I <3 Real Estate ?

A number of news items in recent weeks have focused on the state of Canada’s housing market, with some hinting the worst of the correction may be behind us, and others suggesting more weakness to come. For example, CMHC says overvaluation risks are subsiding in some of the country’s hottest markets, while the B.C. government […]

The deep freeze in the Canadian housing markets continues. The latest housing market stats show that housing sales and prices in January were lower than the ones recorded a year earlier.

A retrospective view of the housing markets raises significant concerns. The impact of stringent mortgage regulations appears to be longer lasting than was initially expected.

In January 2018, housing sales declined after stricter mortgage regulations, including a stress test, were enacted. The January 2019 numbers are the first piece of evidence suggesting that housing market slowdown is deeper rooted than a direct and immediate reaction to policy interventions.

The sustained slowdown in housing markets presents at least two alternatives to the government. The first alternative is to maintain the status quo and do nothing. The second alternative is to rethink the policy interventions made in the recent past and see if there is any new evidence that warrants a change in policy.

The decline in housing sales in January 2018 was expected. A whole host of new regulations designed to tighten  mortgage lending became effective on the first day of January last year. Sales in December 2017 were higher than usual as households rushed to close deals to avoid being subject to stricter mortgage regulations a month later.

When January 2018 sales were 14.5 per cent lower than the month before, there was no surprise, and the decline was attributed to the new stress test. Similarly, year-over-year sales were down 2.4 per cent from January 2017.

The January 2019 sales figures are more disturbing. Compared to the year before, sales last month were down by four per cent. In fact, the Canadian Real Estate Association (CREA) revealed that sales in January 2019 have been the weakest since 2015.

In addition to sales, housing prices have also softened. The average house price across Canada was $455,000, 5.5 per cent lower than the same time last year.

The January 2019 statistics offer the first opportunity to compare the annual change in housing market dynamics after the stress test came into effect. The decline in last month above and beyond what was observed a year ago is indicative of the fact that the markets are not merely reacting to new regulations, but the markets have embraced a more systematic response that is characterized by fewer transactions and lower prices.

The weakness in housing markets also affects mortgage lending, a business The Big Five banks continue to dominate in Canada. The continued slowdown in housing sales may have influenced banks’ mortgage portfolios — the first signs of such an effect could soon be visible when the banks release their updated earnings report in the coming days.

The past few weeks have witnessed diverse voices both questioning and supporting the efficacy of the more stringent mortgage regulations. Some believe that stress tests are working fine. Phil Soper, CEO of Royal Lepage, thinks that the stress tests are needed “for the longer term health of the economy.”

Others believe that the stress tests have adversely impacted homebuyers who are either unable to buy at all or are forced to consume less adequate shelter space than they would have afforded in the absence of stress tests.

After reviewing the sustained decline in housing sales, Dave Wilkes, President and CEO of the Building Industry and Land Development Association (BILD), believes that the stress test “has overshot its target.”

BILD has advanced two proposals for the feds to contemplate. First, to consider lowering the stress test threshold that requires borrowers to qualify at 200 basis points above the contracted rate. As the interest rates have been revised upwards since the stress test was implemented, there is merit in reviewing the threshold.

Housing trade groups are also advocating to reintroduce the 30-year amortization for CMHC insured mortgages, which was available until July 2012.

First-time homebuyers are likely to benefit more from these changes. The ability to stretch the amortization period to 30 years lowers the monthly payment and allows many to participate in homebuying who would otherwise be forced to rent at a time when rental vacancy rates are at historic lows in large urban housing markets.

Critics of the 30-year mortgage point out its two obvious shortcomings. First, borrowers end up paying considerably more in interest. Second, longer amortization periods contribute to house price inflation.

Good public policy should be responsive and rooted in evidence. Recent housing market data indicates that the impact of tighter mortgage regulations has been longer lasting than what most housing experts expected. A course correction might be a prudent way forward.

Murtaza Haider is an associate professor at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at www.hmbulletin.com.

Mortgage lenders look at two things when deciding if you’ll qualify for a mortgage – your credit score and your debt ratio. Don’t make the mistake of assuming you are a shoo-in for a mortgage if you have a great credit score. If your debt ratio tells another story, you may find it harder to get a mortgage than you thought.

Compare Offers from Several Mortgage Lenders.

If your debt ratio is much higher than it should be for a loan program, you may want to consider employing the following tips to help eliminate your debt.

Pay Your Credit Cards off in Full

The best thing you can do is pay your credit cards in full. Any outstanding credit card debt that you have affects your debt ratio and your credit score. If you can swing paying it off in full, do it. If you can’t, pay the balances down as much as you can so that you have less than 30% of your total credit limits outstanding.

Your lender will use your minimum monthly payment to determine your debt ratio. You’ll want to get those credit card balances as low as you can to lower those required payments. It doesn’t matter if you pay more (you should) than the minimum payment; the lender strictly relies on what the credit report says, which will be the minimum payment.

Pay Loan Balances if You are Close to the End of the Loan

If you have installment loans that have less than 10 months of payments left, consider paying them off too. While lenders used to be able to ignore loans with less than 10 payments left, most lenders today have to include them. If the loan payment puts your DTI over the threshold, figure out if you can pay the loan off in full.

