Having bad credit is one of the main reasons that you could be turned down for a mortgage, as it represents the credit risk that financial institutions are taking if they loan you money. Repairing this score is a bit like losing weight, there is no quick fix, it just takes time and acting responsibly. Here are some things that you can do right now to put you on the right track.

1. Review your credit report – There are many places online that you can request your credit score for free. Once you have examined the report, it contains information that is used to calculate your credit score and it can sometimes contain errors. There are two common errors you can find: any incorrect listings of late payments and improper amounts owed in each of your open accounts. If you find any of these things report it to the Credit Bureau of Canada.
2. Institute automatic withdrawals or set up reminders for payment – Ensuring that your bills are paid on time is the largest contributing factor to having a good credit score. You can set up automatic withdrawals from your bank accounts or credit cards to ensure that they are paid off or set reminders in your calendar every month. Both of these will help you be more fiscally responsible.
3. Reduce your debt – This step is the most difficult, but also the most satisfying. Pay off any high-interest debt first, for most people this will be credit cards. Then work your way down. But don’t forget the minimum payments on all other debts. Just because you’re focusing on one debt doesn’t mean the others can be put on hold.

If you have any questions about these steps, speak with a mortgage specialist to assist you.

Two of Canada’s biggest banks are raising their benchmark rates for five-year, fixed-rate mortgages.

TD says as of Wednesday it increased its posted rate for five-year fixed mortgages to 5.59 per cent from 5.14 per cent.

Mortgage planner and rate comparison website founder Robert McLister says the increase is “unusual” as the benchmark rate hasn’t seen a jump of 45 basis points or more since March 2010.

TD spokeswoman Julie Bellissimo says a number of factors are considered when determining rates including the competitive landscape, the cost of lending and managing risk.

Meanwhile, Royal Bank spokesman AJ Goodman says the lender plans to raise its posted rate for a five-year fixed mortgage on Monday to 5.34 per cent compared with the 5.14 per cent currently posted.

McLister says the actual rates banks offer to borrowers are not seeing an increase, but notes the Bank of Canada uses the posted rates at the big banks to calculate the rate used in stress tests to determine whether homebuyers qualify for loans.

The Canadian Press

by Neil Sharma

A recent study elucidated how badly homeowners got burned when Toronto’s housing market plunged about a year ago.

The report, published by Move Smartly, determined that hundreds of homeowners lost an average of $140,000 because of closing defaults, and according to John Pasalis of Realosophy, that totaled $121mln in lost market value.

“It tells you how rapid the decline was,” Pasalis told the Globe and Mail. “It tells you how quickly markets turn.”

Closing defaults often result in litigation, but that becomes even trickier when the purchaser who reneges on the transaction lives in another country.

“One client sold to a buyer from Iran, who was buying as a non-resident, and decided he’s not closing on the deal, and then what’s the recourse of the client—you’re going to sue someone in Iran?” said Mortgage Outlet’s Principal Broker Shawn Stillman. “Some people will simply not close because they don’t want to buy something that’s worth $200,000.”

On preconstruction purchases, Stillman recommends to all his clients that they take the on-site mortgage broker’s preapproval. While the terms might not be favourable, it mitigates the chances of defaulting on closing.

“One thing we always recommend people do is the builders always offer a preapproval for a set amount of time and we tell them to take it,” he said. “It’s something we can’t offer in the mortgage world. There’s always a mortgage broker from a major bank on site that usually does financing that will preapprove you for a few years. It’s a terrible rate but I always tell clients, ‘You don’t know what the future holds,’ and to always take that preapproval because that would be the worst case scenario.”

Unfortunately, through no fault of their own, sellers end up being the real losers. Because they sell their home on condition and buy another to move into only for their buyer to back out, they’re stuck between a rock and a hard place.

