By Hal M. Bundrick, Cfp, And Holden Lewis Of Nerdwallet
THE ASSOCIATED PRESS
The Federal Reserve cut short-term interest rates by half a percentage point on Tuesday in an effort to protect the economy from more damage from the virus outbreak. The move may present options for mortgage shoppers.
What does all this mean for home buyers? Or those looking to lock in a mortgage rate? For owners considering a refinance? And for those holding an adjustable-rate mortgage?
WHY THE FED CUT INTEREST RATES
Mortgage rates started falling weeks before the Fed’s emergency rate cut. By reducing the federal funds rate, the Fed is playing catch-up, following the lead of the market forces that set mortgage rates.
The novel coronavirus identified in late 2019 has been of increasing concern to the world’s stock and bond markets. The distress stems from uncertainty about how the officially named COVID-19 outbreak will impact manufacturing, tourism, travel, the hospitality industry and even consumer spending.
“Lower rates are likely to drive refinances higher and may entice home buyers out to shop as well. That’s certainly the Fed’s hope,” says Danielle Hale, chief economist for Realtor.com. “However, if buyers are hesitant to go shopping because they want to avoid contact with others, this could dampen home sales.”
THE IMPACT ON MORTGAGE RATES
The Federal Reserve manages the interest rates used by banks to borrow from each other. It’s a foundation for how longer-term interest rates move.
While mortgage rates are not directly affected by Fed rate decisions, they can’t resist the general direction of the bond market. Lenders use the 10-year Treasury as a guide to pricing loans, and the yields have reached record lows.
Mortgage rates are likely to follow, at least in the near-term. The 30-year loan is already approaching _ and at times sinking below _ the all-time low of 3.31% (with 0.70 discount points) reported by Freddie Mac on Nov. 21, 2012.
The news is also good for those with or shopping for adjustable-rate mortgages and home equity lines of credit, which are directly guided by Fed rate cuts. ARMs will likely see lower rates at their next reset period, and HELOCs could fall half a percentage point in the next billing cycle or two.
WHAT TO KNOW IF YOU’RE:
BUYING A HOME
If you’re in the market to buy a home, you probably face competition from other buyers because there aren’t enough homes for sale to meet demand.
There’s only so much that lower mortgage rates can do to stimulate home sales. Mortgage rates and affordability aren’t the biggest challenges in today’s housing market, Hale says. “A lack of options continues to be the largest hurdle,” she says.
Here are tactics that make you more likely to prevail in a hot housing market:
_ Get a mortgage preapproval. A preapproval letter gives sellers confidence that you’ll be able to get a loan and that the sale will go through.
_ Limit contingencies, such as requesting that the seller make repairs or pay your closing costs.
_ Let the seller know that you can be flexible about the closing date if that’s possible.
If the fear of COVID-19 makes you reluctant to tour homes but you’re committed to buying this year, “now is the time to strike,” says Daryl Fairweather, chief economist for Redfin, an online real estate broker. “People who commit now are going to have an advantage over people who wait.”
Plenty of homeowners are refinancing now. Lenders are enduring heavy workloads. You can do your part to lighten the load by submitting a complete application, with all the necessary documentation. Online applications usually will let you know if you haven’t provided all the necessary documents.
_ Know why you’re refinancing so you can get the right loan. It might be to get a lower monthly payment, to shorten the loan term, replace your adjustable-rate mortgage with a low fixed-rate loan, to borrow more than you owe in a cash-out refinance, or to get rid of FHA mortgage insurance.
_ Shop more than one lender. You’re more likely to land the best possible deal if you apply with multiple lenders. Each lender will give you a disclosure document called a Loan Estimate. By comparing Loan Estimates, you’ll be able to identify the best offer.
_ Lock your rate for long enough. During normal times, a 30- or 45-day rate lock for a refinance is sufficient to close the loan on time. But when so many homeowners are refinancing at once, it might behoove you to get a longer rate lock. Ask your loan officer for guidance.
Be careful of getting a cash-out refinance. “It might be tempting to take cash out, but especially if you’re worried about a recession in the future, or your job security, it might not be the best idea,” Fairweather says. You want to have a cushion, instead of taking out all your equity, she says.
