Private Lending Tips

Are you in need of private money or hard money?

I can help!

Before you submit your deal to a Private Lender....!

1. A thorough application is required (What are the funds being used for and the story behind the deal)

2. Explain the issues on the credit bureau (what is the balance really..? Why are you in arrears...?)

3. Get a copy of existing mortgage statements (You ever have the scenario where they say “I think about $120,000” but the real balance is $160,000? “My mortgage is paid up to date” (really it is 2 payments behind) This could kill the deal! Get this information up front)

4. Get a copy of the Property tax statement (this will also disclose any arrears and save you time and energy!)

5. Get an appraisal up front..we all know the value rarely comes in as the client states..they always hope for more (and so do we!) Get the appraiser to do up a broker copy so it is not prepared for any lender!

6. While you are at it you might as well get a copy of the Fire Insurance! It is the last piece of the puzzle!

I know I know this seems like a lot of work upfront...however..there is nothing worse than a deal dying at the lawyers because of property tax arrears, or not enough money to payout a mortgage.

We will still fund a good deal even if there is mortgage arrears or property tax arrears!! We just need to know up front!

If you follow my Quick Tips you should have a quick and easy close because you will have all your figures in line!...and don’t forget to give me a call or email to break down the deal..that always helps too!

905-778-8100 ext 5161

Giuseppe

Interest rates to remain at historic lows: Carney

Interest rates will likely stay at their current historic lows through June 2010 in an effort to meet the Bank of Canada's inflation target of two per cent, says governor Mark Carney.

Speaking to CTV's Question Period Sunday, Carney confirmed speculation that interest rates would remain at 0.25 per cent, the lowest rate Canada has ever seen, well into next year.

When asked if Canadians should lock in to five-year mortgage terms on the news, Carney demurred.

"It's not my job to give investment advice to Canadians," Carney said. "But on the general point anybody, anytime they borrow for a longer period of time, wants to think about, 'Can I sustain that borrowing over the course of that time? What happens when interest rates ultimately normalize?'"

Carney reiterated earlier Bank predictions that the Canadian economy will continue to grow, by three per cent next year and by 3.3 per cent in 2011.

"That's more modest than usual recovery, so it's not going to feel like a gangbusters recovery," Carney said. "But it is a recovery and that's important."

According to Carney, government stimulus will continue to foster growth in the short-term. But investments from the business community will kick in by 2011 and beyond, when public money dries up.

"True growth comes from the private sector," he said. "And the private sector is starting, even after what has been a very difficult recession -- a short, but very deep recession -- is starting from a position of strength. Corporate balance sheets are in outstanding shape, the best they've been in 25 years in this country."

CMHC's Growth Fuels Worries Over New Risks

Boyd Erman and Tara Perkins
Globe and Mail Update
Published on Friday, Oct. 16, 2009

The federal government has quietly given Canada Mortgage and Housing Corp. more financial muscle, raising concerns the multibillion-dollar agency is expanding at an unprecedented pace with little oversight.

For the second time since the beginning of 2008, Ottawa has raised the amount of mortgage insurance CMHC can have outstanding. The increase moves the cap to $600-billion, up from $450-billion and nearly double the $350-billion limit in place at the end of 2007.

CMHC is by far the largest provider in Canada of default insurance on mortgages, which home buyers are legally required to have if their down payment is smaller than 20 per cent. As home prices rise and smaller down payments become the norm, CMHC is selling more insurance each year.

That trend, combined with a ramped-up program of buying mortgages from banks as part of the government's strategy to spur the home-loan market, has turned the Crown corporation into one of the country's largest financial institutions. With $203.5-billion in assets last year, CMHC dwarfs the country's sixth-largest bank, National Bank of Canada, and its growth is blistering.

CMHC projects that its assets will hit $345.3-billion in 2009. Bank of Montreal had $415-billion in assets as of July 31.

Critics charge that such growth demands more oversight, pointing to the fact that even though CMHC is now central to the financial system, it is not regulated by the financial industry's main watchdog, the Office of the Superintendent of Financial Institutions. It's also a risk for taxpayers, because while CMHC sets aside billions as a cushion against losses, and is very well capitalized, Canadian citizens are ultimately on the hook for losses on its insurance should the housing market falter and those reserves prove too small.

