Your Credit Profile

When you apply for a loan or mortgage, the first place a lender goes to check you out is the credit bureau to determine your credit profile. Credit bureaus are private companies. Their business is the collection of financial data regarding the credit habits and history of consumers and businesses.

Lenders often refer to the credit bureau's report as your credit rating. With their vast database and statistical rating system, your credit rating can be summed up in one number, known as the credit score. In addition, some lenders, have incorporated the credit bureau's score into their own statistical rating system to determine the lender's own unique score. All this analysis is done instantaneously and allows the lender to better manage their credit risk. If your score exceeds a set number, determined by the lender, your loan is approved; if you score less than the set number, your loan will likely be rejected.

Develop a positive credit profile

The better you understand what statistics or categories are behind your score, and the more you qualify under, the easier it will be for you to get credit. To develop a positive credit profile, qualify yourself in as many categories as you can based on the list below.

The Major Categories of a Positive Credit Profile In order of Importance:

• A positive up-to-date credit report
• A home with a mortgage
• The age of your credit history
• A job you have held for a year or more
• A current or paid-off bank loan
• A major credit card
• A department store credit card
• A telephone in your name

In addition, other factors influencing your credit profile which you may or may not have control over include:

• The amount of debt you have relative to your income
• Your net worth
• Your age
• You have a chequing and or savings account (chequing & saving accounts do not report to the credit bureau. However derogatory banking information may report.)
• Length of time at current and previous residence
• The number of credit cards you own
• The number of times you applied for credit in the last 6 months

Always remember, a positive up-to-date credit file, listed above as the number one influence on your credit profile, is your responsibility, not that of the credit bureaus. Furthermore, it is something you create, not something that happens automatically.

Strategies for controlling your credit bureau file:

Check your credit bureau file once a year: Your credit report is prepared for you in easy to understand language, without all the jargon and rating codes only a lender would understand. If you need help interpreting your report, our exclusive network of mortgage brokers are standing by to assist you.

Have the credit bureau re-verify and correct any incorrect personal and credit data: The credit bureau has an obligation to use its best efforts to check and correct the file.

Have all missing positive credit data added to your file: Supply the credit bureau in writing with a list of all credit cards, loans, and mortgages, you have kept current, if they are missing from your credit file.

Add your story to the file: You have the legal right to add your side of the story to your credit file; that is, why your payments were late, or that credit data is incorrect and is being re-verified.

Have the credit bureau remove any derogatory information outside the statutory limits: You have the right by law to a credit file that does not contain data older than the statutory limits.

Want to know more about your credit?

MortgageResource.ca has partnered with TransUnion of Canada to give you quick access to all the credit information and resources you need.

Your Credit Profile An easy-to-read version of similar information about your credit history that would be supplied to a creditor. With your credit profile, you have the option to add your credit score, debt analysis and alerts to monitor critical changes.
Consumer Disclosure A complete account of all the information on your credit report. This version is only available to you and it contains additional data that are not provided in a Credit Profile.
Credit Disputes TransUnion is obligated to verify the accuracy of information on a credit report that you dispute. If you do not recognize information on your credit report, or believe an item may be inaccurate, you may request an investigation. You can file your dispute online with TransUnion. It couldn't be any easier.
Fraud and Identity Theft Learn how TransUnion can help you if you are a victim of fraud or read tips on how to avoid becoming a victim of fraud.

About Interest Rates

The most popular subject when talking about mortgages is interest rates. And getting a good rate can make a big difference in your total interest cost. For example, I can currently get 1.75% off the banks posted 5-year rate. On a $100,000 loan, that represents a savings of $8,750. And because you pay your mortgage with "after-tax" dollars, that savings can be grossed up. For example, if you are in the 40% tax bracket, the $8,750 saved is equivalent to getting a $14,583 bonus at work over the same period.

There are a few more things about interest rates that you should know about. Every lender will hold a rate for a period of time while you look to buy a home. This comes with getting a pre-approval. Some lenders' rate hold is only 60 days. That means if you buy a house and set the closing date 70 days later, the lender will not have to honor the rate. If you need more time, up to 120 days is available.

Another potential pitfall is the lender's rate drop policy. Between your approval date and the closing date, will you benefit if the rate drops? If so, are there any restrictions, and when will the final rate be set?

Lastly, something everyone should know about, how is your interest rate calculated? With few exceptions, in Canada mortgage interest rates are calculated semi-annually. What does that mean? All you need to know is, the more often interest is calculated during a year, the more expensive the loan for the borrower. And there is no connection between how often the interest is calculated and how often you make payments. Insist on having this information fully disclosed. It's the law.

