21 May

What is a mortgage broker?


Posted by: Kevin Carlson

You may have noticed that there are many different terms for those of us who work in the mortgage industry besides “broker”.
Mortgage: specialist, expert, advisor, associate, officer, etc. I just want to clear up some potential confusion with all these monikers.
There are 2 main categories that these fall in to. Those that work for a bank to sell mortgage products available from that bank.
The other is for those like myself that work within a mortgage brokerage that has no direct affiliation with any one bank.
Each mortgage brokerage has agreements in place with multiple banks and mortgage lenders to be able to submit mortgage applications for consideration.
There are of course obvious differences between these but some may not be quite so apparent.

Mortgage Brokerage
All those working in the mortgage brokerage industry in Saskatchewan must be licensed by the provincial government agency, the Financial & Consumer Affairs Authority (FCAA).
There are 3 different types of licenses offered by FCAA: mortgage associate, mortgage broker & principal broker.
The mortgage associate and broker are very similar as both advertise themselves to obtain clientele, work directly with the clients, mortgage lenders, mortgage insurers, realtors and lawyers in the service of their clients. The key difference is that an associate must work under a supervising mortgage broker to ensure they remain in compliance with FCAA regulations.
Each mortgage brokerage will have a principal broker (aka: broker of record) that oversees the operations of the brokerage as well as all the associates and brokers within the brokerage.
Most all those working in the mortgage broker industry are commission based. Our income is derived from the mortgage lenders that we submit mortgage applications to.

In order to apply for a license as a mortgage associate, applicants must complete an approved mortgage associate education course and provide a current criminal record check along with the required application documents.

Application for a license as a mortgage broker are the same as for an associate with addition of a previous experience requirement.
The applicant must have been licensed as a mortgage associate for at least 24 of the previous 36 months.

In addition to annual applications for renewal, licensees must also:
>Purchase and remain in good standing with professional errors and omissions insurance
>Complete FCAA approved annual continuing education courses
>Provide FCAA auditors access to mortgage files for review whenever requested
>Advise FCAA of any changes to brokerage or contact information
>Immediately advise FCAA of any offences under the criminal code (other that traffic offenses)

Bank Branch Mortgage
Those that work in mortgage lending for a bank are normally paid by the hour or are salaried and may have a performance bonus structure.
Entry level positions do not require any education beyond high school. Training is provided on the job by the employer with supervision by the branch manager and more experienced staff.
There are no licensing requirements by any provincial or federal governing body and errors and omissions insurance is not required.
Many banks have mobile mortgage staff that may or may not conduct business within the branch and are often paid on a commission basis rather than hourly or salary.

I have been a licensed mortgage broker for over 14 years and work without an assistant to ensure no detail is overlooked for every one of my valued clients.
That is not to say that I work alone. The brokerage that I work within is one of the largest in Saskatchewan and has a wealth of talent and experience.

21 Mar

CMHC First-Time Home Buyer Incentive

Latest News

Posted by: Kevin Carlson

I have been fielding quite a few questions about the announcement of the new First-Time Home Buyer Incentive program. To begin with, these programs are not scheduled to begin until September of this year assuming no governmental changes.

I have taken the time to break down the math a little further to show the potential savings.

Bear in mind that the incentive funds of up to 10% on a new home and 5% on an existing home are merely an interest free loan that must be repaid upon sale of the property. This is for first time home buyers and household income cannot exceed $120,000.00 per year.

I will use the example that was in the budget release that illustrates the very maximum benefit available.

Link to Federal Budget

Details of the example:

  • New home purchase price: $400,000.00
  • Household income: $120,000.00
  • Down payment from the buyer: $20,000.00
  • CMHC Incentive Loan: $40,000.00
  • Assuming level fixed rate of 3.5% with an amortization of 25 years.

*Mortgage default insurance (CMHC) is required for a home purchase with less than 20% down payment. The insurance premium percentage decreases for each additional 5% down payment. The buyer with the standard 5% down mortgage pays a much higher premium.