“We need a debate, which I don't think we've had in my lifetime, about the role of the CMHC vis-à-vis our financial institutions and our housing market,” said Ian Lee, the director of Carleton University's MBA program and a former mortgage manager at Bank of Montreal.

The government and many economists credit CMHC for helping to pull the economy through the credit crisis of the past two years.

“The Canadian financial sector and housing market have remained sound throughout the recent crisis,” a spokesman for Finance Minister Jim Flaherty said.

“This has been in large measure due to the effectiveness of the roles played by federal institutions, including CMHC, in supporting markets, backstopping risks and sustaining the availability of credit.”

Canadian Imperial Bank of Commerce senior economist Benjamin Tal describes CMHC as the “secret weapon” that has now been revealed. “One of the main reasons we did not need a bailout [of banks] is because of CMHC, and the ability to provide cheap credit through its facilities,” he said.

“Did CMHC help to improve house prices today? Yes, they did because they gave cheap credit to bank and banks were able to provide credit and low mortgage rates, which I think is the main reason why house prices are rising now. That's a reflection of a system that works, in my opinion,” Mr. Tal said.

CMHC insurance helps to keep borrowing costs down for people with small down payments who would otherwise face higher interest rates from banks. That enables would-be buyers to bid more for houses, knowing that they won't be penalized for having a small down payment, and adds fuel to the housing market's soaring prices.

CMHC's securitization programs, through which it effectively buys swaths of mortgages from lenders, free up space on banks' balance sheets, allowing them to give out more mortgages than they otherwise could.

In an e-mailed response to questions, CMHC said housing affordability has improved over the years. The monthly mortgage payment on an average-priced house has decreased as a share of workers' incomes, the agency said.

As of the second quarter of this year, the mortgage payment on an average-priced house was 29 per cent of disposable income per worker, down from just under 39 per cent at the end of 2007.

The company attributes the need for the increases in the insurance cap to “a number of successive strong years of activity in the mortgage markets.”

CMHC also points to a trend of banks buying insurance for mortgages that aren't required to be insured, enabling them to sell the loans to investors to raise cash.

Whatever the reason, critics like Mr. Lee say that the institution's stunning growth deserves new scrutiny. Yet, because CMHC enables more people to buy homes, it's unpalatable for politicians to criticize it, Mr. Lee said.

“That value is embedded in the Canadian consciousness,” he said. “It's not as sacred a cow as health care, but it's right up there.”

Ottawa created CMHC in 1946 to house returning war veterans. Its main objective is now to facilitate access to more affordable and better quality housing for Canadians.

The two main programs it uses to achieve that goal – insurance and securitization – have ballooned in the past year. CMHC planned to insure 578,539 housing units last year for $86-billion in 2008. Instead it insured 919,790 units for $148-billion.

It guaranteed 2.5 times more mortgage securities than planned, an extra $64-billion, which is nearly double the 2007 level. Part of the reason for that is the emergency mortgage purchase program that Mr. Flaherty unveiled at the height of the credit crisis in October, 2008, to help ease the banks' funding costs. But even prior to that program's launch, CMHC's securitization activities were on a steep upward trajectory.

Canada Housing Trust, which carries out CMHC's securitization activities, has seen its assets grow by more than 20 times since it was established in 2001, according to Moody's Investors Service.

The opposition Liberal Party says the cap increases and the surging size of CMHC may warrant more attention.

“It's a lot of money and it could justify debate in Parliament,” said John McCallum, the Liberal finance critic. However, he acknowledged that suggesting the reins be pulled in on CMHC is ticklish for politicians and said that CMHC should be able to continue growing “as long as they're prudent.”

“I don't think we want the government to be rationing Canadian home-buying.”

OECD forecast, factory data dampen hopes of fast rebound

Canada's recovery from recession is shaping up to be tepid, as new evidence underscores that the bulk of the demand in the world economy is being generated by government stimulus spending and companies remain reluctant to hire.



