New mortgage rules behind slide in B.C. home sales: real estate association

VANCOUVER _ The British Columbia Real Estate Association says tough mortgage qualification rules are a key reason for a provincewide drop in housing demand last month compared with February 2017.

The association says home sales fell 5.7 per cent in February, with about 6,200 properties changing hands.

Chief economist Cameron Muir says on a seasonally adjusted basis, sales have plummeted more than 26 per cent since new federal mortgage rules took effect at the beginning of the year.

But the association says prices continue to climb, with the average home selling for just over $748,000, an 8.8 per cent jump over February of last year.

The Office of the Superintendent of Financial Institutions implemented new lending guidelines in January that require borrowers who don’t need mortgage insurance to show they would still be able to make payments if interest rates rise.

In order to get insurance, homebuyers must prove they can service their uninsured mortgage at a qualifying rate two percentage points higher than the lender’s rate or the Bank of Canada’s five-year benchmark rate, currently set at 5.14 per cent.

Mortgage 101 For First-Time Homebuyers

Article by The Ross Firm

Entering the housing market for the first time can be a bewildering experience, especially where financing is concerned. Our post this week looks at the bare basics of residential mortgages and how a real estate lawyer can help ensure that a housing newbie’s first go at financing is a smooth one.

Mortgage Types – Conventional vs High-Ratio

Mortgages fall into two categories depending on the amount of home that a buyer finances. Those able to finance less than 80 per cent of a property’s value can apply for a conventional mortgage.

High-ratio mortgages are for purchasers who finance between 80-95 per cent of the property’s value. These mortgages allow more individuals to join the housing market, but with the higher risk involved, the law imposes mandatory mortgage loan insurance on these transactions as a safeguard against mortgage default. Read more about mortgage loan insurance in one our previous post.

It Pays To Shop Around

The first place that first-time homebuyers logically turn to for mortgage help is their own bank. This can be a good starting point to obtain information and do some number crunching, but a number of alternative options exist. These include trust companies, insurance companies, credit unions and private lenders.

Rates, options, conditions, risks and benefits differ, so it’s wise to treat a mortgage no differently from any other major purchase decision. Shopping around could also sizably impact the total money a buyer saves or loses in interest over the long term.

Working with a mortgage broker instead of a single lender opens up options. These brokers do the shopping for the mortgagee, scouring various institutions to gather the best possible packages to suit the needs in each transaction.

The Role Of A Real Estate Lawyer In Financing

Meeting with a real estate lawyer is the next wise investment, especially for a first-time buyer. Experienced lawyers have reviewed hundreds and thousands of mortgage agreements. They can cut through the fine print and provide clarity to ensure that buyers know exactly what they are signing to.

Real estate lawyers can also spot existing and potential problems that buyers are often not aware of. They can also ensure that legal provisions are in place to protect against possible future risks. With one of life’s largest investments involved, professional scrutiny makes good sense – both financially and practically.

Buying or selling?

Call us.

On behalf of Quinn Ross of The Ross Firm Professional Corporation posted in Residential Real Estate on Wednesday, April 12, 2017.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Alleged key players charged in $17-million mortgage fraud investigation


Toronto police have charged two men with fraud for alleged ties to a sophisticated $17-million mortgage fraud case and the disappearance of a rookie lawyer who fled the country and was central to the alleged scheme.

Arash Missaghi and Grant Erlick, are facing criminal charges of fraud exceeding five thousand dollars, conspiracy to commit an indictable offence and accessory after the fact to an indictable offence. Missaghi was also charged with uttering forged documents. Erlick was charged with money laundering.

The charges come almost four years after the Star looked into the case of the missing millions, the private financing of luxury homes in one of the city’s toniest neighbourhoods, broken business relationships and a young lawyer on the run, Golnaz Vakili.

Toronto Police have named their investigation Project Bridle Path.

Missaghi and Erlick are accused of “enabling (Vakili) to escape” and providing “comfort” to Vakili, respectively, while knowing she was “party to the offence of uttering forced document and obstructing justice,” according to court documents.

