Module 3.7 Review market for lender and product

Question 1

What are preferred lenders

Answer 1

are those lenders with whom a brokerage conducts a significant volume of business and from which the brokerage may receive certain partnership benefits. In order for these types of “partnerships” to occur, a brokerage needs to demonstrate that a high percentage of its applications are approved and closed.

Question 2

What are benefits to brokerages from preferred lenders

Answer 2

• brokerages are expected to send a certain amount of deals to preferred lenders. saying that they will reward with:
• exclusive mortgage products
• rate discounts
• more flexible underwriting
• faster turnaround times

Question 3

6 best practices to ensure you have a good lender relationship

Answer 3

Review the brokerage’s preferred lender list (if there is one), or review the market to find the lender that best fits your applicant’s situation.
Review and understand that lender’s underwriting guidelines.

Review that lender’s products to ensure that there is a product that is a fit for your applicant’s circumstances.

Thoroughly review every aspect of your applicant’s loan application.

Ensure that the documentation does not misrepresent the applicant.

Ensure that you have addressed any red flags and that none of the documentation is forged.

Question 4

6 reference/info files for lender information

Answer 4

the lender’s underwriting guidelines
information about the insurer that the lender uses
the lender’s preferences for format and content in a loan file
deal-breaker information for that lender (such as type of property and size of property)
loan file checklists from previous deals with that lender
fact sheets/product sheets for products offered by that lender

Question 5

Possibilities of organizing lender files

Answer 5

paper filing in folders or binders
lists, databases, or spreadsheets
electronic bookmarks online
dedicated information management software programs

Question 6

what is generally the LTV and max loan value for insured mortgages

Answer 6

greater than 20% downpayment, 25 year am, and less than 1 million

Question 7

Some qualities of an unisured mortgage

Answer 7

• outside the scope of definitions above for insured/insurable mortgages.
• over 1 million
• refi
• am greater than 25 yrs

Question 8

What programs do insurers use to evaluate risk

Answer 8

emili (used by CMHC)
mySagen (used by Sagen)
Vantage (used by Canada Guaranty

Question 9

How does risking software compare information submitted in the loan application

Answer 9

Reviews and evaluates the file base off:

characteristics of the property compared to similar properties in the neighbourhood
employment trends
value of the subject property compared to neighbourhood norms
local housing market compared to historic market trends, local data, analyses, and future expectations
applicant’s current living arrangements
qualifying ratios
loan details
equity position
credit report(s)

Question 10

3 Benefits to automated risking

Answer 10

Turnaround times are much faster (from days to minutes).
The risk assessment models are consistent and predictable.
“24-7” automated risking frees up human underwriters to concentrate on higher risk files.

Question 11

what resources does mortgage default insurers provide

Answer 11

mortgage insurance products and information about premiums
information about the mortgage and housing industries
online tools and calculators for mortgage professionals
training workshops and seminars for mortgage professionals
consumer information for your clients

Question 12

What services does CMHC provide

Answer 12

research-based market analysis information and reports
funding for low-income housing, assisted housing, and retirement facilities
funds for on-reserve housing
consumer education about housing
free publications about home maintenance, renovations, and healthy (green) housing

Question 13

what is Sagen

Answer 13

Sagen is the Canadian arm of a large, American-based, global financial services provider

Sagen was the only private mortgage insurance provider in Canada. Although its main offering in Canada is mortgage default insurance, Sagen also sells life insurance, universal life and long-term care insurance, lifestyle protection, annuities, and various investment products.

Sagen underwriters and account managers can provide you with information about the company’s products and services and will review applications and make suggestions to improve the possibility for approval for insurance.

Question 14

what is Canada Guaranty

Answer 14

Canada Guaranty Mortgage Insurance Company is the only 100% Canadian-owned private mortgage insurer. Prior to 2010, Canada Guaranty was known as AIG United Guaranty Mortgage Insurance Company Canada. The company is currently owned by the Ontario Teachers’ Pension Plan and National Mortgage Guaranty Holdings Inc. Canada Guaranty sells a range of different mortgage insurance products for high-ratio loans.

Canada Guaranty underwriting teams in different areas of the country have local experience and expertise. Calls to the underwriting centre are answered by underwriters who can address your questions and concerns about submission, review, and adjudication of mortgage insurance applications. Regional account executives can also provide information, direction, and insights to help mortgage associates find appropriate solutions for their clients. Account executives offer professional development seminars on industry-relevant topics.

Question 15

what info is important to learn about insurance providers

Answer 15

From your broker, learn which lenders use which mortgage insurance provider(s).

Learn what each insurer has to offer (products and services). Each has a detailed and informative website, e-newsletters, mobile/web apps, and each offers information and/or training seminars.

