New Year’s Underwriting Resolutions

So the New Year is quickly approaching. You may have already scribbled down your personal resolutions for 2015 – but have you written down your professional ones?

Underwriters unite! What New Year’s underwriting do you have to share with your fellow financial professionals?

HPI Monthly Report: Home Prices Down 0.3% in November

In November, the Teranet–National Bank National Composite House Price Index™ was down 0.3% from the previous month. It was the first monthly decline in a year. Moreover, it was very broad-based: prices were down in eight of the 11 metropolitan markets surveyed, flat in two and up in only one. Prices fell 1.6% in Halifax, 1.5% in Quebec City, 1.0% in Montreal, 0.7% in Winnipeg, 0.6 % in Ottawa-Gatineau, 0.3% in Toronto and Victoria and 0.2% in Calgary. Prices were flat from the month before in Vancouver and Hamilton and rose 1.1% in Edmonton. It was the first time in two years that prices were up on the month in only one of the markets surveyed.

Since in November 2013 the composite index declined only 0.1%, this November’s 0.3% decline meant that 12‑month home price inflation decelerated from 5.4% in October to 5.2% in November. That countrywide average was largely exceeded in Calgary (9.2%), Toronto (7.3%), Hamilton (7.0%), Edmonton (6.2%) and Vancouver (5.9%). Unsurprisingly, the resale market in these five urban areas is balanced or even tight. The 12-month increase was more moderate in Winnipeg (1.5%), Victoria (1.4%) and Montreal (0.6%). Prices were down from a year earlier in Ottawa-Gatineau (−0.2%), in Quebec City (-0.3%) and Halifax (−1.8%). The composite index has been up from a year earlier for 62 months now, since October 2009. The only one of the 11 markets to match that run is Toronto, though Hamilton comes close with 60 months.

For the full report including historical data, please visit: www.housepriceindex.ca

Underwriting 2.0 - Using an AVM to Validate Your Appraisals

Many mortgages involve appraisals. When you are considering funding a deal that relies heavily on home equity the appraisal is the one thing that validates that your security is worth what was stated in the mortgage application.

Appraisals can be somewhat subjective because, while there are 2 distinct methodologies (comparable sale method and income method) an appraiser can be swayed by their opinion of property condition. They have the discretion to select which comparable sales are used and sometimes even discretion over what distance and sale time is acceptable in terms of what is used. For example, if you don’t specify distance to the appraiser, your appraisal could include comps outside of the client’s subdivision and variances in value can be vast from one subdivision to another; from one side of a subdivision to another, the quality, types and designs of homes can change, which can impact value.

Many lenders are now adopting AVMs (Automated Valuation Model) into their underwriting process just to double check/validate the value that comes back on an appraisal. Where equity is not as high a concern, many lenders will also couple a drive-by appraisal with their AVM. An AVM, as you may know, is an automated tool that you can use to estimate the value of a property. Different AVM providers obtain their data from different sources and also use different methods in terms of how the value was calculated.

What is true of all AVMs is that they are emotionless. They estimate value based on data and data alone. For this reason often an appraisal coupled with an AVM is your most powerful combination to ensure the value you are lending is certainly within the ballpark of what was initially estimated.

Another way that an AVM can be used with an appraisal to actually reduce the overall cost of appraisal is that you can even look at an AVM before you request the appraisal. This way you can get a ballpark on the value, upsell your deal where there is more value, or go back to the broker or the branch if the value is not there and before you or your client incur the expense of a drive-by or even full blown appraisal.

Once the appraisal is performed you will have the full picture because you will have an automated valuation of the property to compare against the appraisal, thereby giving you more insight into interior/exterior conditioning, home improvements and other things that you would otherwise need to visit the property to learn.

For more about the benefits of coupling an AVM with an appraisal, or to find out more about Automated Valuation Models, please contact Purview For Lenders today by calling 1.855.787.8439.

The True Cost of Mortgage Fraud and How to Mitigate It!

While perpetrators of mortgage fraud may think it is no big deal because it is somehow a victimless crime, mortgage fraud costs the mortgage industry as a whole. The cost of mortgage fraud is more than just the cost of the lost mortgage that may have been advanced – operational costs associated to collections, default management, power of sale/foreclosure costs, legal fees, property repair and maintenance costs, resale costs and more are all resulting costs associated with this crime.

The cost of mortgage fraud to brokers and the public include: more stringent lending guidelines and verifications by lenders, and rightfully so.

While as a lender you may rely on the mortgage broker or real estate lawyer to catch fraud, you have no way to know what tools they use or what internal procedures they have in place when performing due diligence. In fact, there have been many proven cases of mortgage brokers or real estate lawyers who were the perpetrators of the fraud.