Continue reading: OECD forecast, factory data dampen hopes of fast rebound

Priceless: How The Federal Reserve Bought The Economics Profession

By Ryan Grim

The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found.

This dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic economists. In the Fed’s thrall, the economists missed it, too.

“The Fed has a lock on the economics world,” says Joshua Rosner, a Wall Street analyst who correctly called the meltdown. “There is no room for other views, which I guess is why economists got it so wrong.”

Continue reading How The Federal Reserve Bought The Economics Profession

A ‘long and winding' road to recovery

Globe and Mail Update Thursday, Sep. 03, 2009 08:28AM EDT

Recovery from the global recession is likely to arrive earlier than had been expected a few months ago, but the pace of activity will remain weak well into next year, the Organization for Economic Co-operation and Development said in a forecast Thursday. Canadian economists agree that the global economy is turning the corner. Here's a look at what that means for Canada:

Scotiabank's take: We'll get there, be patient

“Canadian domestic activity will revive in the months ahead as consumers begin to return to the malls in greater numbers and a myriad of government-funded shovel-ready projects actually get into the ground,” Bank of Nova Scotia chief economist Warren Jestin said in a research report this week.

“The Bank of Canada will likely nudge up interest rates as the economy recovers in 2010, but borrowing costs will not be an impediment to the revival of domestic demand. However, with foreign sales one-third of Canada's gross domestic product, the strength of the rebound will be tied to commodity markets and reversing the recent slide in U.S. sales,” Mr. Jestin said.

Canada is already benefiting from higher commodity prices in response to demand from China and other nations, he wrote, but global growth through 2010 will be tepid.

“The United States rebound will help bolster south-bound exports, but gains will be tempered if, as we expect, the loonie moves towards parity vis-à-vis the U.S. dollar as commodity markets strengthen further and the greenback comes under pressure on global currency markets,” Scotiabank said in its report.

“The bottom line – we will soon begin moving away from one of the most difficult economic setbacks experienced in our lives, but patience will be required because the road to recovery will be a long and winding one.”

Housing market recovering - but prices expected to moderate

Housing starts are expected to rebound in the second half of 2009, reaching a total of 141,900 for the year, and will increase to 150,000 in 2010, Canada Mortgage and Housing Corp. forecast Thursday.

This marks an improvement, but is well down from the 211,056 starts in 2008 as Canada came off a prolonged housing boom.

“Economic uncertainty and lower levels of employment tempered new housing construction in the first half of the year,” CMHC economist Bob Dugan said. “In the second half of 2009 and in 2010, we expect housing markets across Canada to strengthen.”

“Existing home sales … have rebounded strongly since January and will reach 420,000 units in 2009 and remain close to that level at 419,000 units in 2010,” CMHC said. “The average price is expected to moderate to $301,400 in 2009 and to increase to $306,300 in 2010.”

Jobless rate: still rising

Economists expect that the Canada's unemployment rate continued to rise in August.

Bank of Nova Scotia said in a note to clients that Friday's Statistics Canada release is expected to show a loss of 15,000 more jobs, and an increase in the unemployment rate to 8.8 per cent.

Furthermore, the labour market recovery will be slow, economists say.

“It is often said that employment is a lagging indicator, and that's particularly the case when the recovery is only modest, and that's likely to be the case in this cycle as well,” Bank of Montreal deputy chief economist Douglas Porter said this week in an online discussion on reportonbusiness.com.

“We don't believe that we will see a meaningful pullback in unemployment rates until the spring. Employers need to be convinced that the turn in the economy is for real, then they will shift part-timers to full-time, then go to overtime, and only after that begin to hire people again. And even then, payrolls may not rise as quickly as the underlying growth in the labour force,” Mr. Porter said.

Beyond the recovery: new world realities

“The road to recovery won't take us back to the world that existed before the sub-prime crisis began,” Scotiabank's Mr. Jestin said. The global financial system is being revamped, he noted, and “big government deficits are back and will be politically difficult to unwind…

“The global economic landscape is also changing, with developed nations like Canada and the U.S. likely to experience relatively subdued growth in the decade ahead,” Mr. Jestin said.