If you do pay your loans off, make sure you keep proof that they are paid in full. It could take some time for the credit bureaus to report the loan’s satisfaction. If you have proof from the lender of the loan being paid in full, your lender won’t include the debt in your debt ratio.

Apply for the Loan With Someone

If you are married or buying a home with someone you should consider applying for the mortgage together. This will only help you if your co-borrower doesn’t have a lot of debt too. The idea is to combine your income to reduce the debt-to-income ratio that you have on your own.

Click to See the Latest Mortgage Rates.

If you buy the home with someone that also has a lot of debt and not enough income to keep the DTI down, it may not work to your benefit. Each loan program has a different debt ratio requirement, but in general, you shouldn’t have a total debt ratio that exceeds 43% of your gross monthly income. If you are beyond that point even with a co-borrower, it may not be in your best interest to use the co-borrower. Instead, you may want to focus on paying your own debts down so that you can get the DTI low enough to get your approval.

Increase Your Income

You might think that increasing your income isn’t going to be easy. If you already work a full-time job, how could you possibly make more money? The first step should be to inquire about a raise at your full-time job. If it’s been a while since you’ve had a raise, it doesn’t hurt to ask. If that’s not an option, you can explore other opportunities.

Taking on a second job just to pay your debts down is a great way to eliminate debt. You won’t need the income to qualify for the mortgage, so you don’t have to worry about having the job for two years first. You just need it to help you get out of debt so that you can afford a new mortgage.

If a second job won’t work, consider starting a side hustle. If you have a skill, such as plumbing or HVAC repair, let friends and family know about it. If you are crafty and can make items to sell, do it. The internet offers numerous ways to sell your items without leaving your home. You can even find side hustles that you can do online, such as data entry or virtual assistants.

Again, using the money to pay off your debt, you’ll have an easier time qualifying for the mortgage.

Reducing debt for mortgage approval is often crucial to your ability to get a mortgage. Even if you can get approved, if you have a higher DTI, you may find that you don’t get the lowest interest rates or the best terms. Do what you can to get out of debt before you apply for a mortgage for the best results.

Click Here to Get Matched With a Lender.

Click to See the Latest Mortgage Rates»

The post The Top Four Easy to Reduce Debt for Mortgage Approval appeared first on Blown Mortgage.

I <3 Zero Fee ?

First Mortgage NE has hired seven new staff members who will work across three of the company’s branches; Gateshead, Sunderland and Chester le Street.

The firm has hired Jennifer Pattison as branch manager of the company’s headquarters in Gateshead.

Other new appointments include Denise Morton and Rachael Leonard as mortgage and protection advisers, and Philip Jobson, who will fill the newly created role of insurance manager. All will work at the company headquarters in Gateshead.

Debbie Redpath has been hired as compliance officer at the Sunderland office, and Lorraine Robinson as a case manager at the company’s Chester le Street branch.

Furthermore, Rachael Kelly has joined the company as its new build manager.

First Mortgage NE new build director Phil McGuire comments: “There have been some real highs over the last 12 months, having opened four new office locations and expanding our Gateshead headquarters.

“The team will continue to grow this year as we drive forward our expansion plans.”

The post First Mortgages NE announces seven new hires appeared first on Mortgage Strategy.

In yet another effort to push mortgage lending firmly into the 21st century, loanDepot has debuted its proprietary “mello smartloan” technology, an end-to-end digital mortgage loan intended to cut out the paperwork and lengthy turn times. It should also make the process a lot more secure, with less sensitive information floating around the web via [&hellip

Largely echoing previous numbers among government-approved lenders, Home Equity Conversion Mortgage (HECM) endorsements continued to drop in December, with total endorsements falling 31.4 percent to a total of 1,749 loans, according to the latest data from Reverse Market Insight (RMI).

The HECM Originators report for December 2018 shows the losses afflicted on both retail and wholesale channels, with retail down 29.4 percent to settle at 1,075 loans, making up just over a third of the recorded figure in January of 2018. Wholesale was hit even harder, with a recorded drop of 34.4 percent finishing at 674 loans.

While RMI President John Lunde notes that the “carnage was widespread” with all top 10 lenders exhibiting drops, he also shared that these numbers are still affected by the partial government shutdown that persisted into 2019.

“The same caveats apply regarding the government shutdown as to the December HECM Lenders report released in early January,” Lunde told RMD in an email.

There were at least a few data points that provided some positivity to the overall report. Liberty Home Equity managed to grow their retail volume to 39 loans, marking an 8.33 percent increase. Resolute Bank saw a 60 percent jump in volume to 16 loans, while Integrity 1st Mortgage jumped to 9 loans, marking an 80 percent increase for that lender.

“I thought it was encouraging that some originators bucked the trend, although given that we’re talking about endorsements rather than applications or fundings that could be timing noise rather than true business dynamics,” Lunde said. “I still wouldn’t read too much into this one given the inherent noise of the shutdown effect, other than it was even weaker than expected for seasonal and shutdown reasons.”

Although the overall percentage figure is virtually identical in this instance to RMI’s previous December HECM Lenders report, Lunde previously detailed for RMD that the HECM Originators report is useful in seeing the splits in and health of the retail versus wholesale channels, which helps to illustrate how lenders are doing from a more individualized and channel-specific perspective.

The post Wholesale Reverse Mortgage Channel Hit Hard in December appeared first on Reverse Mortgage Daily.