Archive for the ‘Mortgage Information’ Category

Math whiz Ravi Sood has ridden the highs and lows of the wild world of hedge funds.

The president of Lawrence Asset Management Inc. made a name for himself running the firm’s flagship hedge fund with stellar returns such as his 75-per-cent gain in 2007.  But the stock market crash has dealt a blow to Lawrence Partners Fund, which suspended redemptions this week after plunging 65 per cent for the first 10 months of this year.

The investment firm “believes it is in the best interests of all shareholders to suspend redemptions for 60 days,” the 32-year-old manager told investors in letter on Monday. “We are reviewing the situation and expect in the upcoming weeks to present to LPF shareholders a number of alternatives.”

Mr. Sood is the latest victim among Canadian hedge funds caught in the market turmoil.  Falling stock markets are forcing many hedge funds to wind down or undergo a makeover.  “Certainly we are going to see more hedge funds suspend redemptions to meet an orderly request of unitholders who want their money,” said fund analyst Peter Loach. “A lot of hedge funds focus on small-cap stocks, and they have been hit the hardest.”

Last month, Toronto-based Epic Capital Management Inc. said it was closing its flagship Epic Limited Partnership hedge fund after assets sank to $200-million from $300-million.

Lawrence Partners Fund’s options could include winding down. They could also include cutting the management fee for investors willing to stay, sources say, or allowing some investors to pull out if they agree to a further loss on their investment in return.

The past two months have been challenging for Mr. Sood, a precocious student who completed high school at age 16. He joined Toronto-based Lawrence & Co. after graduating with a math degree from the University of Waterloo.

This is the firm founded by legendary Bay Street bond trader Jack Lawrence who built the former Burns Fry into a powerful investment dealer. It boasts blue-chip names such as John Crow, former governor of the Bank of Canada, and Paul Volcker, former chairman of the U.S. Federal Reserve Board, on its advisory board.  With his partners at Lawrence & Co., Mr. Sood founded Lawrence Asset Management as a subsidiary in 2001.

His hedge fund, which invests in smaller-capitalization Canadian stocks and has private equity holdings, saw its stellar track record unravel in September when it took a 48-per-cent haircut. The fund, which had about $217-million in assets in late March, lost more money last month.

Mr. Sood could not be reached for comment, but he told investors in his letter that the fund’s poor performance was also affected by the credit crisis. He “was forced to adjust on little notice to more restrictive credit terms in an already problematic market.”

Sources close to Lawrence Partners say the fund’s prime brokers at BMO Nesbitt Burns and CIBC World Markets cut back on their loans, and that forced the fund to sell holdings in takeover targets Fording Canadian Coal Trust and BCE Inc. at a loss.

The fund was also “negatively impacted” by the delay in closing and lowered pricing in the acquisition of PBS Coals – a major holding – by OAO Severstal, Mr. Sood wrote.

So with Hedge Funds drastically plummeting, where should you turn for safer, more secure investments?

The MBN (7-1) Bond Fund offers the security you are looking for, with the return you want.  It is an RSP eligible bond that provides a 7.0% annual fixed rate of return compounding over a 4 year period, which provides an annualized rate of return of 7.7%.  This fund, unlike most other funds, is Hard Asset Backed, meaning it is secured to real estate which is a tangible asset.  Hard Asset value offers an objective measure of value, based largely on supply and demand economics (market forces) and the law of substitution.  All of these factors, when combined, make for an extremely secure investment and create the asset backed investment, rather than stock backed investment, that most Canadian Financial Institutions are comfortable lending on.  Ask yourself this: What do most of the Major Banks lend on: Real Estate or Stocks?   The answer is Hard Asset Backed Mortgages, or Real Estate.

With the MBN Bond Fund the principal is backed by real estate and the interest is covered by a performance bond.  This gives you peace of mind with regards to the security of your investment.

By transferring your registered investments to the MBN Bond Fund there are no tax implications to be had as you are moving your investments from one Registered Fund to another; you are not relying on consumer confidence to increase the value of your stocks; and you are removing the market volatility that has caused the decrease in your investments.