When underwriting the original mortgages, the buyer that is using the CMHC incentive loan is allowed to have more ongoing debt payments outside of the mortgage. The incentive buyer can have monthly debt payments up to $1,650.00 per month, when the standard 5% down buyer can only have up to $1,100.00 per month.

I will take it a step further with the longer-term effects after the sale of each home. I will use a market value increase of 15% over 5 years bringing the sale price to $460,000.00.

It is very clear from the above financial illustration that the benefits of the CMHC incentive loan are realized in the up-front savings on the insurance premium and the reduced interest costs during the mortgage term. If this program comes into effect, I will be advising buyers to set the mortgage payments as close to the 5% down level as possible to further leverage the benefit and put more in their pocket after the sale.

If you have further questions about your next mortgage, please contact me directly at 3o6-533-1445.

Kevin Carlson – Mortgage Broker

DLC – The Mortgage Firm

18 Mar

Foreclosure, Bankruptcy, Consumer Proposal & Credit Counseling


Posted by: Kevin Carlson

The Canadian Bankers Association’s latest report on mortgage delinquency shows that Saskatchewan has the highest per capita of all the provinces. The national average shows that .24% of home owners are having difficulty paying their mortgage. Saskatchewan is more than triple that at .80% with next in line Atlantic Canada at .51% and then Alberta at .46%. At first glance these numbers seem relatively small until you note the fine print that “delinquency” in this report only represents those homeowners that are more than 3 months behind.

Link to Canadian Bankers Association Report.

I thought that I would take the time to go over the mortgage ramifications of foreclosure, bankruptcy, consumer proposal and credit counseling.

This is when the mortgage has gone unpaid to the point that the bank is forced to take back the security for the mortgage which is the home. First of all, the bank doesn’t want to have to do this. Non-payment of the mortgage for an extended period of time forces their hand. The foreclosure process is different in every province. Saskatchewan has the most difficult foreclosure process for the bank and gives the homeowner many chances to catch up and stop it. This process can take months to work through for the bank to take possession of the home to be able to sell it to recover their losses. The long-term effect on a client that goes through foreclosure is permanent. A record of the foreclosure is placed on each clients’ credit report. Unlike a bankruptcy or consumer proposal that are eventually removed, the foreclosure stays on their credit report for life. What that will mean is that when they want to eventually purchase a home again, they will more than likely require at least 20% down payment.

Bankruptcy & Consumer Proposal
Both bankruptcy and consumer proposal are administered through a licensed insolvency trustee. Typically, every creditor that you have debt with will participate in the process. This includes student loans and arrears with Canada Revenue Agency.
If you have gone through either of these insolvency actions, the mortgage industry sees them as them as the same thing. What is most important after either of those is to get back up on the credit horse and walk before you run. Canadians that swear off debt of any kind after insolvency are better known as lifelong renters. Never having a credit card or loan again is certainly fine until you apply for a mortgage to buy a home. Banks and mortgage lenders want to see that you can walk with small amounts of credit before running with hundreds of thousands in a mortgage. Once discharged from either a bankruptcy or consumer proposal obtaining a credit card should be your very first step. The next thing to do is advise both Canadian credit reporting agencies that you were discharged. You may be required to send documents related to the insolvency. It is a good idea to keep all your paper work from this process in a safe place for at least 10 years.

Here are links to both credit reporting agencies.
Trans Union

Credit Counseling
Credit counselling could be a viable option for those that are keeping up with their debt payments but need help in making a household budget to get out of debt faster. For those that have fallen behind on their debts and 1 or more have gone into collection status, credit counselling may not be the answer. There are 2 distinct differences between working with a credit counselor and a licensed insolvency trustee.
1. Student loans and debts to Canada Revenue Agency cannot be addressed within credit counseling.
2. If the credit counseling requires debt negotiations and/or payment arrangements, some of your creditors may decline to participate. This leaves debts outside of the credit counseling arrangement that you must address on your own. It’s a little like having 2 flat tires on your car and only 1 spare. The spare may work well to fix one flat but your car still isn’t roadworthy.

