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Archive for March, 2019

Lower mortgage rates as bond yield inverts

The current decline in the bonds market is good news for Canadian fixed-rate mortgage borrowers with rates heading lower.

As the bond market yields invert – as they did Monday in Canada – the cost to banks of borrowing in the market declines, meaning they are able to finance mortgages at a lower rate and pass savings on to customers.

It’s not all good news though because the inverted yield, also seen in US bonds, is often a foreteller of weakening economic conditions and potentially recession.

However, this risk is likely to mean that the BoC will remain highly cautious of increasing interest rates.

An outlook from TD Economics’ Beata Caranci and James Orlando suggests that Canada may need “the real interest rate to remain close to or below zero for a long period” with the deleveraging process only just starting.

There is a growing cohort of investors and analysts that believe the BoC’s next move on rates will be a cut and that is proving good news for variable rate mortgage borrowers too.

Janine White, vice-president of told CBC News that rates will climb in the next couple of years but “for the rest of 2019 the prediction is that the variable rate is going to be stable and maybe has a chance of coming down."

by Steve Randall

26 Mar 2019

Young Canadians are taking some crazy financial risks

Canadian millennials are risking damage to their credit profiles and financial security by not protecting their personal information.

A study by Equifax Canada has found that fewer Canadians overall are checking their financial statements, shredding personal documents, or installing security to their computers, despite the rising threat of fraud and identity theft.

“Identity theft and fraud is more complex and sophisticated than ever, which should be of growing concern for Canadians,” said Tara Zecevic, Vice President, Fraud Prevention and Identity Management, Equifax Canada. “Millennials, in particular, should be doing more to educate themselves and protect their personal data given the incidence of credit card fraud we saw in 2018.”

Data flagged by financial institutions and tracked by Equifax Canada includes:

  • Attempts of credit card fraud have increased by 42% over the last two years;
  • Millennials were targeted in 48% of all fraudulent credit card applications in 2018; and
  • Suspected true name fraud (when an identity thief poses as a real person in completing a credit application) has also increased by 84% over the last five years.

Although the survey highlights complacency from many Canadians, it also found that consumers are sharing less on social media (up to 43% from 39%) and more people are checking their credit reports (up to 28% from 21%). And millennials checked their credit reports more than any other age group (29%).

“Younger adults need to recognize the importance of preventing fraud before it happens,” added Zecevic. “There are so many little things consumers can do to help protect their personal information. It’s simply knowing what to do and making the time to do it.”

by Steve Randall

18 Mar 2019

OREB, BCREA weigh in on federal budget’s housing policies

While pleased the federal government introduced measures in the federal budget to support housing affordability, the Ottawa Real Estate Board nevertheless believes its efforts fell short.

“Some first-time homebuyers will be assisted through the shared-equity mortgage program and the increase of RRSP withdrawals to $35,000,” said OREB President Dwight Delahunt. “However, we would’ve preferred a measure such as the one we proposed to government to increase the first-time homebuyers’ tax credit from $750 to $2500 as this would not have created another debt to be repaid.”

The real estate board believes increasing the RRSP withdrawal amount is a great idea, at least in theory.

“While the government has said these measures are to help millennials specifically, we question whether this cohort actually has this amount invested in RRSPs and whether they will be able to qualify for a shared-equity mortgage program,” continued Delahunt. “Many millennials are facing affordability issues related to their income levels and student debt.”

Despite those criticisms, OREB credits the government for amending the Homebuyer’s Plan to include leniency for turbulent life events.

“We certainly applaud the modernization of the Homebuyer’s Plan to include those going through difficult life-changing circumstances, such as the breakup of marriage and common-law relationships—we have been advocating for this for some time.”

British Columbia residents know the struggle with housing affordability all too well, and the British Columbia Real Estate Association lauds the federal government’s efforts in the budget, particularly with respect to RRSP access.

“British Columbians who aspire to home ownership need to be able to achieve this goal to assure a sustainable future for our province,” said Darlene Hyde, BCREA’s CEO. “Realtors have advocated for modernization of the HBP [Home Buyers’ Plan] for a long time and we’re pleased to see it addressed in Budget 2019.”

However, Delahunt suggests that supply constraints in Ottawa are problematic and could have been addressed in the budget, but wasn’t—nor was amending B-20, which he added exacerbates affordability woes.

