Unit 10 - Mortgages

Question 1

Mortgage

Answer 1

pledging of real property to a creditor as security for a loan; security for the debt

Question 2

Origin of mortgages

Answer 2

1066 in England’s feudal system

Question 3

Dominion Housing Act 1935

Answer 3

First national housing legislation
Job creation measure for construction of residential housing by increasing ease of first mortgages
government provided 20% lending value
standard amortization plan

Question 4

National housing Act 1938

Answer 4

replaced dominion housing act
promote new home construction and upgrade existing ones
fed govt loan was capped 25%

Question 5

NHA 1944 amendment

Answer 5

due to WWII, max mortgage term 20 years; prepayment after 3 years with 3 month interest fee to lender

Question 6

CMHC 1946

Answer 6

established as crown corporation
mtg term changed to 25 years
changed loan-to-value formula
new method for interest

Question 7

NHA changes 1954

Answer 7

increase supply of mortgage money
govt insured loans instead
allowed banks to lend money
established resale market from investors

Question 8

Bank Act 1960

Answer 8

eliminate 6% interest cap
permitted banks to invest in diff mtg types

Question 9

Inflation 1970s

Answer 9

Oil prices driven
rates increased
partial amortization loans
could grant mtgs 75% higher than property’s value

Question 10

Partially amortized mortgages

Answer 10

periodic payments with longer amortization; when mature, balance either paid or renewed at new interest rate

Question 11

1980s

Answer 11

interest rates for mtgs record highs
introduced mortgage backed securities

Question 12

mortgage backed securities

Answer 12

direct invest. insured through CMHC sold to investors who receive payments; comparable to govt bonds

Question 13

2006-2009

Answer 13

US housing market crash
sub-prime mtgs
amortization 40 years, no dp; CMHC amort 35 years
5% dp
min credit score of 600

Question 14

High ratio mortgage

Answer 14

Loan amount exceeds 80% of property value

Question 15

2010s

Answer 15

Protective measures:
had to qualify for 5 yr fixed rate mtg
limit refinancing to 90% of value
20% down

Jan 2011:
amortization down to 30 years for more than 80%
refinance 85% from 90
no govt insurance backing on LOCs

Jul 2012:
max amort 25 years; less interest
refinance 80%
GDS at 39% DSR 44%
$1 million+ can’t get insured

Jan 2018:
20% down stricter qualifying criteria (stress test)
(<20% was since 2017)

Question 16

Mortgage fraud

Answer 16

misstatement, misrep, omission to fund, purchase, or insure a mortgage loan
CSIS: deliberate; false

Fraud for housing & profit
(housing - larger mtg than qualify for; profit - organized crime)

Question 17

Impacts of mtg fraud

Answer 17

Increased demand on law enforcement; courts, prisons, health services, higher taxes

Question 18

What to watch for in fraudulent situations

Answer 18

Refuse to provide photos; different name variations on documents; under-qualified to buy property; swearing false affidavit; inconsistent conversations or behaviours; straw buyers and property flips;

Question 19

Mortgage assumption

Answer 19

When both fraudsters involved as buyer or seller

Question 20

Law of Property Act 2004

Answer 20

Include personal covenant to other mtg insurers to cover potential loss

Question 21

Red flags of mtg fraud

Answer 21

Identity
Value of property
unusual transaction
conduct of RE prof.
operation of brokerage
appraisal agreement issues
other issues

Question 22

Key concepts mtg fraud

Answer 22

Seek accomplices
Use technology
Any real estate market
Any property type
Adapt

Question 23

More likely in rising market

Answer 23

non occupancy
mtg assumption
seller financing
title fraud
equity access
vendor cash-back
redevelop
property flip
contract kiting
secret second
straw buyer
inflated appraisal

Question 24

Declining market schemes

Answer 24

seller financing
bankruptcy fraud
debts/foreclosure
inflated appraisal
vendor cash-back
contract kiting