If you have questions about bankruptcy, consumer proposal or debt difficulties in general I highly recommend Pamela Meger at MNP Ltd. Ph: 306-790-7925.

27 Feb

Mortgage Tips & Tricks for Realtors


Posted by: Kevin Carlson

Mortgage Pre-Approval

When I am working through the pre-approval process for any home buyer, a critical last step is to pull their credit report.  Making sure that the client has acceptable credit history helps to ensure that bad credit or errors on their report will prevent mortgage approval when the time comes.  If your client was pre-approved by their bank or credit union, there is good chance that their credit report was not pulled.  The credit reporting agencies do not publish data on their services but there is an industry estimate that over 30% of all credit reports have at least 1 error on it.  Most errors are minor and may or may not require action to address.

A very common error that I see is with Regina’s largest credit union failing to properly update their clients credit report when loans and lines of credit are paid in full and closed.  While this is only a minor issue and easy to address, it’s another document that the clients need to obtain prior to making an offer on a home.


Mortgage Documents

Whenever I am working with a new client, I am sure to ask who their realtor is and I am sure that all of you do the same with your clients with respect to their mortgage.  Paper work required for a mortgage must be timely and not stale dated.  Some paper work can be collected at the pre-approval stage like tax returns, T4s, etc. but the rest like pay stubs and letters of employment must be from the last 30 days.

I always instruct my clients to give me a heads up when they are starting the offer process.  That allows me the chance to give them a complete list of paper work that will be needed once their offer has been accepted.  However, in the excitement of the home buying process they can overlook doing that so I encourage all of you to give your clients mortgage broker/associate/CSR a quick note to expect an accepted offer in the coming days.



One question that you may consider asking your buyers is how much down payment they are planning to put down.  If they are putting 20% down then their mortgage will more than likely not be default (aka CMHC) insured.  The benefit of an insured mortgage is that the lenders can rely on the insurers property valuation system.  Most all lenders have their own internal property valuation systems but clients putting 20% down may need an appraisal on the home if the internal lender valuation is not possible.


Energy Efficient Homes & Mortgage Default Insurance

All three mortgage default insurers have rebate programs in place for clients that buy energy efficient homes.  If one of my clients builds or buys an energy efficient home and their mortgage was default insured, I always make sure to send them information on how to apply for their rebate.  These rebates are not small either.  Depending on the home, the clients can get up to 25% of the mortgage insurance premium that they paid back as a rebate.  If you have a client buying an energy efficient home, imagine how happy they would be with their trusted realtor when a cheque for $2,500.00 arrives.  In fact, go through your files and see if you have any past buyers that fit this criterion.  CMHC will accept rebate applications up to 2 years from funding of their mortgage.

Here are links to all three mortgage insurer energy efficient programs.



Canada Guaranty


Gifted Down Payment

Ever since zero down 100% financing mortgages were discontinued, we have seen an increase in the number of clients getting their down payment from family.  That is certainly allowed in the form of a gift from immediate family such as parents, grandparents & siblings.  The client is still required to have the closing costs from their own funds.  Banks and lenders have adopted a national high-water mark for legal and closing costs of 1.5% of the purchase price.  One thing that does add an extra step in the mortgage process is if the person giving the gifted funds gives the real estate deposit from their account.  This often results in the need for a copy of the cheque and/or a receipt made out in the name of the party giving the gift.  To smooth this process, I recommend that the client obtain the gifted funds into their account in advance of writing an offer and giving the deposit funds from that account.  As a side note 100% financing still exists with the Borrowed Down Payment Program that allow buyers to borrow their down payment from a loan or line of credit.


