Sep 12 | 2017

5 Terms Every Property Owner Should Know When Refinancing

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Whether 5 Terms Every Property Owner Should Know When Refinancingyou’re looking for more cash flow, want to lock in a good interest rate or just change the terms of your loan, you may be considering refinancing your home. One thing to keep in mind is that unless you’re already at the end of your loan term, there will likely be additional costs involved in the process. Before you move forward, make sure you’ve done all the calculations to check if the penalties and fees make the refinance worthwhile.

Once you’ve decided that refinancing is the best choice for you, it’s time to sit down with your mortgage broker or financial institution and go over your options. To prepare for your meeting, it’s important for you to understand the following terms and how they will affect you*:

1. Amortization period: This is the number of years it will take to pay off your new mortgage. While amortization periods can go up to 35 years, you should remember that even though your monthly payments are lower with a longer period, you’re paying more interest in the long run. It’s important to pay attention to this because if the Bank of Canada increases their rate, your lender may increase your amortization period in order to accommodate it.  Amortization period is often confused with the term of your loan, which is the period in which you commit to the interest rate and other conditions related to your mortgage with a specific lender – usually for about 5 years.

2. Debt-to-income ratio: To determine what products and services you may qualify for, a lender will check your debt-to-income ratio. This figure calculates your monthly expenses versus your monthly income and the resulting percentage is your ratio. It tells the lender how much more debt you can afford to take on. If you have a low debt-to-income ratio, you’re less of a risk to the lender.

3. Loan-to-value (LTV) ratio: This percentage refers to the amount of the mortgage divided by the value of the home. The maximum LTV ratio that lenders require to qualify for a mortgage/refinance is usually 80%. It determines whether you or your lender will need extra protection like mortgage insurance.

4. Portability: If you’re planning to move before your mortgage is fully paid off or you’re just not sure how much longer you’ll be staying, look out for the portability feature of your mortgage. It allows you to move your mortgage with the same interest rate and conditions to a new property with no penalty.

5. Prepayment penalties: With any mortgage, you will likely face a penalty if you pay it off before the term is up. It varies between lenders and depends on whether you have a fixed or variable rate. For instance, the penalty may be 3 months interest on a variable rate term but might be higher for a fixed term.  It’s important to find out the prepayment penalties before choosing a lender as some may have stricter rules and higher costs that make it harder to pay off.

Refinancing your home is not as simple as finding the best interest rate. The lowest rate doesn’t necessarily mean that you’re getting the best product. It’s important to evaluate all the other conditions that come with your new mortgage carefully before making a decision.

If you have questions about refinancing, you can always talk to your mortgage broker or lender.

*This is meant to provide a general overview only. Speak to your lending professional for more information.

 

Aug 16 | 2017

EasyFund is Now Available Directly Through
The Conveyancer®

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EasyFund is now available directly through The Conveyancer®At FCT, we’re always looking for ways to make real estate transactions more efficient for everyone involved. To do this, it’s important to ensure that any new innovation is integrated easily and seamlessly into the existing closing process.

Do Process shares our goals to streamline practices and provide innovative solutions to the legal community. We’re happy to announce that EasyFund is now accessible directly through The Conveyancer platform*. This integration is another way we can provide our customers with greater efficiencies in the closing process. They can now enjoy a truly end-to-end solution through The Conveyancer.

“FCT has found the Holy Grail for Canadian real estate lawyers: electronic transfer of funds between solicitors… and now they’re making it even easier.” Mitch Kowalski, author, advisor and innovator in the global legal services industry.

EasyFund was created in response to a need from the legal community to provide greater efficiencies in the cumbersome practice of paper cheques delivered between offices during a real estate funding process. It is a secure online service that offers legal professionals the ability to safely manage the transfer of real estate closing funds, effectively reducing the need for certified cheques, bank drafts, direct deposits and couriers. It allows legal professionals to manage the payouts of a transaction quickly and easily without leaving the office.

Now, through our integration with The Conveyancer, the payout process can be completed securely and even more efficiently in two simple tabs.

How will this integration benefit you?

  • It will eliminate the need to re-key client information which saves you more time
  • Provide you with an end-to-end solution to process your deals
  • You will remain in control of the entire process
  • You will gain access to a larger network of lawyers who use EasyFund, making your transaction process easier

Join the growing network of law firms who already enjoy easier and faster closings with EasyFund by enrolling now! Contact us at 1.877.313.0505 or easyfund@fct.ca for more information.

*EasyFund is currently available in Ontario only.
Aug 1 | 2017

Is Your Cottage or Investment Property Vulnerable to Fraud?

