B.C. couple says home warranty insurance offers little protection

A Coquitlam couple says B.C.’s home warranty insurance has failed them and there needs to be more government oversight.

In March 2013, Tina and Ben Wilson moved into a newly constructed home on Coquitlam’s Burke Mountain. Now, almost three years later, they are still fighting with the insurance provider handling their new home warranty claim.

“You buy your dream home and it turns into a nightmare,” says Tina.

The home came with home warranty insurance. By law, all residential builders in B.C. must have third-party home warranty insurance on new homes before getting a building permit. The Wilsons say soon after they moved in, they noticed a number of deficiencies including electrical issues, drainage problems with water settling against the house and mold in the basement suite. They decided to file a new home warranty claim.

“We let them know in August about the mold in the basement suite and by November we knew we were in for a fight,” says Tina.

The Wilsons say the insurer, Aviva Insurance Company of Canada represented by National Home Warranty Group, sent a third-party investigator to look into the mold problem. Initially, the couple says they were told nothing was wrong.

“The builder, the insurer, and the third party all came in and said the ventilation system was working fine and installed to code,” says Tina. “When we pushed back and hired engineers and hired environmental specialists, they found that not only was it not functioning at all, but it wasn’t installed to code.”

The insurance company eventually accepted the findings and began the remedial work. However, the Wilsons say the experience with  home warranty insurance has been an uphill battle.

“If you are willing to fight. If you are persistent. If you don’t go away quietly, then new home warranty eventually might do something to help you a little bit,” says Tina.

The Homeowner Protection Office, which is a branch of BC Housing, monitors the performance of home warranty insurance, but it has no authority to regulate warranty providers or insurance brokers. Consumer Matters reached out to BC Housing Minister Rich Coleman, but he declined our request for an interview. Instead, we were referred to the Homeowner Protection Office.

Vice president and registrar Wendy Acheson says, “I believe most homeowners are very satisfied with the system and when you look at the number of homes being built where we don’t get any complaints [it’s] enormous. The number of complaints we get is actually 0.2 per cent of the number of homes that are being built.”

Acheson says there are a number of tools available to the homeowner should they run into trouble. A complaint can be made to the Financial Institutions Commission which regulates insurance providers. A homeowner can also institute mandatory mediation.

But realtor and homeowner advocate John Grasty says there’s little protection for the homeowner because they are forced to use a home warranty company selected by the builder.

“In my opinion what protection that is offered is worthless,” Grasty adds.

“There’s not enough political will. I don’t think enough consumers are speaking out. A lot of them can’t be bothered. It’s just too much of a huge organization to be arguing with. ”

Home inspector Ted Gilmour agrees. He says many of his clients are frustrated by the system.

“I think it’s disingenuous of the government to insist on you buying into that system that does not protect you because you have to sue the builder to get anything done is my experience.”

As for Tina and Ben, fighting with their insurance provider and the handling of their new home warranty claim has become a full-time job.

“You quickly realize going through the process, your idea of what is there is a complete misconception,” says Ben. “There’s no one literally there to help the homeowner.”

The Homeowner Protection Office says the province plans to review new home warranty insurance regulations in 2016.

CMHC says foreign buyers may be pushing up luxury housing prices

CBC News

The chief executive officer of the Canada Mortgage and Housing Corp. says foreign buyers may be playing a role in overvaluation in the Vancouver and Toronto housing markets and says the federal agency is seeking new data on real estate ownership.

“In Vancouver and Toronto, it is very possible that foreign buyers account for a substantial portion of the demand for pricier, luxury single-family homes,” CMHC CEO Evan Siddall said in a panel discussion Tuesday.

Foreign buyers may be contributing to an overvaluation of residential real estate, especially in the luxury segment, Siddall said. CMHC has said 11 of Canada’s cities are seeing some level of real estate overvaluation.

Foreign owners also present a risk for the CMHC, which is responsible for keeping Canada’s housing markets stable.

“While both domestic and foreign investment activity can be speculative, foreign investment may be more mobile and subject to capital flight. This would increase volatility in domestic housing markets,” Siddall said.

