You’re Making a Difference Reducing Mortgage Fraud! Want to Know How?

So you may have noticed that we often blog on the topic of mortgage fraud. This is because we are firm believers that awareness is the first step towards prevention. Fraudsters are always trying to stay one step ahead and so doing your best to be well-tooled to spot possible fraud can help you protect yourself, your lenders and clients.

As recently as this past summer a major Canadian alternative mortgage lender admitted to having suspended 45 mortgage brokers after uncovering evidence that mortgage fraud was taking place. 

In this instance the mortgage fraud related to fake employment letters that overstated the borrower’s income being provided to obtain mortgage approvals. In this instance, through their own audit, the lender uncovered the fraud and dealt with it.

We often suggest education, discussion, collaboration, technology and tools as being the main areas that can really lead to an overall reduction of fraud in the mortgage industry. It seems that Genworth has produced some Canadian statistics that validate this assumption.

In the same article in the BNN that discussed the incident that occurred with the lending institution discussed earlier, Stuart Levings, CEO of Genworth MI Canada, Canada’s largest private insurer, seemed to indicate that fraud is on the decline in Canada.

The article begins “Mortgage fraud has been on the decline in Canada in recent years thanks to tougher regulations, better training and new technology, the head of Canada’s largest private mortgage insurance company said Wednesday.”

A brokerage, especially super brokerages with franchises and established brands, have to lead by example, and so if Genworth is seeing a decline in fraud overall, we hope that many are.

Super brokerages who mandate continuing education, even over and above what is required by FSCO, and also mandate the use of underwriting tools to ensure stronger underwriting, make a massive difference when it comes to combatting fraud.

Courses like the ones offered by CAAMP and IMBA show agents how they can identify fraud and tools like Purview enable them to validate the information in their applications so that if something fishy does come up, they are positioned to address it.

Continuing the above practices really help the industry as a whole because not only are you the agent or brokerage offering a better service and maximizing profitability, you are protecting your other partners who may become a party to the deal you originate with a fraudster.

This was a great article and we blogged about it because it is definitely worth a read and we are also interested in your thoughts… You can read the article here: http://www.bnn.ca/News/2015/8/5/Mortgage-fraud-on-the-decline-in-Canada-Genworth-CEO-says.aspx.

Want to know more about how Purview For Mortgage Brokers can help you combat mortgage fraud? Call us today at 1.855.787.8439.

HPI Monthly Report - Home Prices UP 0.1% in October

In October the Teranet–National Bank National Composite House Price Index™ was up 0.1% from the previous month, a 10th consecutive monthly increase. This rise was about average for a month of October. Prices were up on the month in only five of the 11 metropolitan markets surveyed – 1.9% in Winnipeg, 0.6% in Vancouver, 0.3% in Toronto and Victoria and 0.2% in Edmonton. For Vancouver it was the 10th consecutive month in which prices did not fall, for Toronto the eighth – a trend consistent with the seller’s-market conditions prevailing in those two markets, as measured by the ratios of listings to sales calculated from the data reported by the Calgary and Toronto real estate boards. Elsewhere prices fell – by 0.2% in Quebec City, 0.3% in Montreal and Hamilton, 0.6% in Ottawa-Gatineau, 0.8% in Calgary and 1.7% in Halifax. For Quebec City it was the fifth consecutive monthly decline, for Montreal the third (the fourth for the Montreal condo market). The October rise in Edmonton ended a run of four straight months with no increase. The decline in Hamilton ended a run of five straight rises.

Teranet – National Bank National Composite House Price Index™

In October the composite index was up 5.6% from a year earlier, the same 12-month rise as in September and the strongest since May 2012. In Vancouver (+9.8%) and in Toronto and Hamilton (+9.3%), the 12-month gain was well above the countrywide average. In Victoria (+6.4%) it was closer to the average. Prices were up only 1.4% from a year earlier in Edmonton and were flat in Winnipeg and Ottawa-Gatineau. Prices were down from 12 months earlier in Montreal (−0.6%), in Calgary (-1.0%), in Halifax (-1.1%) and in Quebec City (−3.2%). It was the first month since October 2009 that prices were up from a year earlier in only five of the 11 metropolitan markets surveyed.

Mortgage Underwriting Tips - 5 Steps to Ramp up Your Closing Rates

Some brokers see lead gen and sales as the thing that can make or break their business. While it is true that without customers you have no business, the real aspect of your job that can make or break your success is in fact mortgage underwriting.

Not only does poor underwriting lead to more time and resources wasted on bad deals but it also leads to low closure rates which can damage relationships with larger institutional lenders like banks.