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Is your cottage or investment property vulnerable to fraud?While people may see the value of getting title insurance for their homes, it is equally important to title insure any property you own – a cottage, summer home or even an investment.

Fraudsters may target properties that appear vacant or are rented out, especially ones that are mortgage free, and can either illegally transfer the deed to themselves and sell it out from under you or take out a mortgage on it and escape with the proceeds.

In one instance, a young man decided to use some of his savings and invest in real estate. He purchased an investment property for $204,500.00, as well as an FCT homeowner title insurance policy. Two years after the purchase, he received a notice stating that the mortgage was in default and that the lender would be taking possession of the property. Confused, he went to a lawyer as he knew that his mortgage was in good standing. An investigation revealed that though the man’s original mortgage was not discharged, the title was fraudulently transferred from the insured homeowner and a mortgage in the amount of $165,000 had been registered on the title. Mortgage funds were paid to the fraudster, who was now nowhere to be found.

Luckily for the young man, he was protected by an FCT title insurance policy. We coordinated and retained a lawyer on his behalf, and ultimately paid out $12,548.09 in legal fees to remove the fraudulent mortgage from title and rightfully transfer title back. The young man was able to keep his investment property, while being spared the time, expense and hassle of having to defend himself against the fraud.

While it’s not feasible to prevent fraud from taking place, the easiest way to protect yourself is to purchase title insurance. It will ensure that you are able to defend and retain the title to your property without experiencing all the stress and the costs associated with it, in addition to protecting you from a host of other title and non-title issues.

Have any questions about fraud protection? Share it with us in the comments section!

Jul 21 | 2017

What We Can Learn From Toronto-Dominion Bank v. Currie

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What we can learn about fraud from Toronto-Dominion Bank v. CurrieTo what extent will a private lender be bound by the actions of a mortgage broker working on its behalf?  Will Canadian courts deem the broker to be an agent of the lender?  Will this apply even to fraud committed by the broker?  Earlier this year, in the case of Toronto-Dominion Bank v. Currie, the Alberta Court of Appeal issued a decision on precisely these questions.

Currie was a private lender who used a mortgage broker, Fuoco, to handle some aspects of his mortgage lending business.  In this case, Fuoco arranged for Currie to lend $220,000 to the Craigs, and Currie provided them with a mortgage for their property.  The mortgage instructions stated that all communications regarding the mortgage were to be directed to “DAN CURRIE c/o Fuoco Holdings Ltd.”

Following a default on the mortgage, the Craigs arranged new financing with TD Canada Trust.  The bank’s lawyer wrote to Fuoco requesting a payout statement for Craig’s mortgage.  Fuoco prepared a payout statement for Currie to sign, showing a balance owing of $249,992.55.  For reasons that are not clear from the court’s judgment, Fuoco did not provide this figure to the bank’s lawyer, but instead provided a different payout statement, showing only $75,000.00 as being outstanding, and directing the payout funds be made payable to Fuoco.  Upon closing, the bank’s lawyer sent this amount to Fuoco, who escaped with the funds, never having provided a discharge of the mortgage.

The Court of Appeal had to decide which of the two innocent parties, Currie or the bank, should bear the cost of Fuoco’s fraud.  The Court concluded that, by using Fuoco’s services in his lending business, and allowing Fuoco to receive communications and prepare mortgage payout statements on his behalf, Currie had given Fuoco actual authority to act as his agent, and therefore it was Currie who had to bear the loss resulting from Fuoco’s dishonesty.

This case highlights some important considerations for mortgagees and their lawyers.  When acting for an incoming lender, lawyers should always ensure that they purchase title insurance.  What looks like a valid payout statement or discharge could later be challenged by the previous mortgagee itself. Even if, as in Currie’s case, the new mortgagee is ultimately successful, there can be considerable time and money spent on litigation.  Lawyers should also consider adopting the practice of insisting on having an executed discharge from any outgoing private lender in hand prior to closing.  This is already standard practice in some parts of Canada, and goes a long way toward reducing confusion and risk following closing.

While in this case, it was the mortgage broker who committed the fraud, there are other cases in which it was the lawyer or even the borrower. There are measures that brokers and borrowers can also take to ensure they are not involved in a fraudulent transaction.

Mortgage brokers can protect themselves from fraudsters by verifying all the information provided by their clients. For instance, it is a red flag if their salary doesn’t make sense for their stated occupation. Borrowers can ensure that they purchase title insurance so that their legal costs will be covered if they ever have to defend their title. It will also protect them from a host of other issues such as survey or title defects.

Everyone involved in a real estate transaction has the responsibility to protect themselves from fraud.

How do you make sure that you’re protected? Share it with us in the comments section!

