Mortgage Industry Leaders Offer Insight into the Changing Landscape of Canadian Home Financing

What are the worst-case scenarios? Why are you seeing them? What can be done?

By Gretchen Casey

You’re behind on credit card payments, mortgage payments, property taxes and/or utilities – as a home owner, this is a worst-case scenario. As a mortgage agent, we’re here to evaluate the situation and provide solutions.

Why are people getting into such financial trouble?

This is not something new. One reason why there are mortgage agents is to provide money to those who are turned down by the bank.

But some of the reasons we are seeing more of these situations are:

1. “Near all-time high levels” of consumer debt – according to TransUnion, the average Canadian consumer debt is $26,935, not including mortgage debt. Canadians use credit cards, which often means high interest rates and fees that become unmanageable.
2. Local and global economic challenges and job losses, with the jobless rate in Ontario being at 7.3%, down 0.4% in May, 2013. Those who have found new jobs often have to settle for a lower-paying job.
3. The fear and anxiety felt during times of job instability, job losses and decreased income which then contributes to addictions and habits to “cope” such as gambling, alcohol and drug abuse, co-dependency, shopping addiction; marital problems and break-ups; depression; weight and health issues. “This year, the Canadian Medical Association’s report shows that these tough economic times could also be a serious health hazard for Canadians, “ said Dr. Robert Ouellet, president of the CMA. When you have stress and health issues, money management often suffers.

As a mortgage agent, I am seeing more homeowners seeking financing solutions who have been turned away by their bank due to the government’s mortgage rule changes introduced in June 2012. These included decreasing the amortization on government-backed insured mortgages from 30 to 25 years and lowering the maximum amount when refinancing from 85% to 80%. So what can be done to recover from these difficult situations?

What can you do?

As soon as you are behind on credit cards, property taxes or other bills, if you anticipate you could go behind on your mortgage, then give your mortgage agent or lender a call to see what options may be available. They may offer a “mortgage vacation” for a month or so… or perhaps the option to extend your amortization and reduce your mortgage payment.

Non-profit credit counsellors offer solutions for budgeting and can walk you through step-by-step and there are also companies that you can pay for credit counselling. If you are a do-it-yourself type of person, watch TV shows and read books on getting your finances under control. Great books, tips and resources can be found at many websites, including Gail Vax-Oxlade’s site at www.gailvazoxlade.com. Van-Oxlade is best known from the TV series Til Debt Do Us Part.

If family can help you get up-to-date, that is great. I know of many people who have chosen to buy a smaller home, rent or live with family or friends temporarily. Upgrading your job skills and working together as a family works great, having children involved so they understand the financial challenges. Teens who are informed are more supportive and motivated to get part-time jobs.

If you are already in arrears, have a conversation with your current lender to determine if refinancing for debt consolidation is possible or seek solutions with your mortgage broker. If you don’t meet the criteria at the bank and there is equity in the home, credit unions, trust companies and private lenders offer solutions. These sources can have reasonable rates and fees.

If you are considering a consumer proposal or bankruptcy, I would also seek advice from the other sources already mentioned. Bankruptcies and consumer proposals do have profound effects on your ability to get mortgage financing and if you have a double bankruptcy, it is almost impossible to get mortgage financing.

I am also a very strong believer in the power of your mind, your emotions and your energy system. By taking steps to have a healthy mind, body and spirit, you will add to your ability to find and act on solutions to heal your financial life.

Take the first steps now. I wish you well. Don’t stop believing in your ability to turn things around.

Gretchen Casey is a mortgage agent with Mortgage Alliance