In the former mortgage underwriting course offered at Seneca, the textbook used highlighted a famous example of mortgage fraud in Canada that involved (surprisingly) a real estate lawyer. In 2006, the Law Society of BC approved over 30 million dollars in payments in connection with a multi-million dollar real estate fraud case where a real estate lawyer received funds to discharge titles on real estate transactions he was involved in with a developer. The lawyer was subsequently disbarred.

Most financial and legal professionals are ethical but we can see how a few bad apples can spoil the whole bunch. So what can you do to protect yourself and reduce the cost of mortgage fraud within your organization?

The 2 most common forms of mortgage fraud are:

·       Fraud by shelter - this is when an application is manipulated so that a potential homeowner who could otherwise not afford a mortgage is approved – this could be through misstating income, doctoring documents all the way up to identify fraud.

·       Title fraud - this is when fraud is undertaken by an individual or group to make a profit and often the identity of the homeowner is assumed and a new mortgage is taken out.

The most common ways that individuals and other professionals in the industry commit mortgage fraud as it relates to a property are:

·       Over-inflating the value of the property

·       Misrepresenting characteristics of a property

·       Misrepresenting the use of property – the intention is for the property to be used for rental

·       Builder bail-out schemes – a builder presents paid borrowers as new homeowners to secure financing

·       Fraudulent title transfers

·       Property not in the name of the seller

Many lenders use tools like Fraud Check, an aspect of the Purview Report, to review active mortgages, recent sales, prior foreclosures, no conc. management, active judgement, active caution, active liens, power of sale, unusual discharges, frequency of Powers of Sale in an area and more…This information can really help to avoid the costs associated with mortgage fraud because it helps to mitigate risk.

Leveraging tools such as Purview For Lenders enable you to investigate a property or borrower, identifying potential fraud quickly so that you can dig that much deeper to ensure that you have a solid deal. These tools also go a long way towards mitigating fraud (especially where it relates to a property) and reducing the overall cost of mortgage fraud in the mortgage industry.

Mortgage fraud costs everyone involved a great deal of time, money and effort, can lead to the disintegration of important relationships, can damage reputations and make future success difficult.

For more about how Purview For Lenders can help you mitigate risks and identify fraud before it becomes a major wrecking ball, please contact us today by calling 1.855.787.8439.

Happy Holidays from Purview For Lenders

December is here and it is time for the holidays! The entire Purview team at Teranet extends you and your family warm wishes over the holiday season and all the best successes in the New Year.

Bank of Canada Report Shows that Non-Banks Formidable Competition in Mortgage Market

On the front lines many finance companies, credit unions, MICs and even privates may find it daunting competing with the banks and their massive market budget and constant interest rate sales.

Well, this Bank of Canada report, “The Residential Mortgage Market in Canada,” reveals that in fact non-chartered A banks own a big chunk of the current mortgage market because success in mortgages is about more than just marketing and interest rates! Affordability and accessibility to technology, more flexible lending practices and guidelines and more personalized services have all led this sector to an ownership of more than 25% of funded mortgages as of summertime last year.

Take a look at this report – we would love to hear your thoughts.

Here is a link to the report: “The Residential Mortgage Market in Canada: A Primer”.

For more about what tools you can leverage to make yourself more competitive please contact Purview For Lenders by calling 1.855.787.8439.

Do You Have Your Tickets for the Annual CAAMP Mortgage Forum Yet?

The CAAMP Mortgage Forum provides an invaluable opportunity for lenders, brokers, insurers and other financial professionals to come together face-to-face, network and share knowledge. We look forward to it every year!

As always we will have an exhibit at this year’s event. This year we will be focusing on alignment. Now that Purview is available to both brokers and lenders we invite you to come and experience various demos to see how both professionals can leverage the same data available through Purview to be more aligned, leading to higher closer rates and thereby more closed deals!

Whether you were able to get organized to put up a booth or not, if you are a lender, you should still be at the CAAMP Mortgage Forum 2014. If you attend, please come by and visit us!

If you haven’t registered yet – here is a link to do so: http://www.caamp.org/info.php?pid=58.

For more about the CAAMP Mortgage Forum, or for details about everything Purview For Lenders has to offer, please contact us today by calling 1.855.787.8439.

Recipe for Success – Lender/Broker Alignment

If your business model relies on accepting applications from mortgage brokers, the relationship between you and your brokers is pivotal to your success.

A lack of lender/broker alignment can lead to a high portion of deals that fail to close, more applications with fraud present and worse harm to reputation in the broker community. When a deal doesn’t close, a lot of people lose time and money – sometimes it is clear who is responsible for the deal not closing, while other times it is less clear, thus leading to finger pointing and damaged relationships.

