Multiple Listings Service – The Best Tool for Lenders/Investors to Validate Value?

The multiple listings service (MLS), for a long time, has been what many real estate professionals and lenders alike have used to pull sales comps when trying to establish the list value of a property. Comparably, many appraisers have also relied up upon tools like the multiple listings service and GeoWarehouse to pull sales comparables.

But do mere sales comparables go far enough in today’s lending environment?

In the past 10-15 years, this practice has changed significantly. The internet and technological advances have brought us other tools such as Automated Valuation Models (AVM), and have provided a more comprehensive way to crunch data in order to generate property value.

Automated Valuation Models generate a value based on all comparable sales in an area entirely, not just 2 or 3 that appeal - what often occurs when a human is browsing their local MLS. 

The multiple listings service is a database that stores information around sales and listings, while AVMs have their own respective data sources and methods for analyzing the data. The 3 most common types of AVMs draw their data from distinctive sources or using different approaches.

1.    The House Price Index Model – This model looks at multiple repeat sales which then result in house price indices in different geographical locations. This is then applied to the past transaction price to generate a current valuation.

2.    The Tax Assessed Value Model – This uses data from municipalities that store property value information in connection with tax assessments. In this model past values and subsequent values are used to create a ratio which is often relied upon when updated the tax assessed values of properties.

3.    The Hedonic Model – This model uses price information about all sales related to comparable/similar properties in an area using property specific attributes. The value is then generated using a radius search pattern and other logical search parameters.

Some tools only produce AVMs, while other tools produce AVMs within a report containing other property data.

·        The old fashioned way of investing in real estate: See a property, ask to see multiple listings comps, if deciding to move forward – order an appraisal.

·        The new way of investing in real estate: See a property, generate an AVM on your tablet or at the office, if moving forward you may or may not request an appraisal to accompany your AVM depending on equity.

Appraisals are not AVMs and AVMs are not appraisals. AVMs don’t take into consideration the condition of a property or things that real-time boots on the ground can. Lenders who want to dig deeper use their AVM as a first search measure and then couple it with an appraisal to get a more complete and accurate picture.

Sound complicated? Not so much. In fact, the big banks have been using AVMs for the past 10-15 years. Technology has made them so much more accessible that many smaller lenders, such as credit unions, finance companies and even individual private lenders, have integrated the use of AVMs into their workflows.

Get more information on why an AVM is the new way of doing things by visiting https://lenders.purview.ca/property-valuation.php.

Real Estate Fraud 101 – What Every Underwriter Needs to Know

We continue to bang the fraud awareness drum! Why? Because it is too costly to our industry to be ignored. There are so many types of real estate fraud that while the financial industry as a whole is dealing with the latest and greatest schemes to hit the marketplace – the fraudsters are already working on a strategy to roll out a new one.

While focusing on types of real estate fraud helps us to learn from others in the industry about what to look for, focusing on fraud awareness techniques can help you to uncover these types of fraud and even more issues that could be prevalent on a deal.

There are easier ways that you can go about doing this – and of course more difficult ones - but all hinge on you taking the steps to really review your client’s information, verifying it, and asking the questions needed to ensure that there is no funny business going on.

You can also make your own checklists to ensure that you cover your bases:

• Was the last transaction a cash sale? 
• Have you checked for real estate fraud? Has there been a recent sale or multiple sales activity on the subject property?
• Is the property profile suspect? Who was the previous owner? Is the property in power of sale, owned by a corporation or a party to the transaction like the real estate lawyer?
• Is it a non-arm's-length transaction? Is the person taking out the mortgage a past owner of the property or are parties to the transaction related? 
• Have you checked for title fraud? Has there been any recent discharge of mortgages following a recent transfer where mortgagor is the same?
• Have you checked for value fraud? Have you looked at an AVM to ensure that the property is actually worth what was stated in the application?
• Have you checked for fraud by income? This is something technology can’t do and is something where mere moments can mean all the difference – did you call the employer to verify employment?