Don't be late!

If you are still planning to take advantage of the 100% financing and or the 40-year amortization programs, you have a little over one month to buy a property and submit your application. The deadline for receiving back your approval from the lender AND the insurer is October 15th.

I expect there will be a good number of applications submitted for approval on October 14th so if you were smart you would avoid waiting to the last minute. I would try and firm up your offer on a house by October 10th at the latest. You can close or move in to the property after October 15th, but you approval(s) must precede October 15th.

Also, keep in mind that very few lenders are now participating in the programs. Despite the insurers' October 15th deadline, most lenders decided to withdraw their participation if not immediately, very soon after the announcement. That means the only a few lenders will be looking after the additional workload approaching the deadline and the turnaround times will be that much more delayed.

Good luck finding the house you want in time.

New Government Instituted Mortgage Rules

On July 7th, the Government of Canada announced changes to protect and strengthen the Canadian housing market. The changes were deemed necessary to minimize the risk of a US-style housing bubble developing in Canada.

Adjustments were made to the rules for government guaranteed mortgages. That is, high ratio mortgages insured through CMHC, Genworth, or other insurance providers. The changes included:

* Fixing the maximum amortization period for new government-backed mortgages to 35years;

* Requiring a minimum down payment of five per cent for new government-backed mortgages;

* Establishing a consistent minimum credit score requirement of 620;

* Introducing new loan documentation standards.

The new limits are planned to take effect October 15, 2008. This would allow existing mortgage pre-approvals with the common 90-day duration to be used or expire.

Recently, Darren Thompson, VP of ResMor Trust appeared on the business news channel BNN during their 4:30 daily business wrap-up show. He talked about the changes and a survey his company conducted with Canadians on the subject. To view the clip, click here: http://watch.bnn.ca/wednesday/#clip73722 (at the 28:30 minute mark).

To view the results of the ResMor survey, click here: New Rules Survey

Money Laundering

"What is money laundering?

Money laundering is the process used to disguise the source of money or assets derived from criminal activity. Profit-motivated crimes span a variety of illegal activities from drug trafficking and smuggling to fraud, extortion and corruption. The scope of criminal proceeds is significant â€" estimated at some $500 billion to $1 trillion (U.S.) worldwide each year.
Money laundering facilitates corruption and can destabilize the economies of susceptible countries. It also compromises the integrity of legitimate financial systems and institutions, and gives organized crime the funds it needs to conduct further criminal activities. It is a global phenomenon, and the techniques used are numerous and can be very sophisticated. Technological advances in e-commerce, the global diversification of financial markets and new financial product developments provide further opportunities to launder illegal profit and obscure the money trail leading back to the underlying crime.
While the techniques for laundering funds vary considerably and are often highly intricate, there are generally three stages in the process:
Placement: involves placing the proceeds of crime in the financial system;
Layering: involves converting the proceeds of crime into another form and creating complex layers of financial transactions to disguise the audit trail and the source and ownership of funds (e.g., the buying and selling of stocks, commodities or property); and,
Integration: involves placing the laundered proceeds back in the economy under a veil of legitimacy."

AMP (Almost a Mortgage Professional)

AMP – Almost a Mortgage Professional is how one broker I spoke to last year described the Accredited Mortgage Professional designation. Unfortunately, I can’t say a whole lot more about the dubious title. I will admit I was one of the first to jump in and obtain my new accreditation. The idea was creditable and I still support any effort that puts forward the position and professionalism of today’s honest working mortgage originator. When put to the test of upholding such lofty standards placed on its members, however, CAAMP dropped the ball.

A longtime member of CAAMP since I started my brokerage in 1998, it was a disappointing experience when the day came that I filed a complaint. In all my years brokering, I had never filed a complaint against anyone. Yes, I had heard stories about conduct unbecoming a professional, but I had not dealt with it firsthand. And then one day I had two rather unassuming immigrants walk into my office looking for a second opinion on a second mortgage they signed up for.

I couldn’t sit on my hands and ignore what I witnessed. One of the more disconcerting facts was that the individual broker involved with these clients held the same CAAMP membership card as me. This was a good opportunity, so I thought, to see how enforceable the organization’s Code of Ethics was. So I filed a complaint with CAAMP in accordance with its complaints process. I also suggested the clients file a complaint with the Financial Services Commission of Ontario (FSCO).