Backers say Fire Marque program can offset costs, but one firefighter isn’t in favour
The excerpted article was written by · CBC News
To its backers, Fire Marque’s business model helps municipal fire departments recover thousands in costs by tapping into a little-used area of coverage in many homeowner fire insurance policies.
But others say their work will lead to higher premiums for homeowners or worse, make them less likely to call for help in an emergency.
It’s a discussion underway in London after council’s community and protective services committee (CAPS) voted last month to take a look at the Fire Marque program for London. After hearing a pitch from the company at a recent Federation of Canadian Municipalities conference, Coun. Elizabeth Peloza wrote a letter to CAPS asking them to look into it and report back.
Peloza says Fire Marque could lead to “potential cost recoveries of opportunities” of between $291,461 to $485,769 a year.
But in a letter coming to Monday’s council meeting, London Fire district chief Kevin Dash says he’s “deeply concerned” about entering into any fee recovery agreement.
“When it comes to life safety, fees for service would have a profound negative effect on Londoners, some of whom may delay calling for help when seconds count,” he said.
So what is Fire Marque?
The company enters into agreements with municipalities that allow them to access clauses in home insurance policies that include reimbursement for fire departments that incur extra costs while battling a blaze. Fire Marque pockets 30 per cent of any claim paid to a fire department.
Fire Marque president Ted Woods said the claims can vary by policy, but said he’s seen fire departments collect anywhere from $1,000 per claim up to $250,000 for large commercial fires.
“It can really make sense,” said Woods. “If Londoners can receive a quarter of a million dollars or in that range every year, then every four years they could receive two fire trucks, if you want to look at it that way.”
The claims for this coverage can only be paid to the fire department, not the home owner or the municipality. Also, the money has to be spent in one of three areas: public education, capital expenses and training. The money can’t simply be absorbed into the fire department’s general budget.
“They’re for expenses that aren’t normal,” said Woods.
Woods said Fire Marque offers a potential benefit for cash-strapped municipalities without any risk to taxpayers. If a claim is successful, the fire department gets a cheque.
London city staff last looked at entering an agreement with Fire Marque in 2016, but opted against it.
Greg Hankkio is Thunder Bay’s acting fire chief.
His fire department became a Fire Marque client in 2017 and says they collected $100,000 in claims in 2018 and about the same amount in 2019.
“It’s been a revenue generator for us,” he said.
Hankkio said his department has put the money into a capital fund and used some of the cash to by a small boat for water rescues.
But won’t premiums rise?
Woods says he doesn’t think his company’s work will lead to a rise in home insurance premiums.
“The insurance companies have calculated the premiums based on the coverages,” he said. “A quarter of a million dollars in recoveries across all the companies and across the whole city is negligible.”
Not so fast says Pete Karageorgos of the Insurance Bureau of Canada.
He says it’s naive to think that a rise in claims won’t also increase premiums.
“Any time claims costs increase, that will in the future be reflected in the premiums that homeowners pay,” he said. “Those taxpayers who are paying property taxes for the fire department are going to be paying a second time if they have claims pay outs for fire department charges.”
But what about Dash’s letter, where he worries homeowners may become reluctant to call 911 in an emergency, fearing their premiums will rise or they’ll be hit with extra costs?
Woods says it appears Dash doesn’t understand how Fire Marque’s program works.
“He’s misinformed,” said Woods.
In a note to CBC News, London’s Police Chief Lori Hamer said Dash’s letter to city council “reflects his own personal opinion on this matter.”
Hamer said her department is reviewing the Fire Marque program in response to the request from the CAPS committee.
“We will be reviewing this request and will bring information back to Council for their consideration by June, 2020,” she said.
Source: CBC News
Money was collected from insurance companies to pay for funerals that never happened
The excerpted article was written by · CBC News
A former funeral director pleaded guilty in a Winnipeg court Tuesday to 13 counts of faking death certificates to receive payouts from insurance companies.