We sound like a record on repeat: reviewing the legal homeowner, the sales/transaction history on a property, financial encumbrances and value are the fastest way to identify real estate fraud. Checklists are helpful too! Some technology summarizes information for you:

These are some examples that you can put into your checklist to cover your bases and ensure that you are doing everything you can to avoid real estate fraud. As an underwriter you have a lot of responsibility on your shoulders – the more organized you are and the more tools you have at your disposal the easier it is to perform your very vital role.

Purview For Lenders’ Fraud Check is just one of the many tools we offer to help you mitigate mortgage fraud - contact us today at 1.855.787.8439.

CAAMP Conference and Other Must Attend Conferences for Lenders

As 2015 wraps up, there are still a few must attend conferences that lenders should be considering. Aside from the big annual CAAMP Conference, Mortgage Forum, there are many other smaller events left in 2015 where you can network with others in your profession.

Meeting other lenders and brokers are great opportunities to stay connected to the industry, stay more competitive and even become aware of new trends.

Here is a list of what events are left for 2015:

·         October 6, 2015 Toronto, Ontario – CAAMP Fraud Summit http://caamp.org/info.php?pid=675

·         October 7, 2015 Stoney Creek, Ontario – IMBA, Professional Development Symposium – Alternative Lending http://imba.ca/events/professional-development-symposiums/

·         November 15, 2015 – November 17 Toronto, Ontario – CAMMP Mortgage Forum 2015 http://www.mortgageconference.ca/Welcome

·         November 17, 2015 – CAAMP Mortgage Hall of Fame and Awards Night

The Purview team at Teranet has confirmed that we will be at both the Fraud Summit and the Mortgage Forum!

What conferences will you be attending?

Mortgage Fraud in Canada and What Brokers Have to Say!

We recently concluded our first Fraud Awareness Month during which we dedicated our social media to fraud awareness and increasing the dialogue between lenders and brokers about types of mortgage fraud in Canada that are prevalent in the industry. It was a huge success!

So many financial professionals chimed in with amazing insights and feedback that we wanted to highlight some of those dialogues.

Brokers acknowledge that lender/broker relationships are incredibly important. Lenders who receive business primarily from brokers count on brokers as a first line of defense. This is one thing that is very attractive about accepting mortgages from brokers – they do so much of the legwork. One thing that came out of Fraud Awareness Month was that brokers across the board really care about the quality of the deals they bring forward to their lenders and are summarily committed to deploying whatever tools they have in their arsenal to combating mortgage fraud in Canada.

Many are even leveraging the most current technology, incurring personal expense to take extra measures when performing due diligence including verifying:

·         Home ownership information

·         Registered mortgage information

·         Sales history information

·         Value of the property and more

Many are using much of the same technology that you use – like AVMs, running property searches, even independently picking up the phone to verify employment. Mortgage fraud in Canada and as a whole has been acknowledged across the board as a major issue and it seems financial professionals on every level are realizing that we all play a valuable role in the process of spotting fraud.

Working with brokers the likes of whom were vocal during Fraud Awareness Month can give you peace of mind that you are going to receive deals that close and are unlikely to have issues later. How can you know if you’re dealing with one of these types of brokers?

When interviewing new brokers – ask lots of questions. What is their position on mortgage fraud? Do they see mitigating mortgage fraud as one of their roles in the mortgage process? What tools do they deploy to combat mortgage fraud?

Also, sharing with brokers the tools you use to mitigate mortgage fraud (like Purviews fraud check as one example) is a great way for brokers to seek out broker versions of these tools so that your information is aligned with their information.

Increased alignment, dialogue and sharing on issues surrounding mortgage fraud in Canada lead to strong relationships and a healthier Canadian financial industry.

When it comes to conquering mortgage fraud, we all play a roll, and working together makes it that much easier. Check out how Purview For Lenders contributes to the challenge: http://lenders.purview.ca/. 