Attempts to reach both men for comment were unsuccessful. Toronto police confirmed that Vakili is in Canada and will be a witness in the case.

Speaking to the length of time it took police to lay charges, Det. Alan Fazeli, with the financial crimes unit, pointed to the fact that Vakili has been out of the country. “Obviously there has been a change in that situation. She is co-operating,” and her charges have been dealt with, he told the Star.

Two other men were also charged. Masumeh Shaer-Valaie is charged with fraud over $5,000, conspiracy to commit an indictable offence and accessory after the fact to an indictable offence.

Bob Bahram Azizbeiki, who once worked for Missaghi and accused him of being the “mastermind” behind a string of illegal transactions linked to one of the key properties in the alleged mortgage fraud case as well as making a “direct threat” on his life, has been charged with forgery.

Azizbeiki told the Star he has “no clue” why he was charged.

Police described a “sophisticated and complex mortgage fraud investigation,” where investors were allegedly introduced to people who pretended to be the owners of luxury properties, forged documents were produced to add legitimacy to the transactions, and mortgages that were expected to be secured on the homes were never registered, something that was misrepresented to lenders, according to a news release.

Vakili, the rookie Toronto lawyer, left town in 2013, with $5,000 in cash and a bag stuffed with yoga pants and purses.

She left handwritten notes for her loved ones, confessing she was stressed to the breaking point but offering few clues as to why she abandoned her practice, her husband and her family.

“I’m so sorry to leave in this manner, so suddenly and without a goodbye, but I could not stay a minute longer without completely breaking down,” Vakili, aged 32 at the time, wrote in a letter left to her parents.

Vakili’s husband found the letter on their kitchen table. It went on to say she would be safe in Europe.

Within a month of her abrupt departure, Vakili would be named in a massive civil suit alleging she was a central figure in a sophisticated mortgage scheme worth an estimated $17 million. The courts froze her accounts and the law society suspended her licence.

Then Toronto police charged her with fraud in absentia and issued a warrant for her arrest.

Attempts to reach Vakili through email and messaging apps were unsuccessful. She has previously told the Star she is innocent and did not flee because she had something to hide.

“I did not feel safe speaking to authorities,” she told the Star in 2014, adding that she kept her family in the dark “because I did not want them to be dragged into this and pose a security threat for them …

“I have become paranoid since this situation happened. Ultimately, obviously people you think are good and honest turn out to be the devil incarnate.”

Missaghi, who is also named in the civil case, has faced several previous charges for fraud, uttering threats to two separate women, uttering a threat to cause bodily harm and conspiring to commit murder and arson. He has not been convicted of any of these charges.

In 2014, during a lengthy interview with the Star, he said people either lied about his behaviour, or he was swept up unfairly in a larger investigation.

“This is police. This is their style … where they see smoke they say ‘Let’s just charge everybody, let the judge decide where it goes,’ ” he said.

Missaghi said the accusation made by Azizbeiki is false and was made after a failed extortion attempt.

At the time Missaghi said that he didn’t know where Vakili was, or if she was innocent.

“The face that I saw of that woman, I can’t see her doing any wrongdoing,” said Missaghi. “If I knew of her whereabouts I would convince her to come back. A lot of (this) nonsense could be put to rest.”

The massive $17-million civil suit Vakili is named in was filed by a handful of companies led by businesswoman Tova Markovzki (she goes by the surname Marks), her husband, daughter and a family friend. That case, which the Star has come to call “the Marks case,” alleges that Vakili and others planned to defraud them, and that Vakili forged documents, including postal receipts for an important package that was never mailed, and that she was seen shredding papers in her office.

Missaghi, his associates Erlick and Vakili convinced Marks and her family’s network of companies to make large loans, largely in the form of second mortgages, to people who pretended to own luxury houses, according to a statement of claim in the case.