“Our biggest disappointment was that government failed to make any adjustments to the B-20 stress test, which was an attempt to cool two major markets in the country. We hope the government will continue to monitor the effects of its mortgage policies and be open to adjusting them if necessary. They need to recognize that, while mortgage debt is on paper the largest component of household debt, it is the lines of credit and credit cards that can have a major impact due to the much higher carrying costs of these facilities.”

by Neil Sharma

25 Mar 2019

Thinking of sharing a home?

With high housing prices, more attention is being focused on the concept of co-housing with buyers sharing occupancy and ownership costs of buying a home.

Last month, real estate reporter Tess Kalinowski wrote about a new web-based app — — designed to match would-be buyers. Co-owners of a home should have a binding agreement that spells out the details of the relationship.

But finding like-minded buyers is only half the story. The other half is setting up a binding agreement to govern the relationship. The most important issues to be considered in entering into a co-housing agreement with partners, whether they are long-term friends, relatives or new acquaintances, are:

  • the initial financing and deposit structure;
  • the ownership percentages to be shown on title;
  • the operation and management of the venture, including a process to resolve disputes;
  • an exit strategy where all parties agree to the sale of the property;
  • and an exit strategy where one of the parties is in default or where the parties cannot agree on the sale of the property.

When all residents of the house are getting along and agree on everything, a written agreement may not seem necessary. But the main purpose of a co-housing agreement is to provide for resolution for operating issues, and disagreements over management and sale of the house.

Some of the issues to address in a co-housing agreement:

Repairs or improvements. When they’re needed by one owner, are the costs divided equally? If only one owner wants to paint or remodel, does the other owner pay half the cost? The theory here is that any improvement will probably increase the home’s value.

Utilities. Are they divided by the amount of space occupied in the house or the number of occupants? If, for example, half the house is occupied by one person, and the other half by two people, are the utilities shared — equally, or two-thirds/one-third? If the single occupant is joined by a live-in partner, does that affect the cost-sharing of utilities, cable and internet?

Defaults. If one of the co-owners is behind on mortgage and tax payments, how does the other owner recover his or her share of the arrears? Do they sue each other while living together?

Division of expenses and ownership interests. What happens when one partner occupies two bedrooms and the other uses only one? If just one owner has a car, does that partner pay more of the shared common expenses?

Subletting. If one party moves out, can he or she rent the space to strangers?

Ending the agreement. This is always a big issue and partners should consider if there will be a written provision entitling one owner to force a sale — whether or not the other is in default. One common provision is a buy-sell clause. This provides for one partner to set a price on his or her share of the property, and let the other partner decide to buy or sell him or her out at that price.

An experienced lawyer should always be consulted when preparing a co-housing agreement. The goal will be to provide for smooth operation of the property, a fair division of ownership, expenses and responsibilities, and an equitable way of unwinding the venture.

Bob Aaron is a Toronto real estate lawyer and frequent speaker to groups of home buyers and real estate agents. 
He can be reached by email at, phone 416-364-9366 or fax 416-364-3818.


Real estate bodies restate case for 30-year backed loans

More industry bodies representing real estate agents have given their views on the federal government’s latest housing measures.

Reaction to the government’s budget measures remain mixed but the Canadian Real Estate Association, the British Columbia Real Estate Association and the Toronto Real Estate Board have all welcomed the focus on affordability for first-time buyers.

However, all have also reiterated their concern that the mortgage stress test provisions of the OSFI B-20 rules continue to weaken the ability of Canadians to buy homes.

“Millennials are passionate about owning their own home, but many are worried they will never be able to because of higher home prices and tougher mortgage qualifying rules,” said Barb Sukkau, CREA’s President. “Realtors have been advocating for the modernization of the HBP and are pleased to see it addressed in Budget 2019. The measures announced today will help today’s millennials in a tangible way, while also addressing some longer-term concerns related to housing supply and sustainability.”

Referring to the First-Time Buyer Incentive Program, BCREA CEO Darlene Hyde welcomed the introduction of shared equity mortgages and the increased limit for the Home Buyers’ Plan.

“British Columbians who aspire to home ownership need to be able to achieve this goal to assure a sustainable future for our province,” says Darlene Hyde, BCREA CEO. “Realtors have advocated for modernization of the HBP for a long time and we’re pleased to see it addressed in Budget 2019.”