18 Dec

Mortgage Stress Test – Not the Bad Guy


Posted by: Kevin Carlson

Ever since the federal government regulator, The Office of the Superintendent of Financial Institutions (or OSFI) brought in the Mortgage Stress Test, there has plenty of blame heaped upon it for slowing home sales and new home starts. Even though it has slightly reduced how much of a mortgage I can approve my clients for, the initial logic is sound. The stress test attempts to protect Canadians from taking on more mortgage debt than they will be able to afford when their mortgage renews down the road.

What it doesn’t do is curb additional debt and other financial factors after the mortgage starts. Many clients do not consider long term changes like, child care expenses, new vehicle loans, ongoing credit card and line of credit debt payments.

I work with many first and second time home buyers with wide ranging financial details. The stress test is a limiting factor, but in no way is it the largest culprit in preventing my clients from getting mortgage they are requesting. Credit cards, lines of credit and vehicle loans have a much larger impact on reducing the mortgage borrowing ability for most of my clients.

Here are some real-world numbers on 2 hypothetical first time home buyer scenarios that help to illustrate what consumer debts can have on a mortgage application.

1. Individual or couple – scenario 1
Buyer(s) with household gross income of $80,000.00 that have $17,000.00 as down payment.
There is a student loan with a payment of $200 per month and a vehicle loan of $300.00 biweekly.
This application would be approved for the purchase of a $250,000.00 detached home.
An additional monthly credit or loan payment of only $300.00 per month will prevent mortgage approval for this application.

2. Individual or couple – scenario 2
Buyer(s) with household gross income of $125,000.00 that have $33,000.00 as down payment.
There is a student loan with a payment of $200 per month and a vehicle loan of $300.00 biweekly.
This application would be approved for the purchase of a $500,000.00 detached home.
An additional monthly credit or loan payment of only $500.00 per month will prevent mortgage approval for this application.

Credit cards, lines of credit and vehicle loans are exceedingly easy to obtain but could stand in your way when you are looking to buy your first or next home. Please consider carefully before financing anything. If you are curious about what your debt numbers look like you can try using my Iphone or Android app to find out.

Click Here to Download the App

25 Oct

New Marijuana Rules – What Is A Grow Op?


Posted by: Kevin Carlson

There is quite a bit of information being passed around about growing marijuana in your home that could or will prevent the sale of your property down the road. (Please read the entire article)

CMHC is Canada’s federally owned mortgage insurer. As of October 25, 2018, their stance on homes that were former grow operations has not changed and reads as follows.

“At this time, CMHC is not making any changes to its mortgage loan insurance policies in relation to the impending legalization of cannabis. CMHC will continue to insure mortgage loans for homeowner residential properties (1-4 units) and multi-unit residential properties (5+ units) where cannabis was previously grown and/or will be legally grown. We will also monitor the impacts of the Cannabis Act on our mortgage loan insurance activities over the long term.
We will also be reminding Approved Lenders that, in cases where property damage has occurred, they are required to disclose this information to CMHC in making the request for mortgage loan insurance and confirm that remedial action has been taken to address any related property damage/alterations.”
Courtesy Beverly LePage, Client Relations – CMHC


HOWEVER, in my opinion as a mortgage broker, it is the damage to the home from a “typical illegal” grow op that is most important here. When one hears “grow op” you picture rooms full of plants with lights and irrigation lines with no care taken to prevent irreparable damage to the home.

Please consider the following scenarios.

Tomato Enthusiast #1
Tomato enthusiast #1 absolutely loves tomatoes. He/she finds them relaxing and even fun to share with friends. Tomato enthusiast #1 places dozens of tomato plants in every room of their home with full irrigation and grow lighting. Without proper ventilation this caused a drastic increase in humidity in the home. If that were to continue, a dangerous mold condition may develop, making the home uninhabitable. In this case the damage that Tomato enthusiast #1 caused may prevent a mortgage from being placed on the property by the lender and/or insurer.