In my letter, I cited inappropriate conduct and a violation of rules 1, 2, 3, 5 and 10 of the CAAMP Code of Ethics – the latter being the most serious vis-à-vis the broker’s predatory lending practices and outright fraud. I enclosed the broker’s Statement of Mortgage as evidence of this charge. The total cost of borrowing was 42.729%, but the broker’s disclosure was only 14.878%.

The inappropriate conduct included: making the client wait one month for an answer; not disclosing his fee until the clients came in to sign – a drive from Burlington to North York, no less; not providing the client a copy of the lender’s commitment letter; asking the client to sign without dating anything; and telling the client not to contact a lawyer. The broker’s high pressure and delay tactics were a throwback to a much earlier period of time when this boiler room practice was more prevalent and far less noticed – not to mention most of this conduct was a breach of the Ontario Mortgage Brokers Act.

This is a sad commentary and doesn’t speak to the professional image the majority of us have worked hard to establish. I expected CAAMP would act quickly to discipline the accused. And I was more encouraged to file my complaint after reading the CAAMP complaints process, which stated:

“Handling consumer and industry complaints is one of CAAMP’s most important functions… Effective complaint handling ensures CAAMP is able to uphold the high standards both members and consumers expect. CAAMP’s complaints process ensures legitimate complaints are appropriately considered, while protecting members from frivolous ones.”

Unfortunately, nothing was done – not even a slap on the wrist. And what bothered me the most was CAAMP’s handling of my complaint – yet another well-conceived process written into their constitution. It was approaching two years after I officially filed my complaint that I learned of the outcome. To top it all off, CAAMP didn’t notify me of the outcome. After several ignored e-mails, I finally received this response:

“Your complaint against Mr X was investigated by Financial Services Commission of Ontario. When their investigation was completed they confirmed with me that they could not find any evidence that would cause them to take any action against Mr X and they dismissed the complaint. As a result of FSCO’s decision to dismiss the complaint the Chair of the Ethics committee determined that your complaint would not be referred to a Hearing Committee and the file was closed.”

Wow! That’s some complaints process. And, yes, I was equally disheartened to hear that FSCO did nothing. CAAMP did make it clear it would be waiting on the FSCO outcome for legal reasons I find difficult to digest. It seems one only needs to threaten a lawsuit against CAAMP and it will back down. I was told by CAAMP the accused had filed 187 pages of documents in his defence. That’s about a barn full of BS, I’d say.

I still had hope in the early going when CAAMP communicated to me the following:

“Even if FSCO dismisses the complaint, CAAMP will proceed with your complaint against Mr X. The Chair and members of a Hearing Panel looked at the evidence earlier this year and they believe that this case justifies a hearing of the Ethics Committee. We are ready to go to a Hearing once we get word about FSCO’s response.”

Was this the same Chair of the Ethics Committee? Sadly, no hearing ever happened. In the end, Mr X bluffed and walked, and our industry took a giant step back. If we are to move forward and truly become a self-regulated profession, we need an industry association that will stand up to talk the talk and fight the fight. I personally don’t buy the argument that CAAMP was afraid of getting sued. Furthermore, what message does that send to the membership about its integrity and vigilance? CAAMP’s Code of Ethics and complaints process are just fine in writing, but this industry needs far more than hallow words of wisdom. Having a Code of Ethics behind your name or title is one thing, but standing behind your members and enforcing the code is a far greater acclamation.

The good news is, I was able to arrange a second mortgage (line of credit) for my clients with a reputable institutional lender, and at a cost they could agree with.

Acceptable Identification

In 1999, it was estimated that Canada laundered approximately $17 billion in illegal funds, which represented 2.5% of the GDP. As such, Canada was put on the US State Department's list of "primary concern" for money laundering and faced global pressure from international money laundering control organizations to amend it's legislation on anti-money laundering.
Canada is now considered a leading country in anti-money laundering legislation and regulation, and complies fully with recognized global standards. Furthermore, the Government of Canada took on the Presidency of the Financial Action Task Force (FAFT), July 2006.
To comply with federal regulations lenders are require to provide the following examples of acceptable identification:

* Birth Certificate
* Current Drivers license
* Current Passport
* Record of Landing
* Permanent resident card
* Similar record issued by the federal or provincial government.

The documentation used to identify the individual, must be original (no
copies) and it must be valid (not expired). Health cards issued in the following provinces: Ontario, Manitoba, or P.E.I. are considered invalid.