The New Immigrants - This group of clients not only scare me but even make the hair on my skin stand up..It is not the Immigrants who are the problem but how they are being used by lawyers, real estate agents, mortgage agents to increase their earnings.
Here is how this scam being played out.
In this group there are people who are new immigrants to Canada and who have been in Canada for no longer than 1-2 years. They have practically no
idea how the real estate market works or who quickly the interest rates can rise. since they are relatively new to Canada they also have net to
nothing in their own savings. this group is geographically spread out across Canada (due to recent changes in the immigrant policies) and thereby the
risk is spread out which is good but also worse in the sense that when the crash happens it will be felt across Canada and not just in major cities.
The people in this group are being told by the real estate agents that the interest rates are low and will remain low until US starts raising them and
then Canada will follow I have had clients tell me that their real estate agent and brokerages are telling them that there is treaty between US and
Canada in 2008 that the rates cannot be increased independently. I was stunned and when I told the couple that is a lie they did not believe me, after
all I only work for the people ( real estate agents, Lawyers, underwriters and mortgage brokers)
Moreover the individuals in this group are taking variable rate mortgages and are only paying down 5% of the down payment but even this a deception,
since this group does not have any saving to finance their down payments they are taking loans against their personal line of credits or even worse
the lawyers and the mortgage brokers are arranging for private mortgages. Let me be very clear the bank or the main lender who has the first charge
say on paper that there should not be a second mortgage or a private mortgage but the mortgage brokers are moon lighting for private lenders and since
the lawyer who did the clients home purchase and registered a charge on title cannot do the private mortgage charge the file is being sent to their
friends for a small cut in the fees. This is done after 2-3 months of the initial purchase so that the bank or the main lender does not question them
in many cases the private lenders lend the money on the spot with a signed agreement that the charge will be registered after 2-3 months and to
compensate for the risk the charge will be greater than the amount lent and have at least 12% interest rate.
The result being that there is now a second charge/mortgage on the property that the bank or the main lender does not know about, the client is now
100 % leveraged, even a healthy 5% price correction in the housing market will put them underwater. Another fact is that since February 2012 nearly
80% of the clients whose file i am handling in the course of my work are going in for Collateral Mortgages given by the top 5 banks.
And the most fearful part of all this is that there is no way to verify income. Since clients in this group are new to the country they always have a
tax consultant to take care of their yearly tax needs but the same tax consultant works with the mortgage agent to identify potential clients whose
income can be inflated by giving out false income slips all for a small charge.
As far as the banks/main lenders underwriters are concerned there is an emerging practice to either give then false evidence of income, home appraisal
and savings and if this does not work then the trend is that the mortgage agent will firstly ensure that the mortgage commitment and the instruction
to the lawyer is sent late. Secondly the mortgage agent will deliberately hold back a crucial piece of fact which is mostly income verification or the
evidence of savings then on the last day or the funding day all the paperwork from the lawyers office and the mortgage agents office will be sent to
the underwriters and the regular staff for the lawyer and the mortgage agents will then start calling the banks/main lenders every 1/2 hour and put
pressure on them to approve the paperwork and give consent to fund and release the funds.
Those mortgage agents who have been in the business for long enough have gone further down the road to know the underwriters personally and offer
I have no power, I have no means and I have no strength to fight and change the system but I do have the courage to speak up.
anyone of influence out there reading this, i have never begged in my life but I beg you to pay attention, pay attention to the warning signs.