Feb. 28, 2010

Home Equity Fraud: Explanation and Its Types

My second article for the real estate scam series is here. It deals with home equity fraud and two of its most common kinds. Let's start with saying that the majority of lenders are just alright and honestly want the best for you, willing to help and offer you a good deal. But we cannot forget about those who are trying to profit and are not quite sincere. You need to be cautious.

The two most common kinds of home equity fraud are home equity flipping and home equity stripping.

Home equity stripping:
It is taking money out of your house/condo and basically even taking your property away. Let's say you have trouble with paying your monthly loan payments. When being in such a situation, do not apply for additional credit. You really need to be careful. Some lenders may well tell you to lie and fake your personal information in order to qualify for a mortgage loan, you would not qualify for otherwise. The best decision is not to listen to such lender and start looking for a new one. In case you cannot afford a mortgage loan, do not obtain one. Remember that lying does not solve the situation, it might just complicate everything for you. You lender might take away your house and strip you of basically everything ("equity stripping") if you cannot pay your monthly mortgage loan payments.

One of the basic forms of home equity stripping is 'home equity lines of credit'. Your property serves as a guarantee in such a situation. In such cases, it is extremely important to know and truly realize how big loan you can afford and at what rate. Be sincere to yourself at least - if you lie to yourself, you can just lose your property.

Home equity flipping:
Home equity flipping occurs when a lender is trying to convince you flip your current loan, whether you currently have more convenient conditions or not, just for their own benefit (keep in mind that the lenders earn on all your transactions). Just do not let them persuade you that repeated refinancing is good for you. If you actually are well informed about your situation, it is a big plus. Make sure to read all the documents you get and use your head. When in doubt, talk to someone who is informed enough. Just ask for an advice if you need one.

Part 1: Real Estate Scam

Real estate fraud is a quite usual thing. Lately, it has been gaining popularity. I'm pretty sure the vast majority of you have heard about that already. Still, I want to briefly summarize some of its types for you.

Foreclosure scam
Picture a situation that you have just purchased a new property, which you are really excited about. On the other hand, though, you have debt and big problems with paying it off. You might become kind of hopeless and thus ready for any help. Out of sudden, someone representing themselves as a mortgage consultant comes to your life, seemingly prepared to save the situation. They persuade you - the desperate homeowner in need, to transfer the ownership to them. From now on, your monthly mortgage payments will go straight to them. In spite of the ownership transfer to the "consultant", you still owe the monthly money to the institution lending you.

Mortgage Fraud
This is different than the foreclosure scam. It is a criminal act which aims to misrepresent personal info to be able to qualify for a mortgage loan. It involves identity theft, employment fraud, shot gunning, fraud for profit, income fraud, cash-back schemes, occupancy fraud or failure to disclose liabilities.

In identity theft, the scammer claims to be someone else (of course, without consent of this person) a uses their fake identity to obtain a loan, which they never pay off.

A situation when someone is officially borrowing for their primary place of stay, but actually use it for investing while occupying another residence, is called occupancy fraud.

Shotgunning occurs when numerous mortgage loans are obtained for the very same property, greatly exceeding its value.

Employment fraud is when a scammer claims to be in a higher position as they actually are, or they claim to own or to be self-employment in a non-existent company/institution just to prove they will be able to pay off their loan.

Income fraud is when a borrower lies about their income, claims to earn a lot more than they do in reality to be able to get a bigger loan.

Failure to disclose liabilities occurs when borrowers hide credit card debt or mortgage loans on other properties to decrease the monthly debt on the loan application.

Cash-back scheme means that a price of a home is significantly exaggerated (not in a legal way) to provide cash-back to the borrower or other transaction participants.

When the price of the home is understated or overstated on purpose, appraisal fraud occurs. To either get a bigger loan or to get a lower price on a foreclosed property.

Fraud for profit occurs when a group of people that cheats for financial gain. It also involves overstating the value of the house or condo.

This is just the first article from my real estate scam series. I am going to continue soon. Just leave a comment in case you are willing to share your experience with real estate fraud, I will be glad.