Mike Knysh, who once owned and operated Knysh Funeral Chapel in Winnipeg and Beausejour, was set to go to trial in April on 24 counts in total — 11 for fraud and 13 for forgery.
Instead, his lawyer, Frank Coniglio, and Crown prosecutor Mandy Ambrose reached an agreement that saw the 11 fraud charges dropped in exchange for Knysh’s guilty plea in Court of Queen’s Bench to the 13 forgeries.
The victims had purchased prearranged funeral plans from Knysh, police said in April 2018, when the charges were laid.
The 13 counts represent 13 separate people for whom funeral director’s statement-of-death certificates were filed with insurance companies, even though all were alive at the time, court heard.
Knysh then received money from the insurance companies to pay for funerals that never happened. A total of $83,000 was claimed from the insurance policies, police said.
The incidents happened between 2004 and 2014.
As the court clerk read out each charge individually Tuesday, Knysh quietly pleaded guilty. He then responded with a muted “yes” when the clerk clarified each time that he said “guilty.”
Justice Chris Martin followed up by asking if Knysh realized his guilty pleas mean he will have a criminal record.
“Yes,” Knysh said.
Sentencing is set for April 14.
Outside the courtroom, Coniglio called the plea deal “an acceptable resolution,” noting there were a number of charges the defence did not believe were valid.
By avoiding trial, many witnesses — including several who are elderly — will not need to attend court, Coniglio added.
“We didn’t want any of them to have to go through that experience if it wasn’t absolutely necessary,” he said.
Coniglio hopes that will be considered as a mitigating circumstance by the judge during sentencing.
He added there are other such circumstances that will be presented at that hearing to show the crime “is not exactly what it might look like on the face of it.”
‘The situation is evolving, anxiety levels are increasing,’ says Education Minister Zach Churchill
The excerpted article was written by · CBC News
Nova Scotia is considering a provincewide ban on international school trips as anxieties around the COVID-19 outbreak mount, Education Minister Zach Churchill said Tuesday.
Principals are meeting with staff from the regional centres of education over the next couple of days to discuss plans for the upcoming trips, Churchill said, and the government is waiting to get their feedback before making a final decision.
Churchill said in each region there are different trips at “various” risk levels depending on the destination, so the province wants to hear from parents and education centres on whether a “system-wide decision is necessary.”
“The situation is evolving, anxiety levels are increasing,” Churchill said Tuesday. When asked if he’s contemplating ban, he said it “is a possibility, but we have not made a determination on that yet.”
It’s a quick change in tune from just four days ago, when Churchill said the decision to cancel or alter international school trips rests with travel companies and parents.
The minister added the government will make a final decision soon, since many of these international trips take place over the upcoming break during March 16-20.
Insurance kicks in if group cancels
When asked if a provincial ban would impact any travel insurance claims, Churchill said Tuesday families should be able to claim the cost of the trip whether the regional centres make the final call, or the province.
EF Educational Tours Canada, which runs student trips, confirmed that to be the case.
“If the group, the school, or the school board collectively chose to cancel the trip, those travelers who purchased insurance would be able to make an insurance claim,” Adam Bickelman, tour spokesperson, said in an email Monday.
Bickelman said the company’s policies allow groups to delay or change their plans — including to domestic locations — without penalty, or take a refund in the form of a travel voucher up to the day of departure.
At this time, schools in the Halifax Regional Centre for Education (HRCE) with trips planned to Europe, and in particularly Italy, the hardest hit country on the continent, are “working with tour operators and families to examine available options if they wish to alter their travel plans,” spokesperson Doug Hadley said in an email Tuesday.
Hadley said HRCE encourages families who have purchased trip insurance to check with their insurance company about what protections are available to them if they wish to cancel a trip.
Family calls for Europe trip to be cancelled now
But some families are questioning why these trips haven’t been cancelled already, leading to worries around whether they’ll have to choose between losing money or sending their children into a precarious situation.
Jeff O’Toole said Tuesday he won’t be sending his 16-year-old son Ryan, who is in Grade 11 at Cole Harbour High. At the moment, he said the school’s Europe trip is still going ahead amid “vocal” opposition.