The most common discrepancies or disputes that occur between lenders and brokers relate to discrepancies in the mortgage application – the information submitted on the application may change after the point of application or you or your insured may disagree with information in the application.

In the past year we have seen increased lender/broker alignment thanks to technology. Davis and Henderson’s EXPERT tool is a great example of this. The introduction of this web-based application almost eliminated the fax machine and lenders and brokers are more aligned because they can share and review the same information: credit reports, application details, etc… They can also electronically transmit their applications and mortgage documents to you right through the same platform.

The same has occurred with the Purview application. While historically Purview has been a tool that lenders have used to validate home values, equity, and home ownership information, in recent years a version of this application has been made available to brokers. How does this improve lender/broker alignment? Brokers being encouraged to run an AVM at the point of application in Purview will be able to benefit from the information you see when you perform due diligence and run your AVM – this way everyone is aligned and dealing with the same data when assessing the property value provided by the client.

Communication is also another staple of good lender-broker alignment. If your clients don’t clearly understand your lending guidelines, there will constantly be differences of opinion over lending decisions - and sometimes just because your guidelines were not clear enough or because they were misinterpreted.

This strong communication can be achieved through social media. Getting connected to your brokers and sharing insight into how they can be more successful working with you can make a world of difference. The challenge is that so many lenders get so hyper-focused on blasting out rates and banking their success on competing based on rate, when often rate is only one of many aspects of a mortgage that a broker and their client will consider. Providing your brokers with tips to help them be more successful getting their deals closed gives you the competitive edge.

So now you can see how you can leverage technology to improve your alignment with your broker partners. Aligning technology and digital communication is your recipe for success and a long term lender/broker relationship.

For more about creating better lender/broker alignment please contact Purview for Lenders today by calling 1.855.787.8439.

Teranet announces changes to Quebec data Acquisition

Over the past several months we have been working hard to improve your overall PURVIEW experience and would like to take this opportunity to share some recent developments regarding our Quebec data acquisition strategy.

Historically, Teranet has relied on 3^rd party relationships to provide the majority of Quebec data used to calculate regional property valuations (AVM’s) as well as power the Teranet-National Bank House Price Index.  To ensure we continue to provide quality data to our valued customers, we are currently implementing a direct sourcing option that will improve the timeliness of our Quebec data in particular. 

As we transition to this direct sourcing option and repatriate our data in Quebec, the short term supply of Quebec AVM’s may be impacted.  Over time, the supply will continuously improve.  The Teranet-National Bank House Price Index will however not be impacted by this change and will continue to provide leading insight into the dynamics of a highly varied Canadian market. 

As we further integrate this approach, we will continue to communicate any updates with you as they become available.

If you have any questions regarding these recent developments, please speak with your Account Executive or contact us at 1.877.787.8439 or purview@teranet.ca.

Thank you for the continued confidence you have placed in Teranet as your risk management solution provider.

How You Can Leverage Your AVM to Identify Upsells that the Broker or Branch May Have Missed

Most people have no idea what their house is actually worth! This occurs for so many reasons:

·        They purchased the house so long ago and a lot has changed in the neighbourhood or area 

·        They live in an area where the market is really hot

·        They have a unique property type

·        The area where the property is located is very mixed

·        They simply haven’t paid attention and don’t know

When the customer applies for a mortgage with a broker or a bank, they are always asked “what is your home worth,” but what’s next? 

·        Some brokers will further ask when the client bought their home and what they paid for it

·        Some will ask if the client has had an appraisal recently and what the value was

·        Some will ask what the value is on the property tax assessment

·        Recently, brokers began receiving access to the Purview Automated Valuation Model (AVM) tool, so now some brokers will request an AVM at the application stage

For those in the first 3 groups – How can you determine, when you receive an application, that you are positioned to make the most out of the deal? We can tell you how.

What are the 3 things that matter the most on a deal:

·        Credit

·        Equity

·        Proof of Income

Here is a great example: in the credit category, lenders use the client’s credit history to both mitigate risk and identify upsell opportunities. In this category, lenders who lever soft credit report hits have the competitive edge because they are able to see how their clients’ situations have changed and where they need to re-arrange the relationship accordingly.

In the area of equity, not double checking the client’s equity positioning at the point where a broker or branch sends you an application is a total missed opportunity. Never mind avoiding bad deals and increasing closing rates, an AVM will provide vital insight into the property and borrower you are financing. Things like:

·        The sales history on the property

·        Sales comparables

·        An estimated value

·        Registered encumbrances and more

Armed with this information, you may discover that you are perfectly positioned to offer that client a secured line of credit because there is more equity than anticipated, or recommend leveraging more home equity to achieve other financial goals.

For more about the benefits of an AVM, please contact Purview For Lenders today by calling 1.855.787.8439.