Tomato Enthusiast #2
Tomato enthusiast #2 also loves his tomatoes but not quite as much as #1. He/she enjoys having a few slices on toast on a Friday evening as a weekly treat. Tomato enthusiast #2 places 4 tomato plants in front of the living room window and daily watered & talked to them pleasantly. Having 4 tomatoes plants in the home was not illegal before October 17th and probably never will be. With proper care the 4 tomato plants thrived and never caused any damage to the home. A few weeks down the road Tomato enthusiast #2 decided to sell the property. When their trusted realtor arrived to list the home there was no apparent damage caused by any plant or animal that resided there and it was immaculate. It is highly unlikely that the presence of 4 tomato plants would prevent approval by a mortgage lender or insurer.

31 Jan

2017 Mortgage Insurance Premium Increase


Posted by: Kevin Carlson

Well 2016 was action packed in the mortgage industry with changes to regulations

and it looks like 2017 holds a few surprises too.  For the third time in the past four years,

mortgage default insurance premiums are scheduled to increase as of March 17/17.


Just as a refresher; mortgage default insurance is sometimes referred to by

the general public as CMHC fees.  CMHC (Canada Mortgage & Housing Corp.) is just

one of the three insurers that provide default insurance in Canada.  This insurance

is required when a client obtains a mortgage for the purchase of a home with

less that 20% down payment.  It carries a onetime premium of a percentage

of the mortgage amount and is often added to the mortgage. 


This insurance protects the mortgage lender from losses in the event that

the home owner defaults (stops making payments) on their mortgage to

the point of eventual foreclosure.


The other two default insurers are Genworth Canada and Canada Guaranty. 

Genworth has announced their premiums will also increase to match CMHC on March 17th

Canada Guaranty has not sent out a press release yet, however it’s inevitable that they will follow suit.


So how much more will it cost the average buyer? 

I have ran the following numbers that will give you an idea of what the typical

first time home buyer might be faced with.


Purchase price: $300,000.00

5% down payment: $15,000.00

Mortgage insurance premium today of 3.60% of the mortgage amount: $10,260.00

Monthly mortgage payment now: $1,365.68


Mortgage insurance premium after Mar. 17/17 of 4.00% of the mortgage amount: $11,400.00

Monthly mortgage payment after Mar. 17/17: $1,370.96


Difference in premium: $1,140.00

Difference in monthly payment: $5.28


In order to avoid paying the increased premium, your “live” mortgage application must be

submitted prior to the March 17th deadline.  Then the funding of the mortgage can still take place

after the deadline at the lower premium.  It is unclear yet how much longer after but I would

expect at least 120 days.  Pre-approval applications do not qualify as “live” so an offer to purchase

for the home to be mortgaged must accompany the application.


20 Sep

OSFI Proposed Changes – 2016


Posted by: Kevin Carlson

Some of you may have heard that there are some changes coming in the mortgage industry that could end up costing you more.  I just wanted to give you all a very brief overview of the changes that are coming, however the costs associated with this are still relatively unclear.

The Canadian government regulates banks, credit unions, trust companies, etc. through the Office of the Superintendent of Financial Institutions or OSFI.  The best description of what they do is within their mandate noted on their website…

“OSFI acts to protect the rights and interests of depositors, policyholders, financial institution creditors and pension plan beneficiaries while having due regard for the need to allow financial institutions to compete effectively and take reasonable risks.”

Click here to read their complete mandate.

This basically boils down to protecting Canadians from a similar mortgage crisis that the US experienced starting in 2007.  No small task as what happened then had ripple effects globally for years.

Among its many rules and policies, OSFI has what is called a Capital Adequacy Requirement (CAR) guideline that dictates the ratio of a bank’s capital to its risk.  In simple terms it is similar to what a water reservoir is to a city.  A federally regulated guideline to make sure that there is a healthy reserve on hand in case of a drought or in this case financial loses.  Under the proposed new guidelines this amount is not expected to increase by very much.  However what is new is the “countercyclical buffer” policy.  This allows OSFI to continually monitor the markets and have the banks put aside more capital if the markets start to become abnormally volatile.  To extend the metaphor, start rationing water well ahead of when the reservoir starts to run dry.