“World activity will be driven increasingly by China, India, Brazil and other emerging powerhouses, with their production and investment decisions having a major impact on world trade, commodity prices and financial markets.”

For Canadian businesses: tougher competition, new opportunities

“For many Canadian businesses, these new world realities point to tougher competition in traditional markets, but a world of opportunity in emerging ones,” Mr. Jestin said. “Our share of the U.S. market has dropped significantly over the past decade, with China gaining bragging rights as the largest U.S. supplier and, excluding energy products, the euro zone surpassing Canada in U.S.-bound sales.” This calls for new approaches.

“Focusing our collective attention and scarce national resources on supporting the familiar while avoiding the unfamiliar is a losing strategy,” Mr. Jestin said.

“At a time when the auto sector and other traditional manufacturing industries are shedding jobs, new enterprises associated with environmental remediation, global infrastructural development and emerging market demands have the potential for sustained, rapid growth.”

Soaring Prices for AIG, Fannie and Other Financial Stocks Sending Mixed Messages to Investors

William Patalon III
Executive Editor

Three of the financial institutions that were key catalysts to the global financial crisis – and that owe the federal government billions of dollars as a direct result of those problems – have seen their shares triple in price so far this month.

That could signal that a big rebound in bank-sector earnings is just around the corner. Or it could be merely a speculative “short squeeze” that all but confirms that these stocks are basically worthless.

Shares of busted insurer American International Group Inc. (NYSE: AIG) have soared from $13.14 to $50.23, as of Friday’s close, a gain of 282.3% so far this month. Shares of mortgage giants Freddie Mac (NYSE: FRE) and Fannie Mae (NYSE: FNM) posted similar gains, MarketWatch.com reported. Fannie’s shares advanced from 58 cents to $2.04, an increase of 251.7%. Freddie’s shares zoomed from 62 cents to $2.40 each, a gain of 287.1%.

AIG actually gained for a ninth straight day Friday, reaching a 10-month high, as short-shelling speculators got squeezed and were forced to buy back the shares they’d sold short, traders told MarketWatch. AIG has 21% of its “float” – shares available to the public sold short, the sixth-highest proportion in the Standard & Poor’s 500 Index, according to Bloomberg News.

But the gains might also sign that the banking sector is poised for a major profit rebound, according to some new analyst research.

"Dating back to 1995, bank-sector outperformance has typically preceded [earnings-per-share] growth outperformance by one to two quarters," Stifel Nicolaus & Co. (NYSE: SN) analysts wrote in a market-research note last week. “With sector earnings growth expected to exceed that of the general market in mid-2010, we question whether we will see another leg down in this rally before year-end. On the other hand, perhaps we should question the current growth expectations for the sector?”

Trading in financial-services stocks has dominated the stock-market volume this month. So-called “day traders” have gravitated to once-questionable financial stocks and helped fuel those stunning gains – and huge volumes.

Citigroup Inc. (NYSE: C), for instance, has seen daily trading volume topping 1 billion shares this week. The stock closed above $5.05 on Thursday and $5.23 on Friday. That represents a 439% gain from its 52-week low of 97 cents a share.

Financial stocks have led the market’s slingshot higher from the early March lows. Trading has been fierce in beaten-down shares of some companies that participated in the bailout, such as AIG, Citi and Bank of America Corp. (NYSE: BAC).

The New York-based AIG is trying to sell assets to repay government loans after accepting $182.5 billion in U.S. bailout money. AIG recently reported a profit for its second quarter – after having posted six straight quarters in the red. It engineered a so-called “reverse stock split,” in which AIG gave investors one new share for every 20 they turned in. The company did this to avoid a delisting action. That enhanced the short squeeze, since there were fewer shares available to for short-sellers to repurchase and “cover” their bets.

Despite the torrid run that AIG’s shares have been on, the insurance company’s bonds still trade at levels indicating the company’s shares may be worthless, Peter Boockvar, an equity strategist at Miller Tabak & Co., told Bloomberg.

“The value of the company is still the same,” Boockvar said. “AIG bonds tell you that the equity is possibly worth nothing and that they may not be able to pay back the government.”