FIs monitor closure rates closely because the operational cost of their massive underwriting department working on deals that don’t close is incredibly high. FIs have even taken great measures in implementing tools and technology to verify even more information at the application stage for this reason.

Ramping up your closure rates make you more efficient, productive, and profitable, able to offer a better service and this all leads to stronger relationships. Improving closure rates means enhancing your underwriting process to ensure that more questions and verifications occur at the application stage.

Improving closure rates means looking at the common reasons deals fail and knowing how to verify the information points to identify issues with deals before you submit them.

Does this mean that every time something comes up your deal is over? No. What it does mean is that if something does come up you can ask your client about it and be better positioned to gather more documents and to be able to fight for the deals worth fighting for.

Submitting a deal where the lender uncovers things that you didn’t tell them because you didn’t know (or did) is entirely different from submitting an application with an explanation and supporting documents with respect to issues that you have uncovered and disclosed with the application.

Some examples:

1.      Other people coming up on title – verifying who the legal homeowner is on refi’s especially will eliminate this issue.

2.      Undisclosed mortgages – verifying registered encumbrances on title.

3.      Misstated mortgage balances – if the mortgage balance registered is twice as high as what the client said, and it was registered last year, this is an opportunity to find out from your client why they think their home is worth so much more.

4.      Discrepancies in property description – sometimes people misstate the size, numbers of rooms and condition (e.g. finished basement) and other features of the property. Checking into this first stops appraisal or AVM surprises if your bank like many other banks is using AVMs

5.      Discrepancies in sales history – a property that has changed hands too many times in a short period of time could present an issue.

6.      Discrepancies in value – people often don’t know what their home is actually worth.

These steps are important not because your clients are devious or want to get one over on you. These steps are important because many clients don’t even know what their home is worth or what they owe on their mortgage. The great thing about verifying this information first is that it could go the other way too.

Perhaps you realize there is way more equity or the client owes less on their mortgage. Now you can upsell the client and possibly submit an even bigger deal that makes even more sense for the client and lender.

We hope that this blog has been helpful to give you basic know-how and ideas of what kind of information you can look into to ramp up your closing rates.

Purview For Mortgage Brokers has the tools that make verifying information easy. Strengthen your closure rates and your relationships - call us today at 1.855.787.8439.

Training Time: Performing a Property Search and the AVM Component the PFMB Report

When you perform a property search inside Purview for Mortgage Brokers and generate your Property Report, one very useful aspect of the report is the Automated Valuation Model (AVM).

This is where Purview generates a value estimate based on data stored in the Ontario Government’s land registry database – comparing sales and generating an estimate in seconds.

In this issue of training time we are including a short video that shows you how to identify and review the AVM section of your property report.

Purview For Mortgage Brokers has the tools that make researching a property easy and effective. Not using Purview For Mortgage Brokers Yet? Contact us today at 1.855.787.8439.

Getting Back to Basics: Automated Valuation Model 101

The Automated Valuation Model is something that every mortgage agent and broker would be well served to understand and make a part of their workflow.

Lenders, from private lenders all the way to institutional lenders, have been using the Automated Valuation Model for years and you may remember CAAMP touching on them when completing your mortgage agent or brokers studies.

The Automated Valuation Model is an automated program that can produce an estimate of a property’s value. The value is statistically derived using mathematical modeling and in the case of Teranet comes from public record data found in the POLARIS database. The AVM compares the subject property to that of comparable sales data of similar properties to produce the value estimate.

There are many different types of AVMs that gather information from different sources and formulate estimates using different formulas.

These include:

·         The House Price Index Model which uses data from house price indices

·         The Tax Assessed Value Model which uses tax assessment data

·         The Hedonic Model which uses similar property sales to generate its value estimate

Because AVMs involve a value estimate, some make the assumption that the purpose of an AVM is to replace the need for an appraisal and its accuracy.

AVMs are extremely accurate because the numbers don’t lie and their values are generated based on data with no human element. With that said, they are not an appraisal and are often used at different stages in the underwriting and funding processes.

Many lenders, mortgage agents and brokers alike will use AVMs at the application stage to validate the value stated on the application and determine if it is worth proceeding with the approval and funding process. Many times an AVM will come before an appraisal is ordered. In instances where equity permits, sometimes there is enough equity for the AVM to be relied upon on its own.  Based on the accuracy of AVMs, there is also wide spread usage amongst mortgage insurance providers to evaluate their ability to insure new deals

Appraisals have a human element which means that the appraiser will use their chosen comparables, and render their professional opinion on interior and exterior conditioning. Appraisers can also uncover properties under construction and even properties that have undisclosed tenants.

Since comparables are chosen by the appraiser, it makes good sense to review an appraisal against an AVM because an AVM will consider all comparable sales – not 2 or 3 as is the case with an appraisal.