By doing your research and being a knowledgeable investor you can protect your investments; your lifestyle, your children’s college funds, and your retirement income.  Your investments are too important to leave to chance.  Contact your MBN Bond Fund Specialist at 1-877-212-8002 or www.mbnbondfund.com to learn about how you can transfer your Registered Investments and begin earning a fixed 7% rate of return.

In addition to the Bond Fund, MBN offers a financing team with Mortgage Associates specialized in first-time home buyer financing and investment property financing. 

To learn more about your mortgage options please contact your Calgary and Southern Alberta Mortgage Specialists at MBN Mortgage at 1-866-955-9662 or http://www.mbnmortgage.com

MBN Mortgage

Globe And Mail

Nov 11, 2008

In the midst of the worst financial crisis since the Great Depression, Canada has joined the ranks of governments that in recent weeks stepped up to help banks cope with more fallout from bad U.S. subprime mortgages. In Canada’s case, however, the reason for the assistance is a little different from some of its G-7 partners. Unlike banks in the U.S., Britain and Germany, which needed to be bailed out with hundreds of billions of dollars in new capital, Canada’s major banks are solid and solvent. They don’t need any help to work through their subprime exposure.

So why did Ottawa agree to insure the money they routinely borrow from other banks, a practice that keeps their credit operations liquid? Ironically, the troubled non-Canadian institutions that received capital injections and loan guarantees in other countries now carry a government seal of approval that tilts the playing field in their favor when it comes to borrowing. That leaves Canada’s big banks, including Scotiabank, TD Bank Financial Group, RBC Royal Bank and CIBC, at a competitive disadvantage. So the government acted to level the field, not to aid troubled banks.

Why has Canada withstood the subprime tornado better than other countries, and should the Canadian banking system be a model for G-7 and G-20 leaders when they gather in Washington on Nov. 15? Consider that the Geneva-based World Economic Forum, an influential think tank whose annual conference attracts the likes of Bill Gates and Tony Blair, earlier this month ranked Canada’s banking system as the soundest in the world. The U.S. came in at No. 40, and Germany and Britain ranked 39 and 44, respectively. (Switzerland was No. 16, just ahead of Namibia.) “For Canadian banks, having higher capital ratios than anyone else in the world is a source of pride,” says analyst Mario Mendonca with Toronto-based investment bank Genuity Capital Markets.

The average capital reserves for Canada’s Big Six banks — defined as Tier 1 capital (common shares, retained earnings and non-cumulative preferred shares) to risk-adjusted assets — is 9.8%, several percentage points above the 7% required by Canada’s federal bank regulator. That’s a little better than major U.S. commercial banks like Bank of America, but significantly higher than an average capital ratio of about 4% for U.S. investment banks and 3.3% for European commercial banks.

Another factor that helped make Canada the new gold standard in banking was Ottawa’s decision in the late 1980s to allow commercials banks to acquire investment dealers on Toronto’s Bay Street, the country’s financial hub. As a result, these institutions are subject to the same strict rules as commercial banks, while U.S. investment dealers are subject to only light supervision from the Securities and Exchange Commission. Morgan Stanley and Goldman Sachs, of course, will now be under the U.S. Federal Reserve’s supervision since they have been chartered as bank-holding companies.

Canada’s banks make bad investments on occasion. When Toronto-based CIBC, Canada’s most aggressive big bank, took $3.5 billion in charges against the U.S. subprime debacle, federal regulators quickly arrived on the scene. But here’s the difference: CIBC ended up selling $2.94 billion worth of its own shares in the first quarter of this year to shore up capital reserves. “The relationship between government and banks is a positive one,” says Minister of Finance Jim Flaherty. “We have a lot of discussions and regular meetings. The common goal is a sound financial system.”

There is, of course, a flip side to Canada’s regulatory system. When the global economy was flying high, Canadian banks complained about not being allowed to merge to become more significant international players. “In hindsight, that decision may have saved Canada from having a Royal Bank of Scotland on its hands,” says Lawrence Booth, a finance specialist at the University of Toronto’s Rotman School of Management, referring to the overly ambitious bank’s bailout earlier this month by the British government.

Says FFlaherty: “The credit crisis we’re facing is the result of unbridled greed. We need to bridle greed.” Perhaps when world leaders sit down in Washington to forge a 21st-century New Deal for the global financial system, it may have more than a smattering of Canadian banking know-how.