Introduce yourself to and develop rapport with a representative from each of the major insurers.
Use that relationship to find out the differences between the policies of different insurers. What is or is not acceptable with regard to mortgage default insurance approval? Policy differences can be very important when dealing with programs such as rentals and business for self. Business for self programs are designed for self-employed borrowers who are unable to provide traditional income but have at least a 2-year history of managing their credit and finances responsibly.

Keep in mind that insurer standards are minimum standards. Lenders may impose stricter qualification criteria. (For example, an insurer might allow family GST income to help qualify for a loan, but not all lenders will.)

Question 16

what is mortgage life insurance

Answer 16

Mortgage life insurance (also called mortgage insurance, creditor insurance, or mortgage protection insurance) is an optional product that protects a homeowner against property foreclosure in the event of death, disability, critical illness, or terminal illness. Mortgage life insurance pays the outstanding mortgage balance to the lender, in full, at the time a claim is made and approved.

Question 17

how is claim paid out for mortgage life insurance compared to term life insurance

Answer 17

MLI:At the time of a claim, any remaining mortgage balance is paid out to the lender. (Note that the amount to be paid out decreases as the mortgage balance decreases.)

TLI: At the time of a claim, the full amount of the policy is paid out to a named beneficiary.

Question 18

How much is the premium for MLI compared to TLI

Answer 18

MLI: Depends on the mortgage amount and amortization, and the age, health, and habits of the applicant. (Note that the premium remains fixed even though coverage decreases as the mortgage balance decreases.)

TLI: Depends on the policy and term, and the age, heath, and habits of the applicant. (Note that the premium and the pay out are fixed for the duration of the term.)

Question 19

how long does the borrower pay the premium for MLI compared to TLI

Answer 19

MLI: For the duration of the amortization period or until the mortgage is paid off, or the policy is cancelled.

TLI: For the duration of the term or until the policy is cancelled.

Question 20

Does the premium increase as the borrower gets older for MLI compared to TLI

Answer 20

MLI: The premium is a fixed amount for the length of the amortization. Some policies may expire when the borrower reaches the age of 70.

TLI: The premium is fixed for the length of the term; however, once the term expires, the premium and conditions for a new policy are not guaranteed.

Question 21

What is the difference between offering insurance and selling

Answer 21

Any individual who offers or sells insurance must be licensed to do so under the Insurance Act. There is an important distinction between offering and selling mortgage life insurance.

Question 22

What does offering insurance allow you to carry out

Answer 22

discuss (in generic terms) the pros and cons of mortgage life insurance
offer mortgage life insurance products from a single insurance provider (either a private insurance company or the lender)

Question 23

what is a restricted licence in offering insurance

Answer 23

is an insurance licence that permits you to offer—but not sell—insurance products. In other words, it allows you to present the option to purchase mortgage life insurance.

With a restricted licence, you cannot offer insurance products from more than one provider.

Question 24

who are the two main providers of insurance in Canada

Answer 24

First Canadian Title and FNF Canada.

Question 25

what are the two different title insurance policies

Answer 25

loan policies, which protect lenders against title-related losses
owner policies, which protect borrowers/owners against title-related losses

Question 26

what is gap coverage

Answer 26

is required when a real estate transaction is scheduled to close before the land titles office has registered the applicant’s name on the title. In this case, the loan policy protects against the possibility that a name other than the applicant’s might be entered onto the title during the time gap between when the deal closes and when the title document is officially updated.

Question 27

what are loan policies

Answer 27

A loan policy protects the lender but is paid for by the applicant. Some lenders require title insurance for every mortgage transaction. Others order it only in specific circumstances such as for gap coverage or to protect against issues arising from RPRs.

Question 28

how do loan policies benefit the lender

Answer 28

providing coverage related to a lender’s ability to enforce a mortgage agreement
protecting against mortgage fraud
indemnifying the lender against losses if the priority of the insured mortgage is not as expected. For example, if a lender provided a first mortgage, and it was later discovered that it was registered in the second or third position, the lender would have unknowingly taken a substantially greater risk with the mortgage but would not have charged an interest rate reflective of that risk.

Question 29

who arranges the purchase of a loan policy

Answer 29

In the event that a lender requires an applicant to purchase title insurance or a current RPR, a real estate lawyer typically makes those arrangements. As a mortgage associate, you would not be directly involved in the process.

Question 30

what are owner policies

Answer 30

protects the applicant/owner and is paid for by the applicant/owner.

As a mortgage associate, you have no role in selling owner policies. Typically, it is the lawyer for the deal who provides information about premiums and arranges for the policy if an applicant chooses to purchase title insurance. It is also possible for an applicant to purchase an owner policy directly from a title insurance company or insurance agent or broker.