He’d like to see the trip cancelled now, so parents can have the option of getting their money back under insurance. A decision can always be made about rebooking the trip at a different time.
“This is a virus that we really don’t understand everything about it, but we do see statistics where people are dying. And to send children to Europe at this stage just does not make any sense to me whatsoever,” O’Toole said.
Ryan, who has been checking updates about the virus every day, said none of his classmates want to go on the upcoming trip.
“It’s kind of like a rite of passage to take one of those trips to go and experience new cultures and stuff. And with half of Europe closed, I’m not going to be able to do that,” Ryan said.
7 days without customers is a devastating blow to small businesses
It’s been a month since the state of emergency was lifted in St. John’s, but the headache continues for some small business owners whose insurance claims were denied.
Peg Norman, who owns the Travel Bug and Bee’s Knees stores on Water Street, said her shops were shuttered for a week in January as the city cleaned up from nearly a metre of snow.
Even though the city’s state of emergency made it illegal for businesses to open, she was told she didn’t qualify for business interruption insurance.
“I just assumed that if I wasn’t able to operate because of no fault of my own that my insurance would kick in and cover that expense,” Norman said.
While her insurance covered losses due to things like floods, fires and damage to neighbouring buildings, Norman said it didn’t cover closures due to a state of emergency.
Norman said there was a clause that allowed interruption insurance to pay out if damage to city infrastructure prevented her from opening. The road closures still didn’t qualify.
‘There has to be some consideration’
The city has granted small businesses an extension on paying their taxes this year, but Norman said in the end they’ll still have to pay the same amount and deal with the losses incurred from a week without sales.
“I don’t expect the city to give me any big break or anything, but I think that there has to be some consideration. Small business in this province, and small businesses of this city in particular, is the backbone of the city.”
Dave Hopley, co-owner of Rocket Bakery and Johnny Ruth, also took a major revenue hit during the state of emergency.
“That seven days of sales, we’ll never get back,” he said. “Our costs keep going. We don’t get a timeout on our rent or our taxes or anything like that. It’s just another expense added to the bottom line.”
Hopley said his businesses were also denied on their interruption insurance claims.
“I didn’t really expect that they would cover it,” he said.
“Grin and bear it, I guess. It’s difficult to fight back against insurance companies. They’ve got their policies and all their clauses.”
The only recourse would be to hire a lawyer and fight it in court, but Hopley figured any potential gains would only be eaten up by legal fees.
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The Canada Revenue Agency is sending an unlikely message to kick off tax season: Paper-filers, we have not forgotten you.
Despite a years-long push to have more people file taxes online because it’s generally faster and easier, many Canadians still prefer putting pen, or pencil, to paper.
The people who prefer paper to online are getting particular attention because they tend to be Canadians whose tax files are needed to send them essential benefit payments.
There are seniors who need old-age security, parents eligible for the Canada Child Benefit and first-time filers who might be eligible for a new benefit for low-income workers.
Because of that, the CRA has made changes to the paper tax booklet to further simplify language, add notes about new benefits for the 2019 tax year, and include a checklist so nothing gets missed.
Frank Vermaeten, the CRA’s assistant commissioner, said the agency wants to make sure those who prefer paper are still comfortable using it amid wider pushes to electronic filing.
“Certainly, we promote electronic filing — we see a lot of benefits for Canadians in doing that, but we also want to be sure that paper filers are served and served well,” Vermaeten said in an interview.
The federal tax collector expects to handle about two million paper returns this calendar year out of roughly 26 million filings.
Even at the current rate people are shifting to digital filing and away from paper, Vermaeten said the CRA could see paper files for another 20 years.
The agency’s tax machine fired up in earnest Monday, with new staff joining call centres that run at extended hours.
About 1.6 million printed tax-return booklets are also being mailed out that include an option for some to file by phone if their incomes are largely unchanged from year to year, such as seniors.
Staff have also been hired to manage paper filers, including a team that searches for errors and corrects them.
Vermaeten said a new service will see staff input forgotten T4 slips, for instance, on paper returns filed before the deadline, to save taxpayers interest penalties.