MBN Mortgage

TIME

Monday November 10, 2008

There is a new normal in the Canadian Mortgage Market.  The old normal was discounted Prime Rates on variable mortgages, and fixed rates more representative of the bond yield. 

Welcome to the “now” …

Last week, CIBC Senior Economist Benjamin Tal said “it will be a while before we see a variable rate discount again…the new normal will be Prime or Prime minus 0.25%”.  This is our reality.

What are rates going to look like in the future?  It’s a question we as Mortgage Specialists are being asked frequently.  All anyone can provide is an educated guess because the mortgage market is changing daily as is the consumer reaction to this news, and ultimately, the government’s reaction.

Most analysts believe that rates should be decreasing, for the short term, some of their commentary being:

“Mortgage rates are expected to be relatively stable throughout the last quarter of this year, remaining within 25-50 basis points of their current levels. Posted mortgage rates will decrease slightly in the first half of 2009 as the cost of credit to financial institutions eases. Rising bond yields, however, will nudge mortgage rates marginally higher in the latter half of 2009.”  CMHC

“Some further monetary stimulus (i.e. rate cuts) will likely be required to achieve the 2% inflation target over the medium term.” Bank of Canada

“Credit market traders are pricing in a 100% chance of a 1/4% cut and a 53% chance of a 1/2% cut by year-end. “  CEP

Why are rates coming down?  One reason, according to TD economist Pascal Gauthier, is because the U.S. economy may “record its worst performance in decades, retreating by around 3% in Q4, with the Canadian economy mirroring this performance with a 2.5-3.0% decline, the worst since 1991.”  Moreover, the Bank of Canada’s worst enemy, inflation, is currently no longer a clear and present danger to our economy.

What does this mean for you as a home-buyer? 

If you currently have a variable rate mortgage at Prime Minus, then your monthly mortgage payment amounts should have decreased dramatically due to the large lowering of Prime Rate.  You are in great shape.

If you are a in the process of purchasing a home now, variable rates are typically at Prime Plus One, which is on the high side compared with what we have seen in the past 6 months or so.  Depending on your preference, a variable rate mortgage still offers a lower rate than the current fixed rates being offered.

If you’re in the market for a new mortgage, contact your Calgary and Southern Alberta MBN Mortgage Specialist and we can help you examine your options and arrive at a strategy best suited to your needs.  Good advice in markets like these is imperative when making a choice on rate, term, type of mortgage, and amortization.

MBN Mortgage

Mortgage Trends

The Honourable Jim Flaherty, Minister of Finance, made the following statement: 

“This morning, Statistics Canada reported that real gross domestic product was up slightly in the second quarter.  As expected, the pace of economic activity remains weak as a result of the U.S. slowdown and its impact on our export sector.  For 2008 as a whole, I expect real GDP to increase by about 1 per cent”. 

He went on to say that the expected “growth in income and employment in the second quarter should help support economic activity going forward” thereby putting Canada in a better position that most other countries to withstand the economic uncertainty that we are all affected by.  “Canada’s economic fundamentals remain solid:

·         Our unemployment rate remains near a 33-year low;

·         Our budget is balanced and in fact there was a budgetary surplus of $1.7 billion in the month of June;

·         In addition, real income has increased by more than 4 per cent at an annual rate over the first half of this year. This is income available to Canadians for consumption or investment;

·         Canada’s household, business and financial sectors are strong;

·         Canada’s housing market is sound and interest rates are low; and

·         Core inflation is low and stable.

In addition, the “Actions taken by our government since 2006 will provide $21 billion in incremental tax relief—equivalent to 1.4 per cent of GDP—to Canadians and Canadian businesses this year alone, when it is needed most. This is a permanent structural tax change, unlike the temporary measures in the United States.” 

Canada is well ahead of the game and has implemented strategies to circumvent the fallout of this global financial uncertainty, “in fact, federal personal income tax refunds this year were almost $200 or 14 per cent higher than last year thanks to our tax relief measures. In addition to the stimulus provided by the reductions in personal income tax and business taxes, we have other advantages with respect to the planned business tax reductions through 2012,” which again re-confirms Canada’s financial stability.

