Ontario Mortgage Insight: OMI Market Reports and What They Mean to You

The Ontario Mortgage Insight (OMI) Report from Teranet is a powerful report that provides you with statistical information as it relates to sales mortgages and home equity, according to location and transactions. Many financial institutions and lenders are leveraging this insight to analyze the market, the competition and to gain that competitive edge.

Using the OMI you can measure your outcomes against those of your competitors. You can review data as it relates to equity and mortgage refinances – by institution, area and date. You can track performance in different neighbourhoods and regions and identify markets to target. With this insight you can better understand and manage risk to know where and when to develop new business and ramp up your marketing initiatives.

How? It can be difficult to know at any given time where your marketing dollars are best spent. For starters, you can measure the market penetration of your mortgage products and assess the value in enhancing initiatives. Identifying hot markets quickly makes you more agile and puts you in a position to be able to develop profitable campaigns. Assessing your marketing initiatives regionally allows you to quickly identify local competitors that may be gaining strength, thereby giving you the opportunity to optimize your campaigns accordingly.

You can review and assess an abundance of both market trend data and monitoring data. What does this mean to you? To put it simply, market trend data includes: the number and value of sales or transfers in a particular area, the number and value of mortgages including charges, discharges and transfers, as well as home equity on properties and turnover rates. Monitoring data includes: estimates of market penetration, mortgages, equity and switches in properties between all monitored institutions. These are two powerful sets of data that result in faster and more effective decision making capability.

Now let’s talk risk. OMI reports are an incredible tool for risk management. By measuring your activities against the competition, analyzing lending performance in different regions, you can actually customize your lending practices according to geographical risk exposure. You can measure your activity against your competitors, better understand your geographical market share and more…

The Ontario Mortgage Insight Report has proven to be an invaluable tool to financial institutions of all shapes and sizes, from the big banks all the way down to local credit unions, finance companies and even private mortgage investment corporations. The more informed you are about markets, the more equipped you are to react to changes resulting in less risk and greater profitability.

For more information about OMI please contact Ryan Poyntz (ryan.poyntz@teranet.ca) or call 1.855.787.8439.

Tools that Matter: The House Price Index and You

Not to be confused with the recent Home Price Index being promoted by MLS, the House Price Index is a co-sponsored initiative by Teranet and the National Bank. Also known in short as HPI – the actual full name for the index is The Teranet–National Bank House Price Index™.

HPI is an independent representation of the rate of change of Canadian single-family home prices. The measurements are based on the property sales records of public land registries, lending accuracy and trustworthiness to the index. The monthly public indices currently cover 11 major cities across Canada.

So how does the HPI generate its numbers? It’s all automated!

The Teranet – National Bank House Price Index™ is estimated by tracking the observed or registered home prices over time. Properties with at least two sales are required in the calculations. Such a “sales pair” measures the increase or decrease of the property value in the period between the sales in a linear fashion. The fundamental assumption of the constant level quality of each property makes possible the index calculation but imposes difficulties in selecting (or filtering) those properties that satisfy it.

For the Teranet – National Bank House Price Index™, all properties that have been sold at least twice are considered in the calculation of the index; this is known as the repeat sales methodology. Properties that are affected by endogenous factors are not considered in the estimation. These factors may include: a) non-arms-length sale, b) change of type of property, for example after renovations, c) data error, and d) high turnover frequency (biannual or higher).

In the repeat sales methodology, the averaging of price appreciation from different pairs of sales is done using a complex estimation process in which each pair is a separate observation.

Lenders can leverage the data from the House Price Index to make more informed decisions that enable better overall risk management and portfolio valuation.

If you are a lender you can use the Teranet – National Bank House Price Index™ to:

•         Gain unparalleled insight into the dynamics of a highly varied Canadian housing market.

o   Keep abreast of Canadian housing market dynamics with timely housing data.

•         Acquire more granular information on house types, neighbourhoods, and price tiers with neighbourhood sub‐indices across nearly 90% of the Canadian population.

o   Review market activity at the FSA level

o   Review market activity by type of dwelling.

o   Compare neighbourhoods and gain insight into the performance of each targeted area.

•         Track mortgage collateral value using the catalogue of indexes.

o   Identify an increase or decrease in the value of your collateral by metropolitan area helping you determine where you are most exposed to risk.

• ·        Quickly identify trends and assess changes in home prices over time.

• ·        Assess and adjust your risk exposure.

• ·        Adjust lending policies to meet the needs of targeted geographic regions.

The Teranet-National Bank House Price Index™ is an important tool to utilize to cover all the bases. Save time and resources and be more competitive.

For more about The Teranet-National Bank House Price Index™ please contact Teranet today by calling 1.855.787.8439.