Changes are needed
BCREA advocates a review of the mortgage stress tests in light of interest rate rises and is also calling for the reintroduction of CMHC-backed 30-year mortgages.

These views are shared by TREB CEO John DiMichele who says the restrictions on 30-year insured loans and stress tests are not warranted in current market conditions.

“This is especially true at a time when first-time buyers are facing serious challenges in achieving the dream of home ownership. We applaud the federal government for acknowledging that housing issues are a top priority for Canadians, but current mortgage restrictions still need to be addressed,” he said.

CREA says that it is encouraged that the federal government is carefully monitoring the effects of B-20 mortgage regulations with a view to limiting negative impacts on housing markets that are in balance or struggling, and on economic growth in Canada.

by Steve Randall

21 Mar 2019

Expert witness’s knowledge of typography proves trust papers forged


When Canadians file for bankruptcy, most of their assets — including houses and cottages — become the property of the trustee in bankruptcy and are sold to pay creditors. One of the few exceptions to this rule occurs when the bankrupt person holds property in trust for a third party.

A judge recently ruled two trust documents were shams based on an expert witness’s testimony that the documents’ fonts were inaccurate.  

After their marriage in 1994, Mr. G. and Mrs. K jointly bought a cottage in Muskoka for $700,000. In May, 2003, the couple purchased a farm in Caledon for $635,000.

Mr. G. was an executive in the telecommunications industry and became CEO of Look Communications in 2004. By 2008, the company was in financial trouble and sold its assets for $80 million, with Mr. G. receiving a severance package of $5.6 million.

Look later sued Mr. G. and other former board members to recover the compensation payments. Following a trial in 2017, Mr. G. was ordered to repay Look $5.5 million.

By December, 2017, Mr. G. was bankrupt, and the trustee took steps to liquidate his assets — including the cottage and the farm.

The Mr. G. and wife, Mrs. K. produced two trust documents alleged to have been created and signed in 1995 for the cottage, and 2004 for the farm.

The first, one-page trust document, dated January 4, 1995, stated that the cottage was held in trust for three children from a prior marriage.

The second, one-page trust agreement, dated March 4, 2004, stated that the farm was held in trust for all five children from previous marriages of the couple.

KSV Kofman Inc., the trustee in bankruptcy, applied to Ontario Superior Court last November for a declaration that the two properties were assets of the bankrupt estate which could be sold for the benefit of creditors.In the litigation, both Mr. G. and Mrs. K. relied on the trust documents to claim that the properties belonged to their children and could not be liquidated by the trustee in bankruptcy. If the documents were valid, the properties were beyond the reach of creditors. If they were invalid, they were part of the bankruptcy assets.

Mr. G. testified that the trust documents were created and signed on January 4, 1995 and March 4, 2004, respectively. But counsel for the bankruptcy trustee produced an expert witness: Thomas Phinney, an acknowledged expert in graphic arts, design and typography. He has 20 years of experience in the font industry, including more than a decade with Adobe Systems Inc. creating and using fonts and typefaces.

Phinney identified the font on the 1995 trust agreement as Cambria, which was designed by Microsoft in 2002 and only made available to the public in 2007. His conclusion was that the 1995 trust agreement in Cambria font could not have been created or signed on that date.

Similarly, Phinney testified that the 2004 trust agreement was set in a font called Calibri, which Microsoft developed in 2002 and which was not released to the public until 2007.

Based on the expert evidence, Justice Michael Penny ruled that the trust documents were shams.

The lesson from the case is when you are examining documents, you need to look at the form as well as the content.

by Bob Aaron

Bob Aaron is a Toronto real estate lawyer and frequent speaker to groups of home buyers and real estate agents. 
He can be reached by email at, phone 416-364-9366 or fax 416-364-3818.

TREB puts more pressure on Ottawa

For the second time in just under a full month, the Toronto Real Estate Board has called on Ottawa to review the B-20 mortgage stress test.

While reporting February sales figures—they’re down 2.4% year-over-year—TREB President Garry Bhaura took a shot at the Office of the Superintendent of Financial Institutions while also alluding to the upcoming federal election.