Feb. 13, 2010

The State of Canadian Market

Have you seen the latest Capital Points report by the Scotiabank group? As most of the times, it sumarizes up to date info about various sectors of Canadian economy, showing that on interesting charts, and even more. There's also a comparison of the economy of Canada to that of the US and couple of other countries. So what is the current state and what are some of the expectations according to Scotiabank group? Continue reading to find it out.

The recent state (many of these issues were mentioned in my posts already):
-the number of unsold new single homes in our country decreased and is now at prerecession levels
-as the interest rates are very low, there is increasing demand for houses
-residential building permits and housing starts in last few weeks improved
-there was an approximately 20 percent in residential permits during the last two months of 2009

-there was a big improvement in Asian import demand
-the leader in import among Asian states is China
-even though the share of Canadian exports to China is not exactly great, but as China says, imports from Canada grew by estimated 20 percent in the last month of 2009 Employment
-in January, 43,000 jobs were created in Canada
-there were 109,000 job gains in our country since April 2009
-during the past six months, 138,000 jobs have been created
-there was growth in total hours worked in 2009, although, if compared to the US, the pace was not very fast
-average hourly wages increased by 1.8 percent from 2008 to 2009, the slowest rise since June 2003

-big increases in housing starts
-growth in new home prices
-improvement of the job market
-improvement in housing construction
-moderate narrowing in the deficit on higher commodity prices
-January housing starts at the level of about 184,000, which is a 3.5% gain from a month before

As mentioned, my short posts did include many of these data, but having them summed up with some new info is great anyway, I think. My article however is just a short review and for all the data about Canada and other states, including graphs you should certainly read the original, 20 pages long report.

Feb. 6, 2010

2009 Housing in Canada

A new Canada Mortgage and Housing Corporation report about the 2009 housing situation just came out. You should check it out, it is quite in-depth and interesting. No real surprises if you regularly check the situation, but it is nice to see all the exact data summarized.

Here are the key figures from the report:
The seasonally adjusted annual rate of housing starts in December increased by 5.8 percent from November up to 177,800 units. The November level was 168,000 units. As a matter of fact, the number of housing starts was at its highest montly level since October 2008 in December.

Urban single and multiple starts also rose in December. From November, the seasonally adjusted annual rate of urban starts increased by 6.6 percent to 157,200. Urban single starts rose to 79,400 units, by 6.4 percent. And the rise of urban multiple starts was 6.9 percent to 77,800 units.

Only in the Prairies the seasonally adjusted annual rate of urban starts did not rise in December. There, urban starts actually decreased by 3.8 percent to 30,600 units. Actual new listings for 2009 also declined, by 12.6 percent compared to 2008.

The "sales to new listings" ratio for our country was at the level of 66 percent in December and has therefore stayed in the sellers' market territory. In 2009 overall, this ratio was 59 percent.

As for the seasonally adjusted average MLS price in our country, it rose by 0.9 percent to $345,335 in December. A month before, it was $342,287. The MLS price rose by 5 percent in 2009 compared to 2008.

2,600 positions were lost in December. Total employment in 2009 in Canada decreased by 1.6 percent, which is 276,900 jobs, from 2008. Thus for the first time in 17 years, the annual employment growth in Canada was been positive.

In December, the unemployment rate was 8.5 percent. 200 part-time jobs and 2,400 fulltime jobs were shed. Decrease by 16,600, the biggest one, was in Ontario.

Actual urban starts in 2009 declined by 30.4 percent from 2008. Urban single starts for 2009 decreased by 18.7 percent and urban multiple starts by 38.2 percent from 2008.

Starts in rural and urban areas went down by about 29.4 percent in 2009 in comparison with 2008. For the first time in eight years, housing starts in 2009, went below 200,000 units. Here in Ontario, total starts decreased by 32.9 percent.

There also was a decline in New Housing Price Index - 1.4 percent from November 2008.

In December, the seasonally adjusted annual rate of MLS grew by 2 percent in December, to 561,660 units. In 2009, existing home sales in Canada in 2009 increased by 7.7 percent from 2008. The seasonally adjusted annual rate of MLS new listings grew by 4.7 percent to 854,412 units in December. The seasonally adjusted average MLS price in Ontario was $341,810 in December 2009.

Couple of declines, and the really bad employment situation in Ontario upsets me. Still, nice to see it all summarized. What's your opinion? Do you find the results surprising? What do you expect this year?