The premium for a title insurance owner policy is a one-time fee and is not attached to the mortgage amount as other types of insurance premiums sometimes are.

Question 31

Benefits of owners polcies to applicants

Answer 31

It helps to ensure that the transaction closes on time. (If there are delays in registering the buyers’ names on the title, gap coverage protects against intervening registrations between the date of closing and the date of registration.)
It protects the rightful owner against identity theft and others fraudulently registering mortgages against the title or against someone claiming an interest in the land (for example, an easement for a driveway or a builder’s lien).
It provides coverage for legal fees associated with resolving title issues; coverage for renovations completed without a permit that result in a loss; coverage for known defects such as encroachments, delays in registration, and land-use violations; and coverage if a property does not meet municipal land-use requirements.
Title insurance claims are usually “no-fault,” which means that the insurance company cannot claim negligence on the part of the insured and deny coverage. Even errors and omissions on the part of the lawyer ordering the title insurance are usually covered.
An owner policy remains in effect as long as the borrower has an interest in the property. It also protects the owner’s heirs in the event of his or her death and the owner’s spouse in the event that the property is transferred as a result of marital breakdown.

Question 32

summary of loan policies compared to owner polcies

Answer 32

Where is it available?

Lenders can arrange directly with a title insurance company or through the lawyer handling the transaction

Borrowers/owners can purchase through a real estate lawyer, a title insurance company, or an insurance agent or broker

Who does the policy protect?

Protects the lender against title-related losses

Protects the borrower/owner against title-related losses

How much is the premium?

One-time premium, paid by the borrower; cost varies depending on the value of the property

One-time premium, paid by the borrower/owner; cost varies depending on the value of the property

What does the policy cover?

Covers the full amount of the mortgage on the property

Covers a maximum amount as set by the policy, ideally the full value of the property; specifics may vary from product to product

How long does the coverage remain in effect?

Coverage lasts until the mortgage loan is repaid in full

Coverage lasts as long as the borrower/owner owns the property and often transfers to heirs after death of the owner or to spouse after marriage breakdown

Question 33

home owner insurnace policy breakdown

Answer 33

Home insurance

Covers the physical structure of the house and garage (for example, roof, siding, and fences) against various kinds of damage (for example, from hail, fire, lightening, trees falling over in the wind onto the house, and vandalism)

Property insurance

Covers the personal property or contents of the house and garage (such as furniture, appliances, personal belongings, and lawn mowers)

Liability insurance
(sometimes called casualty insurance)

Covers the owner’s legal responsibility or liability for injuries to other people in or on the property (for example, if a visitor fell down the stairs or tripped over an electrical cord plugged into the block heater of the owner’s car)

Question 34

is home insurance required for condos

Answer 34

no because the insurance for the condo corp covers all the buildings and shared structures

Question 35

what type of insurance to purchase for condo

Answer 35

property insurance to cover all indoor structures

Question 36

what does builders coverage entail

Answer 36

Builder coverage usually provides buyers with a one-year warranty on minor items such as scratched paint, broken drywall, and chipped tiles.

Most insurers require a new home builder warranty if the house has not been occupied for at least one year

Question 37

main providers of new home warranties

Answer 37

(such as Alberta New Home Warranty or National Home Warranty) are private, non-profit companies established by the home building industry, not insurance companies or government organizations.

Question 38

what coverage do third party warranty companies provide

Answer 38

provide coverage for up to five years, protecting homeowners after any one-year builder’s warranty has expired.

Typical coverage includes items such as deposits, completion of construction, and quality of workmanship, materials, and structural integrity. Temporary living expenses are covered in the event that the owner has to move out for a brief time to accommodate unforeseen work.

Question 39

what are lender product sheets

Answer 39

outline the purposes, features, and qualification criteria for each of their various programs and products for different borrowing situations. Sometimes each product is represented on a single sheet. Other times, all the lender’s products and underwriting guidelines are formatted into a chart-like matrix.

Question 40

what is entailed on lender product sheet

Answer 40

name and purpose of the product or program
maximum mortgage amount and eligible uses for the money
broad statements about required credit score, qualifying ratios (GDS and TDS), maximum LTV
available interest rates, term lengths, amortization periods, payment frequencies
down payment requirements, income documentation requirements, equity requirements
prepayment and payout options/penalties, rate hold/rate drop policies
fees, lending criteria and restrictions, time frame to approval
NOTE: Not every product sheet includes all of the above information.

Question 41

where to find alternative sources of product sheets other than broker

Answer 41

Pick them up at tradeshows and conferences.
Contact a lender business development manager (BDM) directly for information, and ask to be added to his or her e-mail distribution list for product information and updates
Search on lender websites.