Inspection
A homebuyer purchasing a resale home should have it inspected. This can prevent the buyer from purchasing a house that was used as a grow op or a drug lab.

ATMs
Consumers should strive to withdraw cash only from their bank’s ATMs. There have been several circumstances where ATMs in small gas stations or other stores have been compromised, allowing the criminal to record debit card and PIN information.

PIN Numbers
Consumers should always protect their PIN numbers, including debit card and credit card numbers to prevent unauthorized use of these cards.

Credit Reports
Consumers should pull their own credit report every three to six months to ensure that there are no inquiries or debts that the consumer has not authorized. This can be done online through Equifax and Transunion.

Online Shopping
Consumers should only use online retailers that they have knowledge of and/or use secure, encrypted processing of payment information. This can be confirmed in many instances through the web browser by way of a lock icon.

Phone Solicitations
Consumers should never give their credit card information to unsolicited callers. If it is for a charity the consumer should obtain a number that he or she can verify and call the charity back, or have the charity send a payment request by mail. Many criminals will impersonate charities or other groups to obtain personal information by phone.

Internet Phishing
Phishing is an Internet scam whereby the criminal sends an email to the consumer requesting personal information. The email may appear to be from the consumer’s bank or other company such as Amazon or ebay. The technology can produce emails and websites that look identical to the actual company’s. However, respectable companies will not request this information by email.

SIN Card
Consumers should not carry their social insurance number card with them as this can be stolen and used for identity theft. There are only limited situations where a SIN card is required, and it is typically not required on a daily basis.

Passwords
Consumers should use passwords that are unique, excluding birth dates and other common forms of passwords. Consumers should keep this information, if written, locked in a secure place.

Ethics can be defined as the process of applying the core values of the mortgage industry to a practitioner’s daily conduct.

Honesty, integrity, acting in the best interests of the client and the industry, and complying with the law and codes of conduct are the core values of the industry.

1. What are the facts?
Before one can come to a decision whether an action is ethical he or she must be relatively certain that all of the facts have been obtained. Failure to do so can result in a faulty decision.

2. Identify the potential solutions
Next, it is necessary to list the possible solutions to the problem. Once all of the possible solutions are listed, one can apply the next step in the process. It’s important to note that if you are too involved in a situation you may not be able to clearly see all of the potential solutions. In this instance it may be necessary to obtain the input of others, such as a co-worker or family member, to add some clarity and objectivity to the discussion.

3. Apply the core value: Honesty
Which potential solutions support this core value? To answer this question apply this core value to each of the solutions from step 2. Do any of the solutions contravene this value? If so, it is not necessary to proceed further; that solution is clearly unethical. Move to the test for integrity with the remaining solutions.

4. Apply the core value: Integrity
Does the potential solution compromise your integrity? In other words, would this solution be inconsistent with how you live and what you believe in? If the answer is yes you must deem this solution unethical. Move to the test of acting in the best interests of your client with the remaining solutions.

5. Apply the core value: Act in the best interests of your client
To be able to apply this core value it is necessary to have performed a detailed needs assessment to determine exactly what his or her needs are. Does the potential solution result in an action that is in the best interests of your client? If it does not, you must discard that solution. The remaining solutions can be taken to the next test.

6. Apply the core value: Act in the best interests of the industry
Does the potential solution reflect well on the industry? Acting in the best interests of the industry does not necessarily mean that the solution must have a positive impact on the industry, such as raising public awareness of the benefits of using a broker, but that it must not act against the best interests of the industry. Even if a potential solution has made it this far, the question would then be: is this solution detrimental to the industry? If the answer is yes, the solution must be discarded. If not, move on to the final core value test.

7. Apply the core value: Comply with law and codes of conduct
Finally, this core value is applied to the remaining solutions. If any contravene this core value they must be discarded.

8. Choose the best solution
Any solutions now available to you can be reasonably assumed to be ethical. If you have more than one solution still available, the test of which provides the greatest good can be applied. In most cases, however, only one solution will remain.

9. Review the process
Once you’ve reached a decision it is important to review the process step by step to ensure that your tests were applied objectively and without bias. It may also be helpful to discuss the process with someone you trust, as long as the discussion does not disclose confidential information, or information that might damage another’s reputation.

To ensure that he or she has thought of all possibilities and that his or her final decision was arrived at objectively and free of bias.

Do additional research if applicable, ask family, friends and colleagues.

He or she should make every effort to obtain all of the facts and should refrain from making a final decision until he or she is certain that all of the facts, or as many facts as possible, have been considered.

If two or more possible solutions make it to the final step, the decision maker should consider the choice that makes the most positive impact.

This question requires personal introspection.

Depending on the situation an individual might not be able to see all solutions clearly. If this is the case others should be consulted to determine if there are any solutions that may have been excluded.

This question requires personal research and will differ from person to person.