This is not to say that we are completely unaffected as “we are facing some significant economic challenges. Canadians understand that Canada is not an island. This is a global phenomenon. The global economy overall is slowing” and “we are feeling the impact of global economic factors—including a struggling U.S. economy, and of course the U.S. is our largest trading partner.”  In saying this, “we recognize that the key to a stronger economy is creating an environment that encourages investment and spurs further job creation” which is why “we have made permanent broad-based tax reductions” and is also why we are investing in priorities: in post-secondary education, infrastructure and worker retraining” and “creating centres of excellence in science and technology.” 

Canada is being responsible and is taking the necessary courses of action by implementing long term strategies to improve competitiveness and productivity and this will ultimately have a positive impact on Canadians and the Canadian economy.

MBN Mortgage

Mortgage Intelligence Inc.

ENTERING THE HOUSING MARKET… OPPORTUNITES YOU MAY NOT BE AWARE OF

With the extensive Economic changes the Unites States is enduring right now, many House Insurers and Lenders have tightened their belts and either modified or completely removed some of their products that were once available to homebuyers.

Government-backed insurers, CMHC and Genworth, have both recalled their 40 year Amortization and Zero Down Mortgage Products, effective October 15, 2008 and many Lending Institutions have already implemented these guidelines despite the fact that these changes have not yet become mandatory.

So where does this leave you as a Home Buyer?

Your Mortgage Professional can not only help you understand the multitude of options available to you, but can also introduce you to alternate lenders that you may not presently be aware of.  Typically these non-confirming or self-insured lenders offer their products almost exclusively through Mortgage Brokers which means that a large number of Canadians have not been informed of the flexible policies they offer which have ultimately made home-ownership for thousands of Canadians a reality. 

By allowing Consumers to take on higher debt loads, extending amortizations, and enabling flexibility with income requirements, these Lenders provide Canadians with the opportunity to enter the housing market.  While these relaxed policies and innovative products offered are fantastic, they often times come with a slightly higher interest rate or less desirable terms.  Lenders base their rates and fees on the perceived risk of not only the borrower (including a client’s credit history, size of down payment, and source of income) but also the property being purchased.  After evaluating the borrower and the property, a lender will determine this perceived risk and apply the terms of the mortgage and applicable interest rates and fees accordingly.

One cannot lose sight of the end goal and ultimate achievement though when looking at the terms and rates being offered.  To enter the market using an alternative lender does not mean you have to remain in the market under those terms for the entirety of your homeownership lifetime.  Often times your Mortgage Professional will provide you with a temporary short term solution that will provide you the opportunity to purchase a home and enter the market.  However, during the term of your mortgage, your Mortgage Professional will work with you to mitigate the concerns a typical big bank might have when considering providing you financing and will guide you on ways to improve your qualifying ability with a typical lender or banking institution.  For example, often times cleaning up your credit and decreasing your debt loads will make a significant difference.

It is important to examine your local market as well – House prices have increased across Alberta at unprecedented rates and consumers are actively searching for a way to take part in the wealth that is created by these increases.  While it may only be possible for a consumer to enter the market under a Zero Down, 40 year Amortization Product, the increase in the value of their purchase over the term of their mortgage might more than make up for the higher rates required to initially complete that purchase.  This increase in value is a huge advantage to individuals once they are in the market as lenders consider this equity a down payment when refinancing or negotiating the terms of your mortgage.

Perhaps your only option today is a “no money down” option but upon the maturity of your mortgage term the equity in your property may help you negotiate a better mortgage.  The larger your down payment or equity position, when applying for a new mortgage, the less perceived risk there is by a lender and ultimately the terms of the mortgage being offered to you should be more favorable. 

There are many options available to you, and numerous mortgage  products that will enable you to enter the housing market.  Work with your Mortgage Specialist and follow their guidance to improve your negotiating position and ultimately, form a partnership with them to not only achieve your Home Ownership goals but to continually improve the terms of your mortgage.

Whether you and your mortgage specialist choose to use a Big Bank or a Non-Confirming Lender, becoming a homeowner is a great step in the right direction for your financial future.