These changes were introduced as a proposal and open to public consultation until October 18, 2016.  That being said however, these changes are to come into effect on November 1, 2016 for the big banks.  I will let you decide what “open to public consultation” means with these dates already set in stone.

The money to set aside certainly will not be coming from bank profits, but it still remains to be seen how much this will really cost Canadians in the long run.  It will be difficult for the average consumer to see these costs as they will disappear into slightly higher borrowing costs and less return on your investment dollar.  Even so, I am sure that it will be a small price to pay to ensure our national financial well being.

This is a very basic outline but if you are interested in learning more, please let me know and I will send you links to many good industry articles that go into this in more depth.

20 Apr

Quick Mortgage Pre-Approvals


Posted by: Kevin Carlson

I am sure that most of you have seen advertisements saying…


KYC is a common acronym in the financial world and it means Know Your Client. 

After over a decade as a mortgage broker I can tell you that it takes longer than 10 minutes

to pre-approve a client for their mortgage.  In fact, it often takes more than 10 minutes to go

over mortgage basics for a first time home buyer who needs my help to understand the process.

Speak to any realtor and they will tell you the disappointment that a client goes through

when a mortgage pre-approval fails to move to actual approval for the home they

worked so hard to find.  Quick pre-approvals lead to missing key pieces of the

mortgage application that may become a barrier once the mortgage approval is requested.

Here are some of the things that can come up in a mortgage application that can be missed.

Down Payment

The source of down payment funds is highly regulated to prevent money laundering. 

If you have had all the down payment funds in your bank/investment account for at

least 3 months, then that is usually just fine.  Statements for those previous 3 months

are requested and submitted to the lender for review.  Any deposits to your account

over those 3 months that are not payroll related is questioned.  Some issues that I

have seen cause problems are:

  • ·         Funds recently transferred from the US
  • ·         Funds transferred from a line of credit
  • ·         Cash deposits
  • ·         Funds given from a non-family member


If you are a full time permanent employee who is salaried, using this income is easy.

Part time, temporary or full time with no guaranteed hours is where income qualification

can prevent a mortgage from being approved.  If you have been with the same employer

for at least 3 years then we can use an average of your income over the last 2 or 3. 

This is often what is done for those who are self employed and we use the personal

taxable income shown on line 150 of the notices of assessments.  There are still

“stated income” programs out there to help those who show very little income

after their accountant has worked their magic.

Credit Reports

It is my standard practice to access credit reports for every client at the beginning

of the pre-approval process.  This is a crucial time to address any problems or issues

that may be on a credit report.  Some examples of potential credit report problems are:

  • ·         Old paid out loans showing a balance still owing
  • ·         Collections from any creditor
  • ·         Habitual late payments
  • ·         Credit cards over their limit
  • ·         Previous bankruptcy or foreclosure

I just want to close this newsletter off with a note about mortgage promotions put out by

some of the retail banks.  Promotions like “Employee Pricing”, “1.99% Mortgages”,

“Switch Your Mortgage And Get $500” are often not as good a deal as they appear. 

Please check with me before applying for one of these promotional mortgages. 

If I cannot prove to you that I can obtain a better rate and/or terms for you,

then the promotional mortgage will be the way to go.

10 Mar

CIBC 1.99% teaser mortgage rate


Posted by: Kevin Carlson

I saw an ad on my Facebook newsfeed about one of Canada’s retail banks offering a 1.99% mortgage rate. Sounds great, right? Well, let’s read the fine print, check the math and find out.

You get 1.99%… for the first 9 months only. Then it gets boosted up to 2.83% for the next 39 months for a total of 4 years.

Today I have a 4 year fixed rate of 2.59% for the entire 4 years.

Based on a mortgage of $300,000.00 here is the interest costs for each over the 4 year term…

Teaser 1.99% / 2.83% = $29,945.45

Broker discount 2.59% = $28,447.56

Savings = $1,497.89

If it sounds too good to be true folks….