Jul 14 | 2017

Why Jack Smith* was Glad he had E&O Extra® with Protection+

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E&O InsuranceWhen Jack’s clients were slapped with a $47,000 development charge, they were astounded. Jack made an honest mistake in failing to advise them about this charge and that there was no cap on it.

To maintain their reputation and keep their clients happy, the law firm was able to negotiate with the builder to reduce it to $10,000. Looking at a reasonable industry standard, the purchaser of a new home could expect to pay $7,500 in development charges so the firm covered $2,500 from their own pocket and the clients paid the remaining amount.

Luckily for Jack, he was protected by his E&O Extra** with Protection+ insurance. He submitted a claim to FCT and was reimbursed for the $2,500 paid to smooth things over with the client.

If you were in a similar situation, would you have been protected?

FCT understands that mistakes happen. We offer insurance products to complement your mandatory E&O insurance. We provide reimbursement for losses resulting from claims against your mandatory E&O insurance for residential and commercial real estate transactions. This includes your standard deductible payment and any increase in premium***.

For additional coverage, like Jack’s, you can add Protection+ to your E&O Extra policy for a minimal fee.  It offers you the ability to settle smaller claims directly with your client and avoid going through your mandatory E&O coverage. It covers up to $10,000 per policy year or a maximum of three claims (whichever comes first).

Contact us to learn the different ways we can protect you and your reputation.

 

*The name has been changed to protect the privacy of our clients.
** E&O Extra does not cover dishonest, fraudulent or criminal acts of omissions.
*** Standard deductibles, premiums and coverage amounts vary by region.
Insurance by FCT Insurance Company Ltd. This material is intended to provide general information only. For specific coverage and exclusions, refer to the applicable policy.
Jul 7 | 2017

3 Tips to Stay Healthy When it Gets Busy

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Tips to stay healthyWhether you’re a lawyer, lender, mortgage broker or realtor – working in the real estate industry can be unpredictable. Before you know it, things get hectic and you can slip into bad habits like skipping meals, not exercising and working on just a few hours of sleep. This will eventually take a toll on your health and even your mood. But when you’re busy, it’s even more important to maintain peak performance.

Here are three simple ways you can stay healthy and energetic all year round.

1. Make healthy food choices

Not that you can’t enjoy the occasional pizza party, but think of it this way, nutrition fuels your body and you’ll get the most out of premium gas. If you skip meals, you may end up making bad food choices out of hunger. Try to stash healthy snacks like fruits, nuts and pre-cut veggies at your desk. This way you won’t need to rely on candy bars and fast food to get you through the day.

2. Keep active

You may be sitting hunched over a desk all day or behind the wheel of a car – going to client meetings or rushing from one property to another. Take some time in the day for a quick stretch break or better yet, start a fitness challenge with co-workers. Getting other people on board is a great way to ensure you all stay moving and motivated.

3. Set expectations and priorities

At the end of the day, you’re only human. Make sure your clients and co-workers have reasonable expectations of you. Create a list of priorities for the day to help you get organized and let people know when they can expect deliverables.

Do you have any other tips to get through busy periods? Share it with us in the comments section!

Jun 28 | 2017

Strata Plan vs Title Insurance: Which One Do You Really Need?

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Strata plan vs title insuranceDarren* applied to change the use of his commercial condo unit to a medical one, but his request was denied. He was told by the municipality that the site plan agreement had not been complied with as the condo corporation required another 97 parking spaces to be added. The municipality then issued a Notice of Violation of the Site Plan Agreement due to the lack of parking spaces. The condo corporation has to decide whether it will add the parking to comply or try to change this requirement in the site plan agreement. This may mean an increase in common expenses or a special assessment to be paid by Darren and the other unit owners. Because Darren had a commercial title insurance policy from FCT, we are paying for the legal costs to defend him in dealing with the Notice of Violation.

In Darren’s case, the Site Plan Agreement would have needed to be compared with the Strata Plan to make sure they matched. However, having a strata plan would have provided no protection as it would not have covered his legal expenses or potential loss of value to his property if he can’t use it as he planned to.

A strata or condominium plan, like a survey, is created by a surveyor and it documents unit sizes and structures as well as what is common and exclusive use property. It also includes any parking or lockers that are part of the unit. However, if there’s an error in the strata plan or the structure does not match the plans – it’s the owner who may be responsible for part or all of the costs associated with remedying the issue.

A legal professional can provide an opinion on title based on the accuracy of information provided to them and an up-to-date or existing strata plan or survey. However, without a title insurance policy, a strata plan by itself offers no protection for the property owner or legal professional in case of incorrect information or discrepancies.

