home capital group home trust
personal finance,  real estate

Home Capital Group: What to do if you have a mortgage

Home Capital Group has been having a lot of problems over the past few months. Here is a perspective from Rachelle Berube, who is the Toronto-based writer and property manager of the blog LandlordRescue.ca. We have reposted her blog post, the original post can be found here.

You may have read a lot of stuff recently in the news about Home Capital Group. You have a mortgage with them. What does it mean? What can you do?

  1. Don’t believe the bullshitters like Stephen Poloz who say that it’s fine. Maybe it’s fine for him, but it isn’t fine for you. You may be in deep trouble.
  2. Home Capital Group will not be able to refinance your existing mortgage.
  3. You will pay more elsewhere if you can even get an elsewhere. Lenders are being more careful

The sooner you start the better off you are.

The bulk of Home Capital mortgages are one and two year terms, you need to start planning now. The optimum solution for you is to become the type of borrower an A lender will accept. You will get cheaper rates.

Sorry about the terrible quality but it’s a screenshot of a blog comment.

“I can’t see how DLC (Dominion Lending Center) is or any other company is offering support. Business is not”as usual” for Home Trust and the money they claim to have in security means nothing as they cannot close a deal for me after issuing a commitment for $225,000??? The deal completed and instructions sent to solicitor and now I am hearing from them they likely will not have the money until June! I’m now scrambling to complete this deal with another lender before the clients go to the branch. Be careful with deals sent to HT…what does past lending experience have to do with what is happening now? ”

Home Trust is almost certainly history. Their latest company statements have said they may not be a going concern and that usually means bankruptcy. So you’ll have to likely move your mortgage elsewhere.

Prepare to Pay More

So it’s not dramatic but you may have to pay .25% or .5% more on your rate. If lending tightens up even more, you may have to pay even more interest.

Get In Touch With Your Broker

You’ll want to touch base with your mortgage broker. They will best be able to direct you. I know two good decent mortgage brokers. One is Bruce Joseph from Anthem Mortgage and the other is Jake Abramowicz of Mortgage Edge  They may be able to help and will be honest with you about your prospects.

My Friend – The Overextended Landlord

One of my friends called me the day after I mocked Stephen Poloz for saying the Home Capital Group is contained.

She’s a landlord and because she owns quite a few properties, her debt service ratio is not acceptable to a regular bank. In her lust for property she may have bought a few two many.

All her properties are cash flow negative because they are in the GTA area. However, I’m pretty sure she’s a paper millionaire, with the way home prices have gone up. What does that mean? She still shops at Walmart or cheaper because it’s all equity gains trapped in the houses.

She called and she has a mortgage up for renewal on her personal residence. She’s paying 3.99% and now she needs to renew at the end of this month. She got an offer for 4.25% and grabbed it on the advice of her mortgage broker.

Finally she promised me she’s going to sell 2 properties. In fact, she probably has to, because those properties are coming up soon for renewal. (We’ll see, she’s promised me before she was going to sell something) Problem is all the properties are cash flow negative except for the one condo she’s owned for over 10 years and the maintenance fees keep going up so it’s not cashflowing a whole lot.

My friend and her husband have good jobs and have never missed a mortgage payment. The problem is that with a new lender you will have to requalify. What if you declared bankruptcy or lost a job? This could cause problems. There is a possibility that some of you may have to sell your homes, or work hard to get a mortgage.

You want to plan ahead, touch base with your mortgage broker, maybe sell a property, consolidate your loans, shrink your debt and figure your shit out.

When my other friend lost his mortgage with Accredited in 2010 (Lender from the states that stopped renewing mortgages) he had 30 days notice and in his position it was not enough leeway to get him in a decent position. He wound up taking a mortgage from a private lender, and another mortgage from TD Canada Trust but ultimately his payments went from $1300 to $2000 per month and when he finally sold his house, he had to pay a $35,000 mortgage breaking fee for the private lender and he wound up with most of his equity gone.

Private Lending – Read the Fine Print

If it turns out that you need a private lender, people please read what you are getting into. Take that contract to a community legal clinic if you have to and have someone look over. There are a lot of predatory lenders who love when you mess up your payments. Seriously.

Don’t Wait Until the Last Minute

One of the things that upset me about my friend was that Accredited knew for several years that they were not renewing mortgages, like Home Capital they were a B lender, they could have sent out a letter letting people know a good while in advance, but they sent out letters just 30 days before the renewal. If my friend had more time to plan, he could have sold his house or found some better terms for his renewal. 30 days is not a long time when it take a few days to get an answer back.

For now, homeowners are getting mortgages elsewhere, a little more expensive maybe, but still getting there. You will still have to qualify and that is a big deal, some people like my friend may have had a serious important change in their circumstances. In his case he declared personal bankruptcy because he was sued by a person who claimed he had set their roof on fire. (He was a roofer) Other people may have lost or changed jobs or had another major change.

In the past your renewal was the worst rate you could be offered but as long as your payments were paid, you had the certainty you could renew your mortgage. Now that is not true. In fact, credit is almost certainly tightening, which may cause serious problems down the road. Certainly if you dream of buying an income property, or cottage you may just be dreaming. Which is not bad considering the prices are insane.

Don’t Panic but Get Thee To The Mortgage Broker ASAP

Victor is the President of Fong and Partners Inc. He is a Licensed Insolvency Trustee and Chartered Professional Accountant. With over 20 years of experience in the insolvency field, Victor has been involved in both corporate and consumer insolvency engagements. Previously with a large national firm, Victor founded Fong and Partners Inc. in 2007 so that he could dedicate his professional life to help people from all walks of life to deal with their debt.