Purview Training: How to Identify Fraud on a Mortgage Application

An automated valuation model (AVM) can be an incredible tool to identify fraud. As it relates to the Purview For Lenders tool, when a property report is generated it will include both an AVM and Fraud Checks among other property information. This enables you to quickly check for suspicious or fraudulent activity and flag applications for further investigation. 

This short training video outlines how to use the configurable Fraud Check models of the Purview For Lenders property report to help identify if any suspicious activity is present on your deal. 

After watching this video, if you have further questions about generating or reviewing your Purview For Lenders property report please visit www.purview.ca/lenders. Not a Purview For Lenders client? Find out more about this revolutionary product today by contacting 1.855.787.8439.

 

 

Industry Impact: Is the implementation of B21 impacting your business?

B twenty what?? While B21 is emerging, some were not even fully aware of the existence of B20. Why? Because these guidelines put in place by the Office of the Superintendent of Financial Institutions applies to mortgage insurers.

Before we can explain more about B21 we have to get you up to speed on the lingo so you can follow the changes and what they may or may not mean to you.

• OSFI = The Office of the Superintendent of Financial Institutions
• FRMI = Federally-Regulated Mortgage Insurer
• RMIUP = Residential Mortgage Insurance Underwriting Plan 

We all know that the purpose of mortgage default insurance and of B21 is to tighten up guidelines since much of the exposure that an insurer faces is as a result of its “mortgage insurance underwriting policies, practices and risk management” according to the OSFI. The B21 sets out the expectations for all FRMIs to follow as it relates to underwriting and related activities.

Lenders, mortgage brokers and agents - this should matter you! If you fund high ratio insured deals the B21 will likely somewhat change the way insurers underwrite your applications.

Insurers – this is your opportunity to prepare for new guidelines and pursue the technology and tools that will make it easier to meet the new guidelines with the least amount of new workflow.

Part II of the guideline sets out 6 fundamental principles for sound mortgage underwriting – here they are as posted on the PSFI website:

• Principle 1: Residential Mortgage Insurance Underwriting Plan - A FRMI that is engaged in residential mortgage insurance underwriting should have a comprehensive Residential Mortgage Insurance Underwriting Plan (RMIUP). The FRMI’s insurance underwriting practices and procedures should comply with its established RMIUP.
• Principle 2: Establishing Standards for the Initial Assessment and Qualification of Mortgage Lenders - A FRMI should establish sound standards for the purpose of initially assessing and qualifying mortgage lenders for mortgage insurance coverage.
• Principle 3: Mortgage Insurance Criteria and Insurance Coverage Requirements for Lenders - A FRMI should establish prudent underwriting criteria, which specify the characteristics and parameters of insurable mortgage loans for lenders. In addition, a FRMI should promote sound mortgage underwriting and loan management practices by mortgage lenders by establishing prudent requirements in its insurance policies (e.g., Master Policy Agreements) for the purpose of controlling risk.
• Principle 4: FRMI’s Periodic Assessments of Lenders’ Underwriting Practices - A FRMI should exercise reasonable due diligence regarding lenders’ underwriting practices, on a periodic basis, in order to assess consistency with the FRMI’s criteria for insuring mortgage loans and compliance with the requirements contained in the FRMI’s policy coverage documents. A FRMI should establish clear policies for identifying, escalating, and as needed, addressing weak or non-compliant lender practices.
• Principle 5: Assessment and Validation of Underwriting Systems, Models, and Underwriters’ Processes - A FRMI that is engaged in residential mortgage insurance underwriting should periodically assess and validate its insurance underwriting systems, models, and underwriters’ processes, to ensure sound insurance underwriting outcomes and consistency with the FRMI’s RMIUP.
• Principle 6: Effective Portfolio Risk Management and other Risk Mitigation - FRMIs should have effective portfolio risk management practices, including the use of stress testing and, as appropriate, the use of reinsurance. Given the objectives and risk appetite established in the RMIUP, a FRMI should consider the outcome of stress-testing and risk mitigation in appropriately setting or adjusting its mortgage insurance underwriting criteria.

Look forward to future blogs where we will delve into some of the specific guidelines and what they mean to different parties involved in a mortgage transaction and also what technologies and tools stand to make compliance easier.

For more reading on this topic you can visit:

• http://www.osfi-bsif.gc.ca/Eng/fi-if/rg-ro/gdn-ort/gl-ld/Pages/b21.aspx
• http://www.ratesupermarket.ca/blog/mortgage-rule-update-will-osfi-b21-impact/

Stay informed and up to date on the latest industry news – always! For more information please contact Purview For Lenders today by calling 1.855.787.8439.