With an FCT title insurance policy, we protect both the legal professional and owner by providing loss of value coverage, duty to defend, funds to fix most municipal enforcements, fraud protection and more. It benefits lawyers by shifting the risk and liability associated with the title and strata/condo plan to us. Our condo endorsement also covers lack of disclosure in a Status Certificate, if the condo corporation has not been properly created and it results in a title defect. A Status Certificate is not always necessary for a loan policy depending on the insured amount.

While both a strata plan and title insurance are important in a condo or bare land purchase, choosing the one that offers you more protection is a safe bet!

*Name has been changed to protect the privacy of the individual.

Jun 21 | 2017

What’s Happening in FinTech?

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Top FinTech LearningsThe spring season brings a lot of activity to the financial services space in Canada. It’s one of the busiest times of the year for typical “money out” campaigns from our banks and coincides with strong activity in listings, transactions, and ultimately closings.

More recently the spring season has also come to signal the start of FinTech conference season across Canada. The size and scale of these events continue to grow while our own homegrown talent is taking center stage. With over 250+ FinTech companies across Canada and $1BN in cumulative venture capital investments, Canada is well on its way to solidifying itself as a global center for financial innovation.

As Head of Product at FCT, one of my primary responsibilities is understanding how the needs of our lenders are going to be changing over the next 3-5 years. Internally, we’ve been aggressively transforming our own product portfolio and expanding our focus on hybrid solutions that leverage the best of our financial technology, business process outsourcing (BPO) capabilities, and insurance expertise. As I have been working through the process of how we align our own product roadmaps to these opportunities, I wanted to share more broadly what I’ve learned on the conference circuit throughout the year.

Developments in FinTech

Opening up financial services data:

  • The European Union is already well ahead of North America when it comes to FinTech penetration. In an unusual role reversal, we actually see governments across the globe leading the charge to create an environment that is conducive to FinTech growth and innovation.
  • Initiatives like the European Union PSD2 open banking API, where by 2018 all lenders will be required to open up transactional data (with user permission) to enable third parties to build new types of financial services is one important example. While Canada is definitely lagging in this area, there are several opportunities to target key data as a starting point and use that information to re-engineer how financial services are delivered to customers across all segments.

While cash flow will always be king, managing identity in the digital age is close behind:

  • Online identity is the next cycle of the internet and as we see more and more digital lending platforms that don’t require in-person interaction, there is more of a need for identity management applications that simplify and perfect authentication/verification, early detection of fraud, and are adaptable.
  • Contextual commerce is the next major area of growth in the financial service space. This area deals with making payments through internet connected devices that are not a smartphone or laptop but rather devices like Amazon Echo, Google Home, Oculus Rift, and even your connected car. Thinking through the connected car example, how would you know the driver of the car is the right driver to offer a service?

Homegrown products will find greater product-market fit than global imports:

  • Canadian built and managed FinTech solutions will have the advantage over more global or regional efforts that try to ‘Canadianize.’ Rethinking financial solutions from the ground up will provide another advantage. The underlying point here is a true need to take a product-driven approach to building new financial services as opposed to a clone strategy from other markets.
  • For example, at FCT we believe understanding your customer segmentation in FinTech is critical. Existing companies overly rely on safety, security, legacy as the bread and butter of their solutions. Those features are table stakes but do not do enough in isolation to capture the wallets of the millennial, and eventually Gen Z segments. Great user interface and user experience, smart use of data, and transparency are at the top of the decision matrix for these segments and are causing radical reinvestments in technology talent across existing companies of all sizes.

This is the year of blockchain….or maybe its Ethereum… but it’s time to see RESULTS

  • By now everyone has heard of blockchain and the power of the underlying technology in financial services, but the conversation is FINALLY shifting to the business opportunities and that will be the catalyst for blockchain-infused products to gain traction. Experiments like Project ‘Jasper’ which is a Bank of Canada + Big 5 proof of concept with blockchain to reduce reconciliation efforts in payments systems are examples of the results and value of using distributed public networks.

We strongly believe that we are less than 12 months way from seeing the first mainstream pilot for tools like smart contracts and we are even bigger believers in the truly disruptive nature of these technologies.

I’m incredibly interested in your opinions and welcome comments. If you are passionate about thinking differently in the financial services space, I’d love to chat and can be reached at rlambert (at) fct dot com or through LinkedIn.

Jun 16 | 2017

Title Insurance: What Every Homeowner Needs to Know

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Title Insurance: What every homeowner needs to knowYou combed through websites, apps, maybe even the papers and visited dozens of places until finally! You found the perfect house! Your biggest achievement, your biggest asset – how do you keep it safe? Or like in this case, how can you even make sure that it’s all yours?

