The Blog

The alternative lending space in the US has been flourishing for years. There are hundreds of companies that have popped up in the last few years. There are ones that lend based on assets, on cash flow of businesses, on incoming account receivables and peer-to-peer lending. In Canada there are only a handful of such companies. A few years ago, Michael Garrity tried to operate a P2P lending company, CommunityLend, in Canada, but due to the regulatory red tape, he suspended operations and instead formed FinanceIt, a point-of-sales lender. The company allows small to medium size businesses to offer financing to their customers for more expensive items. Analogous with the banking systems, in Canada we are much more conservative than the US. So while we

With the recent rule changes the government has imposed in the last few years, more and more people cannot get mortgages at a bank. One group, the self-employed was hit particularly hard. This group has not lost its ability to service a loan in the last few years but they have been pushed into the subprime lenders. The word subprime inevitably conjures up images of the US financial crisis and all sorts of irresponsible behaviours by government, bankers, brokers, insurers and the rest of the financial world. That was a horrible event. I am still furious about it and I am not even an American taxpayer. Just because we use the same word “subprime” it doesn’t really mean the same thing. This is why I

There is a very important development in the world of alternative lending. Peer-to-peer lending or what is now more popularly called “marketplace lending” has hit the big times. In December of this year, two of the biggest players in the US have launched their initial public offering. The IPOs of Lending Club and OnDeck have signaled a new era of non-bank lending. These companies has been around for over 6 years and since then the market has ballooned in the states. Since 2012, there have been over 100 new entrants in the US in this space. It is very new in Canada and there is only one player at this point. By looking at the US, we will get an appreciation of what can or

I have in the past gone over how the banks charge a much larger payout penalty for fixed rate mortgages [see related articles below]. I pointed out that going to a straight mortgage (monoline) lender will save you a lot of money should you need to payout your mortgage early. Those of you who are in love with the banks said the solution would be to go with a variable rate, because everybody charges 3 months interest as a payout penalty. As a result, you get the benefit of staying with an organization you know, and having the same payout penalty. Well, not so fast. Even though both monolines and banks charge 3 months interest, the banks’ 3 month interest is more! How can this

Instead of listing off a bunch of reasons, I am going to use two real world examples from people I spoke to today. Case 1: About 10 months ago, my client had a couple of unsecured lines of credit she wanted to consolidate. Her house is paid off, and only need to take a small amount of equity to pay off the line of credit. She walked into CIBC to seek help. What she got was a cash back mortgage at 3.65%. This does not make any sense. Why would you get a cash back mortgage? The rates are higher and the amount you get back has to be returned if you ever pay off your mortgage early or do anything to the title or

Another recent news article on outrageous payout penalty: http://www.cbc.ca/news/canada/edmonton/td-bank-client-devastated-by-17-000-mortgage-penalty-1.2790108? The subjects in the article went to CBC Go Public to get their payout penalty lowered at TD after their efforts were fruitless. The public pressure got them an undisclosed offer, which they accepted. Not all borrowers will be this lucky. Some readers commented that they should have read the contract and some said they signed for a 5 year fixed for a lower rate and should be held responsible. I think it comes down to whether the contract was explained to him. Whether you go to the bank or a broker, these key points of a mortgage should be explained to the borrower. If not, I think they have a legitimate complaint. Well, if they

Earlier in August, it was revealed that a presale condo project in North York was in trouble. In fact, it was in dire trouble last year as it was sold through a court order. However, the 141 people or so who put down 40K to 700K back in 2010, didn’t know until now. Unfortunately, the lawyer released all the deposit money to the developer by mistake and he skipped town. We are talking about 14.9M. Soon after the story broke, the lawyer filed for bankruptcy. One can argue that anyone can fall victim to real estate fraud if the realtor/developer and the lawyer are working together and that it is not only in a pre-sale situation. I would say it is less likely for someone

The banks been registering mortgages as collateral charges for a long time. Finally, working with the Federal government, the announcement came this month that Canada’s banks will provide consumer information on collateral charges “to help consumers make more informed choices”. It amazes me that it takes government involvement to get these banks to do what they should be doing from the very beginning. You are selling me the biggest loan of my life and you are making the decisions for me? You don’t tell me that you will register the charge for 125% of the value of my home so that I will not be able to get secondary financing elsewhere? You don’t tell me it will be more difficult for me to transfer my

Here is another example of outrageous pay out penalties charged by the banks. Click here for the CTV News piece.  I am not making this stuff up. Last year this person got an $180,000 mortgage at 2.79% for 5 years. Good rate. Unfortunately, she had to sell a year later. Figuring the current rate at the bank for 4 years term was 2.99%, she thought the penalty would be 3 months interest and not so bad. WRONG. It was a ridiculous $7500! If she went with a monoline lender, the penalty would be around $1400. That is $6100 difference. $6100 for one year’s use of the $180,000 is actually 3.39%. In effect, the one-year mortgage at the bank was 3.39% MORE than the monoline lenders.