Recent research

He said CMHC needs a better understanding of the extent of foreign ownership in Canada and plans new studies to collect this data. Last year, it studied foreign ownership in the condo sector and found it was very low — just 2.4 per cent.

Siddall referred to a Sotheby’s report that international buyers accounted for 40 per cent of total luxury home sales in Vancouver and 25 per cent in Toronto and to Vancouver urban planner Andy Yan’s recent account of foreign activity in the Vancouver market, which some have criticized as racist.

CMHC CEO Evan Siddall says the agency is seeking more data on foreign ownership of Canadian residential real estate. (CBC)

He said much of the evidence is anecdotal or has questionable methodology, and says better data is needed.

CMHC has begun asking property managers to provide information on the number of condominium apartment units owned by people whose primary residence is outside of Canada. It also is looking for broader-based data from realtors and land registry offices.

Siddall also addressed concerns raised about the exposure of the federal government to mortgage risk if there is a major correction in the housing market.

Stress testing

He said CMHC has “stress-tested” its own financial health in a scenario like the 2008 U.S. housing market crash, when there was a 30 per cent decline in house prices and a five percentage point increase in unemployment.

That kind of scenario in Canada would result in almost in an eight-fold increase in insurance claim losses, from $1.7 billion to $13.2 billion over five years and CMHC would swing from a $7.5 billion profit to a $2.8 billion loss, Siddall said.

CMHC has a capital cushion sufficient to cope with that kind of downturn, Siddall said, though it is studying shifting some of the risk to mortgage lenders, such as banks, so the burden on the federal government is not as heavy.

The federal agency also has tested itself against other grim scenarios, including global economic deflation persisting for five years, an oil price below $35 US a barrel, and a magnitude 9.0 earthquake in Vancouver.

“The bottom line: it would take a very severe housing downturn and a big jump in unemployment rates, both persisting for a number of years, to start eroding our capital in a significant manner,” Siddall said.

Homes sales climb higher in May as buyers look to preempt insurance hikes

By Alexandra Posadzki

THE CANADIAN PRESS

TORONTO – Home sales accelerated in May to their highest level in more than five years, as some home buyers looked to preempt an increase in mortgage insurance premiums.

The Canadian Real Estate Association said Monday sales last month through its MLS system were up 3.1 per cent from April, marking the fourth consecutive month-over-month increase.

Sales in the Toronto area grew by 4.1 per cent in May compared with the previous month, while sales in Calgary climbed 6.7 per cent and Ottawa gained 6.2 per cent.

CREA president Pauline Aunger says news that CMHC will be increasing mortgage default insurance premiums for home buyers with less than a 10 per cent down payment effective June 1 could have impacted home sales.

“Some buyers may have jumped off the fence and purchased in May to beat the increase,” Aunger said in a statement.

CREA chief economist Gregory Klump says a rebound in sales in Calgary and Edmonton, which posted a 3.2 per cent month-over-month gain, suggests uncertainty stemming from low oil prices could be easing.

The association also revised its outlook for the full year upwards to reflect better-than-expected sales in British Columbia.

CREA now anticipates that national home sales will climb to 487,200 units this year, 1.3 per cent higher than last year.

Compared with a year ago, sales across the country in May were up 2.7 per cent, led by Vancouver, Toronto and Montreal.

The national average price for a home sold in May was $450,886, up 8.1 per cent from a year ago. Excluding the red-hot markets of Toronto and Vancouver, the average price of a home gained 2.4 per cent to $344,988.

The aggregate composite MLS home price index was up 5.2 per cent from a year ago to $493,100.

The Canadian Real Estate Association says the home price index is a better measure of price trends than the average selling price because the index is not affected by changes in the mix of sales activity.

TD Bank economist Leslie Preston said a recent rise in government bond yields could push mortgage rates higher this year, dampening demand for real estate across the country.

“Overall, though, we expect the regional divide to continue,” Preston said in a statement.

“While sales in oil-related markets of Edmonton and Calgary have risen off their January lows, price gains remain modest. The Vancouver and Toronto markets should cool slightly on higher interest rates, however. Given the tightness in these markets, prices should remain relatively strong.”

Preston anticipates that house price gains will slow next year to around two to three per cent.

canada-press

 

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