AVMs have not historically been available to brokers but in recent years this has changed. Mortgage agents and brokers can now obtain and review an AVM before they even submit a deal to a lender.

Using both and AVM and an appraisal at different stages in the process can be quite valuable, and save you time and money on broken deals. Purview For Mortgage Brokers’ AVM provides accurate data you can rely on. Contact us today at 1.855.787.8439.

Protecting Your Lenders: Non-Disturbance Agreements 1-2-3

Have you ever worked on a deal where a party has come up on title as having a life interest in a property? This doesn’t happen often but when it does it can stop a deal dead in its tracks prompting us to write a blog on the topic.

Sometimes a non-disturbance agreement can be in place in the case of tenants, which may or may not be registered on title, or a life interest in the property which may be registered on title, which is often the case with family members.

Why do the presence of either squash many deals? Because the existence of same means that the person during the time or under the terms specified cannot be removed from the property even in the case of a foreclosure.

A non-disturbance agreement is an agreement with a tenant and a landlord or homeowner’s lender that the tenant will remain in possession of the property being leased even if foreclosure takes place and in the case of foreclosure may legally begin making payments directly to the lender. At first glance, you may wonder why would any lender would agree to one of these? Often in the case of private mortgages where there is good equity, these agreements take place because they actually give the lender the ability to capitalize on income from the property when a default in the mortgage takes place. Also, in the case of foreclosure, when a buyer is pursuing an income property, with the numbers in line, many don’t mind buying a property that already has a good tenant in it.

On the other hand, the presence of a non-disturbance agreement is bad news for an unsuspecting second mortgage lender, especially one who is unaware that there are tenants in the property. Not only can they see the first lender snatch income from the property until challenged, they can end up with limited recourse in the event of a default.

A life interest on the other hand is actually registered on title and lasts for the lifetime of the person benefiting from that right. We see this often in the case of seniors who continue to live in a home while having transferred it to the name of a beneficiary to streamline probate in the event that they pass away. The life interest ends when the beneficiary dies.

Not every lender wants to be a part of a transaction that involves tenants or someone with a lifetime right to occupy a property. Knowing that a property is a rental property or not owner-occupied is a form of fraud and if uncovered by a lender could lead to the end of your relationship. Life interests will certainly come up if one exists during the closing process once the lawyer begins performing their due diligence. Deals that get this far along in the process and fail to close can leave a lender wondering about your underwriting capability.

It is always important to clearly ask your clients if a property has tenants, if there are any non-disturbance agreements in place. It is also prudent to ask the client how the property was acquired. If it was passed down by a loved one this can be a sign that you may need to do extra due diligence to confirm that a life interest hasn’t been registered.

Being as prepared as possible only helps to streamline the process. Don’t get stuck with unknowns, or assume that those unknowns will remain so - they likely will not. Get as much information as possible and provide it upfront. Visit Purview For Mortgage Brokers today at www.purviewforbrokers.ca.  

HPI Monthly Report: Home Prices up 0.6% in September

In September the Teranet–National Bank National Composite House Price Index™ was up 0.6% from the previous month, a ninth consecutive monthly increase. This rise was well above the 17-year September average of 0.2%. However, prices were up on the month in only six of the 11 metropolitan markets surveyed – 1.9% in Halifax, 1.6% in Vancouver, 1.3% in Hamilton, 0.8% in Victoria, 0.7% in Calgary and 0.6% in Toronto. Prices in Edmonton were flat. Prices were down 1.9% in Quebec City, 1.4% in Winnipeg, 0.5% in Ottawa-Gatineau and 0.4% in Montreal. The composite index was at an all-time high in September for a seventh consecutive month, though only the Victoria, Vancouver, Hamilton and Toronto component indexes matched it in this regard. The resale market in those centres is a seller’s market by the Canadian Real Estate Association criterion of sales relative to new listings. For the last three of these four markets it was the fifth consecutive monthly rise. For Edmonton and Quebec City, it was a fourth straight month with no rise in prices. The Vancouver index, at 201.2 in September, is the first to top 200, meaning that prices in that market are slightly more than twice as high as in June 2005.

In September the composite index was up 5.6% from a year earlier, the largest 12-month rise since May 2012. The 12-month gain was well above the countrywide average in Hamilton (10.6%), Vancouver (10.4%) and Toronto (8.6%). It was close to the average in Victoria (5.9%). Prices were barely up from a year earlier in Edmonton (0.8%), Calgary (0.3%) and Ottawa-Gatineau (0.2%). Prices were flat in Montreal, and down from a year earlier in Quebec City (−2.9%), Winnipeg (−2.3%) and Halifax (−0.2%).