HPI Monthly Report: Home Prices up 1% in August

In August the Teranet–National Bank National Composite House Price Index™ was up 1.0% from the previous month, an eighth consecutive monthly increase. The rise exceeded the 11-year August average of 0.9%. Prices were up on the month in six of the 11 metropolitan markets surveyed – 3.9% in Calgary, 2.4% in Hamilton, 1.6% in Toronto, 0.6% in Vancouver, Ottawa-Gatineau and Winnipeg. Prices were down on the month in Victoria (-0.3%), Halifax ( 0.4%), Edmonton and Montreal (−0.5%) and Quebec City (−1.1%). The composite index was at an all-time high in August for a sixth consecutive month, though only the Vancouver, Hamilton and Toronto component indexes were at an historical high in August. The resale market in those three centres is a seller’s market according to the Canadian Real Estate Association criterion of sales relative to new listings.

Teranet-National Bank National Composite House Price Index™

In August the composite index was up 5.4% from a year earlier, the highest 12-month increase since November 2014. The 12-month gain was well above the countrywide average in Vancouver (9.7%), Hamilton (8.8%) and Toronto (8.7%). It was below the average in Victoria (3.2%), Edmonton (0.8%) and Calgary (0.7%). Prices were down from a year earlier in Winnipeg and Ottawa-Gatineau (-0.4%), Montreal (-0,5%), Quebec City (-0.7%) and Halifax ( 1.4%).

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

What Could Average Canadian Debt Mean to FIs Across the Board?

It can’t be denied that Canadian debt levels continue to skyrocket. Just about every news outlet from the CBC to Global has reported on this trend. Economists and even the Prime Minister has chimed.

Take a look at the infographic below produced by Equifax, according to an article released by Global News last, consumer debt is up in every single province: year http://globalnews.ca/news/1544506/infographic-debt-levels-jump-sharply-east-of-ontario/.  With the exception of Manitoba and Quebec, all provinces are seeing an average over $20,000.00.

The CBC released an article earlier this past summer that suggests that Canadians are continuing to rack up their household debt. The article looks at household debt which includes mortgages, lines of credit and credit card debt vs. consumer debt which is highlighted in the above infographic. The article sites a BMO annual debt report that resulted in the average debt of those surveyed as sitting at a staggering $92,699 which is $4,000 higher than the previous 4 year average: http://www.cbc.ca/news/business/canadian-households-are-racking-up-more-debt-poll-suggests-1.3146766.

What does this skyrocketing household debt mean to FIs across Canada? This in itself is a very complicated question with many variables that include performance in the capital markets (oil), interest rates, job growth, performance of the dollar and much, much more.

Economists from both BMO and RBC this last quarter called for rate cuts from the Bank of Canada citing signs of a faltering recovery http://www.bnn.ca/News/2015/7/8/Bank-of-Montreal-and-RBC-join-Bank-of-Canada-rate-cut-call.aspx. This occurred while an economist at TDCT went as far as to proclaim that Canada is in recession territory.

The top TD economist wasn’t alone in his sentiment according to this article in the BNN: http://www.bnn.ca/News/2015/7/6/TD-Bank-flip-flopped-on-Canadas-economic-outlook-over-the-weekeend.aspx. Apparently Bank of America Merrill Lynch has said Canada ‘appears’ to have slumped into a recession. According to the article, CIBC called it “a real possibility.”

Add to this the fact that, while economists have mixed emotions on the state of the economy and Canadians are carrying more debt than ever, this past summer the Huffington Post also reported that, according to Stats Canada, while the economy grew – incomes stagnated: http://www.huffingtonpost.ca/2015/07/08/canadian-income-survey-2013_n_7754884.html. The report noted “The median after-tax income of Canadian households was $53,500 in 2013, up by just $100 from 2012, according to StatsCan’s Canadian IncomeSurvey.”

Interest rates continue to be a hot topic when it comes to lending - and continuous changes mean constantly having to stay on top with current trends. Purview For Lenders can help - visit lenders.purview.ca today.

Training Time – How to Use the AVM Component in Purview

Did you know that when you generate a Purview Report the component that provides the value range is in fact the Automated Valuation Model for your subject property?

You can even change your parameters to include a customized valuation model for the Province of Ontario. If a customized model does exist, by default, each estimate value for a subject property located in the Province of Ontario will be generated using your company’s customized model.

This step by step video tutorial will help you learn the ABCs of generating AVMs using Purview