“Unfortunately, it’s not anybody else’s responsibility to help [the defaulting buyer] get out of that hole,” said Stillman. “When things went up in value, builders weren’t saying ‘You have to pay me 20% more, or a $100,000 more.’ Same thing when prices go down. It’s nobody’s responsibility but theirs to close the deal.”

by Neil Sharma

Syndicated mortgage fraud, and the consequences its unscrupulous players are beginning to reckon with, has put the Financial Services Commission of Ontario on the hot seat, with many questioning the government agency’s effectiveness.

“Various parties in our industry have been talking about what’s wrong with Fortress to FSCO for seven years,” said Ron Butler of Butler Mortgage. “FSCO really took no definitive action until the Reuters report hit, and at that point the Finance Minister instructed FSCO to do something about it.”

Reuters reported that FSCO was in possession of enough evidence to act against Fortress-affiliated mortgage brokers, but that Anatol Monid—FSCO’S Executive Director for Licensing and Market Conduct—decided the evidence was insufficient.

Monid also ignored the pleas of various parties within the industry to look into the alleged untoward behaviour.

“We were on a conference call with various FSCO people and we talked about all the red flags,” continued Butler. “We talked about the insane amount of commission being paid—in our business it typically ranged from 50 basis points to 100 basis points, half a percent to 1%; these guys were being paid 8%, being spread out between mortgage brokers and brokerages.  That’s 800 basis points.

“If you read their mortgage document, what the consumer was buying, the consumer was allowing their position on the mortgage to go from second to fifth, so in other words it automatically allowed other lenders being involved and consumers’ interests being constantly postponed. I’ve never even seen that in a mortgage document in my life, and I’ve been doing this for 25 years. It said you may not stay in second position. Never saw that before.”

Also suspicious was the provenance of Fortress Real’s funds. Butler notes the company held a few black tie galas to recruit investors, which are pricey affairs, and still managed to pay out exorbitant 800-basis-point commissions. He wonders where the money came from.

Butler suspects up to half of investor monies were used to recruit even more investors.

“Why are these guys so incredibly different than everybody else in the business?” asked Butler. “It turned out in the end that the front companies like FDS (Broker Services Inc.) would offer syndicated mortgages to investors, and what was unknown was between 35 and 50 cents of every dollar invested was going to Fortress. I think Fortress just existed to raise money and that was their sole contribution to the development. I believe that, but I may be wrong.”

Fortress’s co-founders Vince Petrozza and Jawad Rathore previously paid the Ontario Securities Commission a $3mln settlement, and the latter received a lifetime ban from the Mutual Fund Dealers Association and fined $25,000 in penalties and $7,500 in costs.

“If I was giving money to a development company, I would not want the people to whom I was giving money to have accepted a voluntary ban from the mutual fund industry,” said Butler. “Personally, I would not feel comfortable with it. Others might, but I wouldn’t.

“I’ve never met anyone who invested in Fortress who paid their own ILA [independent legal advice]. They used a lawyer who provided ILA but the investor did not pay for it. I can’t tell you Fortress paid that ILA lawyer, but five of the investors I spoke to said they never paid. For independent legal advice to have validity, you need to pay them. I can’t say who paid.”

The Financial Services Commission of Ontario isn’t held in high regard in the broker channel. Corinna Smith-Gatcke was involved in a transaction in which a borrower could have fallen prey to a predatory lender thanks to a few deceitful brokers.

“None of the brokers who touched the file ever worked on behalf of the client, and I contacted all brokers of record, but what I do know is if you poke the bear and lodge a complaint with FSCO, if you open Pandora’s box, they’ll come after you as much as the person you’re lodging the complaint against,” Smith-Gatcke said of vindictive brokerages.

She was dissuaded by other mortgage brokers who told her not to pursue the matter with FSCO.

“Nobody feels FSCO has any clout at all, and when you do find people doing inappropriate things, very little happens,” said Smith-Gatcke, adding FSCO cannot execute its mandate “in a concise and swift manner.”