The “homeowners” used fake identification and posed as self-employed Iranian businesspeople who claimed to have trouble borrowing money from the bank. It also states Marks and her family were provided with counterfeit mortgage and bogus title insurance documents that made it seem like the transaction was insured against fraud.

Vakili was Marks’s lawyer on the deals and the money was deposited into a trust account she controlled, the claim alleges. It also says Vakili hid the fact that some properties already had multiple mortgages and failed to register some of the new ones.

The Marks case also maintains that many of the nearly 30 properties detailed in the claim were “owned or controlled by” Missaghi and Erlick and this was how the group kept, got a cut of or distributed all or some of the loaned money that is alleged to have improperly left Vakili’s account.

Police are asking anyone with information to contact them at 416-808-7300 or Crime Stoppers anonymously at 416-222-8477.

Toronto police allege four men involved in ‘sophisticated’ mortgage fraud

TORONTO _ A guilty plea from a lawyer who had fled the country gave investigators the information they needed to lay charges against four men in a $17 million alleged mortgage fraud involving high-end Toronto properties, police said Tuesday.

The men, who are all from the Toronto area and between the ages of 45 and 53, face charges including fraud, conspiracy, forgery and money laundering, police said.

Police allege the men took part in a “sophisticated and complex” scheme involving “several high-end properties.”

Lawyer Golnaz Vakili’s flight from Canada in March 2013 was the reason it took five years to bring charges against the men, said Det. Alan Fazeli.

“She was the lawyer that was registering a lot of these things,” Fazeli said. “She was a missing piece.”

Vakili has since pleaded guilty to charges related to facilitating the frauds, he said.

Fazeli said numerous different methods were used in the alleged frauds, many of which involved properties in Toronto’s upscale Bridle Path area.

“One of the methods that was used was fake individuals and shell companies had taken mortgages on some of these properties, and for all of them they had produced fake insurance and title insurance,” he said.

Police would not say how many properties were involved in the alleged scheme.

Law Society of Upper Canada documents say Vakili “participated in a massive fraud spree and multiple dishonest acts involving 13 different properties over a two-year period” beginning in 2011.

“She prepared and acted upon fake documents in support of other clearly fraudulent transactions,” a Law society hearing document states. “She repeatedly lied to her clients. She gave false testimony before the Deputy Director of Land Titles. Her clients lost just under $14 million as a result of her activities.”

Police said the four men two from Toronto and two from Richmond Hill, Ont. were arrested and charged last month.

Fraser Institute: OSFI’s proposed mortgage stress test is unnecessary, harmful

A new stress test for all uninsured mortgages is unnecessary and could increase costs for homebuyers, a report by the Fraser Institute said Wednesday.

Study author Neil Mohindra wrote the proposed stress test  “will do more harm than good” by limiting access to mortgages for some homebuyers.

“The mandatory standard for stress testing could result in a less competitive and more concentrated mortgage market,” he wrote in the report.

The study comes as the federal Office of the Superintendent of Financial Institutions finalizes new lending guidelines.

Among the changes being contemplated is a requirement that homebuyers who have a down payment of 20 per cent or more and do not require mortgage insurance still have to show they can make their payments if interest rates rise.

The head of OSFI has said that Canada’s banking regulator wants to reduce the risk of mortgage defaults because of high levels of household debt.

“We are not waiting to see those risks crystallize in rising arrears and defaults before we act,” OSFI head Jeremy Rudin said last week.

Canadian household debt compared with disposable income hit a record high in the second quarter. Statistics Canada reported last month that household credit market debt as a proportion of household disposable income increased to 167.8 per cent, up from 166.6 per cent in the first quarter.

However, Mohindra said that instead of a prescriptive test, OSFI could use its existing powers to fix what it believes are deficiencies in policies and procedures.

The Bank of Canada has raised its key interest rate target by a quarter of a percentage point twice this year.

The increases have pushed up the big bank prime lending rates which are used to determine rates for variable-rate mortgages and lines of credit.

The Fraser Institute is an independent, non-partisan organization that tends to prefer free-market policies over government regulation.