AIG’s $3.24 billion of 8.25% bonds due in 2018 are quoted at 79 cents on the dollar, to yield 12.2%, Bloomberg reported. The insurer’s $4 billion of 8.175% percent bonds due in 2058 are quoted at 49.5 cents on the dollar to yield 16.7% Bloomberg said.

The Financial Select Sector SPDR Fund (NYSE: XLF), an ETF tracking the financial stocks in the Standard & Poor’s 500 Index, has rallied nearly 30% over the past three months and handily outpaced the market.

Market Matters

While the past few months have been anything but dull for the markets (euphoric may be more appropriate), investors enjoyed a few slow days of peace and quiet.

Another stimulus program came to a close as “Cash for Clunkers” ended with a last-minute flurry of activity. Analysts claimed that more than 700,000 cars were bought over the past month and August auto sales should rise on a year-over-year basis for the first time since mid-2007.

While dealerships enjoyed a nice rebound in activity (even if just temporarily), banks continued to experience challenges as the Federal Deposit Insurance Corp. (FDIC) reported that 416 institutions were on its “problem” list at the end of the second quarter, up from 305 on March 31, and also conceded that its insurance-fund reserves were dwindling.

Goldman Sachs Group Inc. (NYSE: GS) was in the news again as controversy has continued to surround the investment giant since the AIG bailout and Lehman Brothers Holdings Inc. (OTC: LEHMQ) failures. Regulators are investigating its weekly “trading huddles,” where its analysts allegedly gave short-term stock tips to select clients and traders, though most other customers were not privy to such insight.

Dell Corp. (Nasdaq: DELL) posted lower quarterly profits, though
the result still beat Street expectations and management projected stronger performance in 2010 when businesses get back in technology buying mode. Intel Corp. (Nasdaq: INTC) boosted its revenue projections for the next few months, another sign that chip demand is increasing and the business climate continues to improve.

The Dow Jones Industrial Average roared to eight straight days of higher closes, before hitting a stumbling block on Friday (though no one may have noticed as volume was so light) and the days of triple-digit moves ended (for a week at least).

The other indexes traded relatively flat during the week and even the positive news from Intel did little to generate any investor enthusiasm in the tech-heavy Nasdaq Composite Index. Fixed income fared better than most would have expected, considering another $109 billion in government debt hit the street.

Oil surged to a 10-month high before a larger-than-expected inventory report indicated that crude demand remained weak despite expectations of an economic recovery just around the corner. In fact, natural gas plunged to a seven-year low.

In perhaps the biggest news of the week, U.S. Federal Reserve Chairman Ben S. Bernanke will manage to avoid becoming a part of the so-called “jobless recovery” when he was nominated for another term as central bank chair by U.S. President Barack Obama.

While Bernanke certainly has his critics among grandstanding politicos from both sides of the aisle, few Fed watchers expect Congress to hold up his confirmation. For now, continuity seems to be the best thing.

The economic data of the week was relatively favorable with signs of renewed strength in both housing and manufacturing. New home sales jumped for the fourth consecutive month and the S&P Case-Shiller Index even depicted higher home prices last quarter for the first time since 2006. Durable good orders surged in July on increased demand within the transportation sector as both General Motors Co. (OTC: MTLQQ) and Chrysler Group LLC put bankruptcy in their rearview mirrors and boosted production, while other companies also benefited from the “Cash for Clunkers” program.

When second-quarter gross domestic product (GDP) was announced as a decline of 1%, many analysts expected a downward revision (perhaps significant) in the months that followed. Well, the initial revision again showed a 1% decline, a negative showing, but one that many economists believe will be the last contraction in overall activity for a while.

The U.S. consumer remains one big wildcard for the strength of the economy moving forward. Though the Conference Board reported a better-than-expected increase in its August consumer confidence report, the Reuters/U of Michigan sentiment index offered a contrasting view as it fell to its lowest level in four months. Personal spending in July got a nice boost from the increase auto sales (“Cash for Clunkers” strikes again), though the income component of the release was unchanged and concerns about the labor picture continued to hinder consumer activity.