“There’s nothing in our industry to protect you as a broker or an agent. There’s no incentive for a broker or agent to willingly declare that they had seen something fraudulent. Most brokerages make those claims regardless, and those are the brokerages you want to be aligned with, but, unfortunately, there are a lot of other bad brokerages out there.”

by Andy Blatchford

The Bank of Canada is maintaining its trend-setting interest rate as its careful assessment of the timing of future hikes continues amid a backdrop of moderating growth.

The central bank, which kept its rate at 1.25 per cent Wednesday, said slower first-quarter growth of about 1.3 per cent was largely a result of housing markets’ responses to stricter mortgage rules and sluggish exports. The bank had predicted the economy to expand by 2.5 per cent in the first three months of the year.

It’s expecting the economy to rebound in the second quarter with 2.5 per cent growth, in part because of rising foreign demand, to help Canada expand by two per cent for all of 2018. The economy saw three per cent growth in 2017.

“Canada’s economic growth has moderated, and the economy is operating close to capacity,” the bank said in its latest monetary policy report, which was released alongside the rate announcement.

“While a moderation was anticipated, temporary factors … are resulting in sizable short-term fluctuations in growth.”

The bank reiterated it expects further interest-rate hikes to be necessary over time and that it will follow a cautious, data-dependent approach when weighing future decisions.

“Some progress has been made on the key issues being watched closely by governing council, particularly the dynamics of inflation and wage growth,” the bank’s statement said.

“This progress reinforces governing council’s view that higher interest rates will be warranted over time, although some monetary policy accommodation will still be needed to keep inflation on target.”

The bank will also continue to watch the economy’s sensitivity to higher interest rates and how well it builds capacity through investment, which would enable Canada to lift growth beyond what is viewed as its potential ceiling without driving up inflation.

Signs suggest the economy has made some progress in building this capacity, the bank said.

The bank is also keeping a close watch on the evolution of external risks.

Exports and business investment in Canada have been held back by competitiveness challenges and trade-policy uncertainties, which include escalating geopolitical conflicts that risk damaging global expansion, the bank said.

It laid out estimates on the growth impacts on Canada due to tax reforms in the United States, which are expected to lure more investment south of the border. Due to these investment challenges, it predicts Canada’s gross domestic product to be 0.2 per cent lower by the end of 2020.

Exports are also expected to take a hit from reduced investment and trade uncertainties. The bank projects that Canada’s GDP will be 0.3 per cent lower by the end of 2020 due to the negative impacts on exports.

Fiscal stimulus introduced in recent provincial budgets is expected to help offset these effects by adding about 0.4 per cent to Canada’s real GDP by the end of 2020.

Governor Stephen Poloz introduced three rate hikes since last summer in response to an impressive economic run for Canada that began in late 2016. But due, in part, to factors such as mounting trade unknowns, Poloz has not raised the rate since January.

The bank offered an analysis Wednesday of some of the key indicators it’s watching ahead of rate decisions.

On inflation, the bank said temporary downward forces weighing on the rate have largely dissipated. Other transitory factors, including higher gasoline prices and recent minimum wage increases are now expected to raise inflation above the bank’s January predictions.

Canada’s annual pace of inflation in February sped up to 2.2 per cent _ its fastest pace in more than three years _ to creep above the central bank’s ideal target of two per cent. Meanwhile, the average of the agency’s three measures of core inflation, designed to omit the noise of more-volatile items like gasoline, climbed slightly above two per cent for the first time since February 2012.

For wage growth, the bank said despite recent improvements it remains below what would be expected if the economy no longer had slack in its labour force.

On Wednesday, the bank also released new economic forecasts in its monetary policy report.

For 2018, it’s now predicting two per cent growth, as measured by real gross domestic product, compared to its 2.2 per cent prediction in January.

The bank raised its growth projection for 2019 to 2.1 per cent, up from its previous prediction of 1.6 per cent, before easing to 1.8 per cent in 2020.

It noted that these readings would still be slightly above Canada’s estimated potential output for the next three years.

The Canadian Press