Hopefully this isn’t really big news to most of you. Almost a non event. More of an “it’s about time”.
Given that the US Federal Reserve dropped their rate awhile back by a whopping 75 Bps. One had to assume that a drop had to happen. I believe the unthinkable situation would be if the US were to drop their rate and the Canadian rate went up. I think the market might panic and there would be sever repercussions (read almost certain recession).
The Bank of Canada points to a slowing economy, due to a major slow down in the US. We’re all still waiting to see what happens in the US housing market. Has it hit bottom? Still not there yet? Slowly inching down.
What does this mean to a mortgage broker. Two things, first the obvious lower rates for clients starting with the variable rates looking most attractive, while we wait for months for the fix rates to drop. Second it’s becoming much harder to get money to lend for folks who are boarder line. Forget the B & C markets as we like to call it. That market has gone back to 2-3 lenders from a high a year ago of 20. Even the remaining lenders are looking for “high confidence” clients.

I wasn’t sure how this was going to affect the commercial market until I tried to get a commercial loan this week. One commercial lender has cut their product line in half. Private money folks are finding it slightly more challenging to find folks willing to lend their money.

So things have generally tightened up here, despite the fact that the sub-prime market here was barely a blip on the screen. Everyone is pulling their money out of real estate and/or mortgage money.

From J. Paul Ghetty – buy when no one else is buying and sell when everyone else is buying.

Avoid the herd mentality. Go against the grain.

Folks,

Can you tell it’s spring time and I’ve been a little busy?

My apologies for not posting sooner. I just came across a deal that I thought would be good for a friend of mine. I looked at all the numbers and even reviewed he purchase and sale with him.

The one thing that I wasn’t 100% sure on was the whole concept of “tenants in common”. Most people are aware of joint tenancy and if you are married and live together, this is the situation you are in. The concept here is that if either of the two parties dies, the remaining survivor takes over that persons portion of ownership. Simple. No papers need to be signed.

Now we move into the area of tenants in common. This is were each person or individual owns a specific percentage of the property. Each person can in theory sell their portion to another investor or individual and terminate their involvement with that property. If the owner dies, then their portion will need to be transferred through their estate to next of kin or whomever specified in their will.
Sounds simple enough. Everyone pays their portion of the mortgage and life goes on….

Someone was kind enough to point out a small little problem, call it a fly in the ointment. What happens if 1 of the tenants in common defaults on his portion of the mortgage (gee, I don’t know say they pass away)? Hm.

Let’s see, the mortgage is registered against the title. Ok, except the title is only partially owned by everyone. Thus if one defaults, in theory that puts everyone in default. Yikes!

Suddenly you have many new friends who are interested in you fixing your financial problem and quickly. Now I can’t see a bank foreclosing on an entire project, but legally there’s very little preventing them from doing this.

What happens if the persons estate takes more than a year to determine where everything should go? Double yikes. Everyone sits in limbo.

I’ll classify today’s post as one of those “caveat emptor” items. If you are ever asked to purchase into a “tenants in common” real estate project, make sure you know what you are getting into.

That’s all for today’s post.