“The OSFI mandated mortgage stress test has left some buyers on the sidelines who have struggled to qualify for the type of home they want to buy. The stress test should be reviewed and consideration should be given to bringing back 30-year amortizations for federally insured mortgages. There is a federal budget and election on the horizon. It will be interesting to see what policy measures are announced to help with home ownership affordability,” Bhaura said in a statement.

Added Jason Mercer, TREB’s director of market analysis and service channels:

“Home sales reported through TREB’s MLS System have a substantial impact on the Canadian economy. A study conducted by Altus for TREB found that, on average, each home sale reported through TREB resulted in $68,000 in spin-off expenditures accruing to the economy. With sales substantially lower than the 2016 record peak over the last two years, we have experienced a hit to the economy in the billions of dollars, in the GTA alone. This hit has also translated into lower government revenues and, if sustained, could impact the employment picture as well.”

Christopher Alexander, REMAX Integra’s vice president and regional director for Ontario-Atlantic Region, says that while he can appreciate OSFI’s reticence in standing idly by while Canadians continued accruing more debt, he says the situation has changed dramatically.

“They’re saying interest rates will only rise 1% over the next few years, so why are you still asking people to qualify at 2%?”

Alexander says B-20 has transformed from a prudent measure into a monumental hindrance.

“I strongly believe and support responsible lending and debt management, but I think that when the stress test came in it served a purpose and now it’s starting to do more harm than good,” he said. “We need to find a way to incentivize first-time homebuyers to get into the market and incentivize existing mortgage holders to pay down their debt.”

by Neil Sharma

March 05, 2019

Inadequate flood mapping is putting Canadian homes at risk

Canadian homeowners do not have access to enough information to help them decide if they should buy flood insurance, according to a new study.

University of Waterloo researchers have found that flood mapping is inadequate and that’s putting homeowners at great financial risk.

"With governments starting to step away from flood recovery assistance in favour of having homeowners purchase private insurance, it is clear homeowners lack access to information that would help them determine if they should add that protection to their policies," said Daniel Henstra, a professor of political science at Waterloo's Faculty of Arts.

He added that with high levels of household debt, many homeowners would not be able to meet the financial burden of repairs following flood damage, making clear information on flood risk essential.

Together with professor Jason Thistlethwaite, and PhD candidate Andrea Minano, both of the Faculty of Environment at Waterloo, Henstra examined information available online from both government and non-government organizations for more than 300 flood-risk communities across Canada

Lacking consistency and quality
They found that 62% of the flood maps available did not meet the minimum criteria for informing the public about flood risk. The availability and quality varied across regions, making it tricky even to know where to look.

"In this exercise, it became quickly apparent that mapping resources are largely outdated and the resources that are available are hard to find," said Minano. "If Canada wants to move from government assistance to help people recover from catastrophic flooding to a model based on home insurance purchased at the discretion of the homeowner, our maps and their availability need to improve."

The study appears in Natural Hazards and Earth System Sciences.

by Steve Randall

04 Mar 2019

Mortgage fraud risk highlighted in new campaign

The potential risk of mortgage fraud is being highlighted by an industry body as Fraud Prevention Month gets underway.

The Mortgage Broker Regulators’ Council of Canada (MBRCC) is promoting consumer protection from mortgage fraud, including how to spot it and how to report it.

It ties in with the month-long fraud awareness campaign led by the Competition Bureau of Canada and will highlight the practices adopted by mortgage brokers to protect consumers.

"We conducted a jurisdictional scan of current anti-fraud strategies and consulted key stakeholders regarding MBRCC's role in combating mortgage fraud," explains Charles Stevenson, Chair of MBRCC's Mortgage Fraud committee and Registrar of the Real Estate Council of Alberta. "What we learned was that there is a need for anti-fraud information that is applicable to every Canadian mortgage customer and mortgage broker, regardless of the specific legislation that governs mortgage brokering in their province or territory."

MBRCC has made information available on its website for both consumers and mortgage brokers to help identify the risks. For brokers there is also information about responsibilities to prevent mortgage fraud, an anti-fraud checklist, and the consequences of fraud.

"The enhancement of consumer protection is an important strategic priority for the MBRCC," says Alaina Nicholson, Chair of the MBRCC and Director of Consumer Affairs at the Financial and Consumer Services Commission of New Brunswick. "This new release is part of our commitment to promoting a common regulatory approach and consistent standards for mortgage brokers."

by Steve Randall

04 Mar 2019