Before you purchased your home, the property may have changed hands several times leaving room for mistakes like an incorrect survey, a non-existent permit or title-related issues. Even with a new build, somewhere along the way there may have been an error that could affect your ability to sell, mortgage, or lease your property in the future. These are the types of things that a title insurance policy can protect you against.

What exactly is title insurance?

Title insurance is a unique form of insurance. Unlike home insurance where you are insuring the structure and contents, title insurance protects you, the homeowner, against losses related to the title (ownership) and other defects relating to your property. Plus, it may cover fixing issues or legally defending your ownership, which can be very costly and stressful.

Do you automatically get a title insurance policy when you purchase property?

It’s a common misconception that homeowners automatically get a residential title insurance policy when buying property. While a lender policy is required on every purchase, a homeowner policy is not. It’s up to you to make sure that you have the protection available to you through title insurance.

Does the lender or loan policy cover you?

No, a lender aka loan policy covers lenders only  and protects their interests when it comes to priority and enforceability of your mortgage, title and survey defects, municipal issues and title fraud.

What does a homeowner title insurance policy cover?

A typical title insurance policy covers common issues that may have happened both before and after you’ve purchased your home. This is sometimes referred to as pre- and post-policy because the day you take ownership of your home is generally also the effective date of the policy.

The main areas of coverage in the Homeowner Policy are:

  • Fraud — a person fraudulently transfers your property without your knowledge or consent.
  • Forgery — someone forges your signature on a registered document, which allows them to sell or mortgage your property.
  • Encroachments — if a structure built by a previous owner sits outside the property’s boundaries or if a neighbour builds a structure that is partially on your property after you purchase your policy.
  • Lack of building permits — if a previous owner completed work to your property without the required building permits, you could be forced by your municipality to remove or fix the structure.
  • Duty to defend — if you have to protect and restore your title as a result of a covered title risk, FCT will pay for the legal fees and costs associated with it.

How much does a policy cost?

  • For a low one-time premium, you can ensure that you have the protection you need for as long as you own your home. Your lawyer can provide you with a quote within minutes.

Don’t put yourself at risk. For a free quote, visit fct.ca today!

This is provided as general information only. For further details regarding coverage, please review your policy.

 

Jun 9 | 2017

What Can Buyers do to Avoid Surprises and Delays in Closing?

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Tips for closing successfullyWith rising prices and stricter controls on mortgages, housing affordability is getting more challenging. And once you finally obtain funding (after squeezing out every last drop of your savings for a down payment), it’s still not a done deal till the closing date. A number of unexpected issues can come up that may kill or delay a deal.

Here’s a checklist that will help you get to the finish line successfully:

  • Don’t start spending big – Now that you’ve secured funding for your house, you might think that it’s time to start buying furniture for your new home. Try not to spend large sums of money, whether cash or credit, as it will affect your standing with the lender. Your financial status will be checked a few days prior to closing and any major changes from your initial evaluation will need to be reassessed to ensure you still have the ability to pay off your mortgage.
  • Be wary of changing jobs – While it might seem like a great idea to take a higher paying job before your closing date, it may affect your lender’s decision to close as scheduled. They may want a few months of pay stubs from your new position to prove that you have stable income. While it may not be a deal breaker for your lender, it may delay the closing date.
  • Provide documents on time – Your closing date can be anywhere from 30-90 days after signing the agreement of purchase and sale. You do have some time to provide your mortgage broker and lawyer with the documents that they require, but don’t delay! The sooner you provide all the paperwork necessary, the sooner your team will be able to handle any unexpected findings or issues that may arise.
  • Try not to skip the home inspection – With the hot market and multiple offer scenarios nowadays, a lot of homes are being sold without conditions. While presenting a clean offer may win you the home of your dreams, it can also end up costing you more than you expected. When you’re mortgaged to the max, you can’t afford costly surprises like leaks or repairs that you come across when you finally move in.
  • Keep extra funds on hand – Buyers often put as much money as they can into their down payment. However, you should always keep extra money on hand to prepare for closing costs like land transfer fees, legal fees and any bills the sellers may have prepaid, such as property taxes or utilities. You may also need to put down a larger down payment if the lender appraisal values your house at a significantly lower price than you paid for it.
  • Don’t forget the title insurance – Make sure you’re protected by asking your lawyer to purchase title insurance for you. It not only allows you to close fast even in the absence of a survey and provides gap coverage, but it also protects you from paying any liens or debts the previous owners left behind.

Have you encountered unexpected issues before closing? Share your stories in the comment section below!