Mortgage lenders warn, new rules to dampen home sales in Canada

Excerpted article was written by  | The Globe and Mail

Canada’s mortgage lenders say tougher borrowing rules proposed by Canada’s banking regulator could reduce the volume of home sales in Canada by 10 per cent to 15 per cent annually as buyers find it harder to qualify for loans.

Mortgage Professionals Canada – an industry association representing lenders, mortgage brokers and mortgage insurers – said the economic impact of proposed stress-testing rule changes could result in 50,000 to 75,000 fewer home sales a year in Canada when combined with other mortgage-rule changes announced last year and a recent increase in interest rates.

Association president Paul Taylor said the impact of the change could cascade further as other buyers will still make purchases, but will qualify for smaller mortgages and buy less-expensive homes.

“Essentially, everybody is going to step down a rung or two, which means there will be real pressure on all home prices to also fall by a rung or two,” Mr. Taylor said in an interview.

The mortgage association is the latest group to air concerns about a proposal from the Office of the Superintendent of Financial Institutions (OSFI) to require home buyers who do not need mortgage insurance – those with down payments of more than 20 per cent of the purchase price – to prove they could still afford their mortgages if interest rates were two percentage points higher than they negotiated.

OSFI published the proposed changes in July with a request for public comment, saying it was aiming at implementing the changes in the fall if the plan proceeds.

The Canadian Home Builders’ Association has also voiced concerns about the proposed change, saying Canada could see 20,000 to 30,000 fewer new housing starts annually when combining the proposal with other recent policy changes.

In a submission to OSFI, the builders said a drop in new construction could reduce employment in Canada by between 42,500 and 63,800 jobs annually. Including the impact on resales of existing homes, the total number of jobs lost could be as high as 91,500, the group said.

Builders fear OSFI’s latest proposal has the potential for unintended consequences if it ends up helping to trigger the housing market downturn it is trying to buffer against, said Jason Burggraaf, government relations and policy adviser at the association.

“Our concern is that all these consumer confidence signals that are being put out there could in themselves become a self-fulfilling prophecy,” he said in an interview.

“They sort of pile on top of each other, seemingly without any co-ordination. Each one does its little bit, but it’s eventually the straw that breaks the camel’s back. All of them together especially squeeze the first-time home buyer, who doesn’t have access to a significant down payment for their home.”

OSFI proposed the rule change in July to bring qualification rules for uninsured mortgages into closer alignment with similar stress-testing rules introduced last year for people who are applying for insured mortgages – those who do not have a 20-per-cent down payment. When those rules were rolled out last October, Finance Minister Bill Morneau said they were aimed at ensuring borrowers do not take on mortgages they cannot afford if interest rates climb.

Ontario Real Estate Association chief executive officer Tim Hudak, who represents real estate agents in the province, said last week the latest change must be assessed on top all the other recent policy reforms, including last year’s stress-test rule changes, new foreign-buyers taxes in British Columbia and Ontario, and two recent hikes in interest rates. Mr. Hudak said the cumulative impact “risks capsizing the housing market altogether.”

Both the Canadian Home Builders Association and Mortgage Professionals Canada told OSFI the proposed tougher rules could also increase financial system risk by driving more borrowers to use unregulated lenders who do not have to follow OSFI’s standards.

They also warned the rules could push some consumers away from long-term, fixed-rate mortgages – which have higher interest rates but leave borrowers less exposed to interest-rate volatility – to shorter-term mortgages with lower interest rates that can more easily qualify under the tougher rules. Such a shift could add risk to the financial system as a whole if more borrowers are exposed to short-term interest rate volatility.

Mortgage Professionals Canada urged OSFI to consider a lower stress-test level, suggesting a methodology that would assess mortgage affordability at about 75 basis points – or three-quarters of a percentage point – higher than the negotiated rate.

OSFI has not revealed when it will decide on whether to go ahead with the change as proposed, saying only that it will finalize its guideline after reviewing submissions and expects to set an effective date for later in 2017.

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