This is a lender email we got this morning.
Effective immediately, we will no longer be accepting Private Sale Agreements on ANY submissions…It is unfortunate that we need to make this decision, but the reality is that Private Sales are too often linked to property or LTV misrepresentation and we are seeing more of these now as the credit market tightens up…Our statistics gathered are now also showing a very high percentage of delinquency in deals that were funded with private sales.
Certain lenders (not just this one) are scrutinizing private sales much more closely in our falling real estate market.
This particular lender said it will consider some exceptions on “private listing companies” if they are comfortable it is a bona fide arms length sale.
Last modified: April 26, 2017
Wouldn’t the appraisal reveal an honest value of the property?
Are all mortgages insured ? Why wouldn’t a bank carry a home in foreclosure if the mortgage is insured ? Thanks.
Hi Pete,
You would think.
There’s also more to it than value. There’s a higher incidence of fraud, borrowers overleveraging, and delinquencies as well.
Hi Even,
No, not all mortgages are insured. And sorry, I didn’t understand the last part of your question. Banks try to avoid situations that might lead to foreclosure. – Rob
Thanks Rob, what percentage of Canadian Mortgages are uninsured?
The second part of my question was, if Banks don’t lose anything on an insured mortgage, then why do you often hear that Banks don’t like homes (foreclosed) on their books ? If the mortgage is uninsured I’m sure the Banks would renegotiate better terms to keep home owners in their homes, and thus paying.
Hi Evan,
About 50% of mortgages today are insured.
Lenders actually do lose money on foreclosed homes, in a variety of ways. This is despite the insurer’s reimbursement after claim.
Thanks Rob, of this number of mortgages that are uninsured (ie., 50%) what percent are subprime in the US and Canada. Since we have CMHC, I would expect 0% of uninsured mortages are subprime in Canada and higher in the US ?
Rob, where do you get the 50% number from, is there universal data for such a number? Lender’s don’t share these stats.
Lenders lose money on properties if they are foreclosed on. We pay commission and have origination costs associated with every mortgag, therefore if a mortgage defaults early, and we haven’t recouped our costs, then the mortgage was not profitable.
Insurance helps secure no loss in capital on the loan, but doesn’t cover all of the costs on the origination standpoint.
Rob, where do you get the 50% number from, is there universal data for such a number? Lender’s don’t share these stats.
Huh, CAAMP is one source: Link
Rob, your link was to an article in 2007 regarding Land Transfer Tax in Toronto, I did not see any other info on the Caamp site regarding this. Again, banks do NOT share this information, any number mentioned regarding LTV would be pure speculation. CMHC would be the closest to any actual number, even that is still speculation. Remember each individual lender knows it’s average LTV, not usually shared.
Hi Huh,
If CAAMP says the number is ~50%, they would be in a much better position to know than I. So I would defer to them. How they get that number I don’t know. You could always email Jim Murphy and ask him I guess.
Cheers,
Rob
Hi Rob, I do not see anything on the CAAMP website stating average LTV’s. I think what Huh is trying to say is there is not an exact number, and it’s okay to say to questions when you don’t know the answer–I don’t know the answer on that.
Hi Huh/Dave,
There are two distinct questions here that might be confused:
A) “Average LTV” industry-wide; and,
B) The “percentage of mortgages that are insured.”
CAAMP says the answer to B) is ~50% but I don’t remember seeing any data on A).
That said, various lenders do publicly disclose their average LTVs. Canada’s biggest lender, RBC, has an average LTV of 69% for example, as of their 3rd quarter.
Cheers,
Rob
Also I was at a CMHC housing symposium in early November and CMHC stated the average loan to value of ALL homes in Canada was around 40%