Alberta Assumables

[dwb]

The Calgary and Edmonton market slowed down at about the exact same time lenders pulled the plug on the incredibly attractive "assumable mortgages" in Alberta (whereby one could assume a mortgage without qualification).

Is there any truth to the possibility being thrown around that this `pulling of the plug` of the assumables reduced housing demand and thus may have been the mail culprit of today`s Alberta real estate slowdown?

For instance, I was very, very interested in buying Alberta investment property in 2005 & 2006. True story. But mostly because of the easy assumable mortgage structure out there. Now I`m not interested as much, if at all... If others had the same thought process I did, then some significant demand for housing in Alberta deteriorated with the removal of the assumable. And with lower demand (all else being equal) of course that naturally leads to lower prices....

Any chance the assumable will ever make a comeback?

 

[PeterKinchMortgageTeam]

QUOTE (dwb @ Mar 28 2008, 08:21 AM) The Calgary and Edmonton market slowed down at about the exact same time lenders pulled the plug on the incredibly attractive "assumable mortgages" in Alberta (whereby one could assume a mortgage without qualification).

Is there any truth to the possibility being thrown around that this `pulling of the plug` of the assumables reduced housing demand and thus may have been the mail culprit of today`s Alberta real estate slowdown?

For instance, I was very, very interested in buying Alberta investment property in 2005 & 2006. True story. But mostly because of the easy assumable mortgage structure out there. Now I`m not interested as much, if at all... If others had the same thought process I did, then some significant demand for housing in Alberta deteriorated with the removal of the assumable. And with lower demand (all else being equal) of course that naturally leads to lower prices....

Any chance the assumable will ever make a comeback?

If it were up to banks - the assumable would never come back (I`m sure you can understand why). Because the banks need to abide by the laws of the province in which they do business (which allows mortgages to be assumed), they have changed their products which in most cases are no longer standard mortgages, but a collateral charge which cannot be assumed.

It`s unlikely that removal of the assumable has impacted the market in any way. Market fluctuations result from a multitude of factors, not just one. Keep in mind as well, assumables are attractive for some investors, the the majority of investors can qualify conventionally for thier purchases which in many cases results in more attractive rates, terms, products and LTV`s.

 

[GSI]

QUOTE (CanadianMortgageTeam @ Mar 28 2008, 07:52 PM) If it were up to banks - the assumable would never come back (I`m sure you can understand why). Because the banks need to abide by the laws of the province in which they do business (which allows mortgages to be assumed), they have changed their products which in most cases are no longer standard mortgages, but a collateral charge which cannot be assumed.

It`s unlikely that removal of the assumable has impacted the market in any way. Market fluctuations result from a multitude of factors, not just one. Keep in mind as well, assumables are attractive for some investors, the the majority of investors can qualify conventionally for thier purchases which in many cases results in more attractive rates, terms, products and LTV`s.

Hi DWB,

As Pete said, banks don`t like to do assumables in general and the stopping the assumables isn`t related to the slow down in the market. The slow down is correlated to the economic ebb and flow of the market as a whole. Please give a listen to `What`s Behind the Curtain` relating to the strength of Alberta`s economy and the future demand of properties.

I don`t have the exact figures of how many mortgages are assumed versus conventional purchase in Alberta, but it must be a small percent. Maybe Pete would know? Possibly 3% to 5% of mortgages are/were assumed in the Province versus regular.

And there are still a few lenders that still do assumables, but they will stop soon too. I just closed on an assumable property today as a matter of fact. I also have another one that I`m writing an offer on tomorrow. But, these aren`t $2K down deals or anything. They have between 15% to 20% as a downpayment to assume.

Using this strategy to buy is great, but limiting if it`s the only one you have to focus on. There are also other ways to take a property over w/out assumption but that still free you from qualifying (agreement of sale for example).

There are a few other threads about this topic too that you can search for in the MyREINsite.

It`s still a great market to be investing in, don`t let the lack of assumables deter you.

Regards,

 

[MONEY]

QUOTE (CanadianMortgageTeam @ Mar 28 2008, 07:52 PM) If it were up to banks - the assumable would never come back (I`m sure you can understand why). Because the banks need to abide by the laws of the province in which they do business (which allows mortgages to be assumed),

Which law is that? Please direct me to the statute.

 

[MONEY]

QUOTE (CanadianMortgageTeam @ Mar 28 2008, 07:52 PM) If it were up to banks - the assumable would never come back (I`m sure you can understand why). Because the banks need to abide by the laws of the province in which they do business (which allows mortgages to be assumed),
QUOTE (MONEY @ Mar 29 2008, 12:42 AM) Which law is that? Please direct me to the statute.

Well?? I`m still waiting for that statute.

 

[RedlineBrett]

Since when is it anyone`s job to jump through hoops for you?

You`re not a member and you`ve done nothing but add a venomous attitude to every thread that you post in.

If you can`t find it in you to treat the forum with more respect I`ll speak with other regular users and petition to the admins to have you kicked out of here.

QUOTE (MONEY @ Mar 31 2008, 02:51 PM) Well?? I`m still waiting for that statute.

 

[MONEY]

QUOTE (RedlineBrett @ Mar 31 2008, 04:34 PM) Since when is it anyone`s job to jump through hoops for you?Job? Someone who is licensed to provide information, and can`t back it up with truth/facts. What is wrong with asking for verifiable FACTS?


QUOTE (RedlineBrett @ Mar 31 2008, 04:34 PM) You`re not a member and you`ve done nothing but add a venomous attitude to every thread that you post in.

I`m sorry that you feel that way. But that is YOUR CHOICE of view. If for you, you feel it is `venomous`, then you will only see that side of things. Again, I`m sorry that you feel that way, But I am not the controller of your own feelings or views.
I also did not realize that this was a MEMBERS ONLY FORUM.

QUOTE (RedlineBrett @ Mar 31 2008, 04:34 PM) If you can`t find it in you to treat the forum with more respect I`ll speak with other regular users and petition to the admins to have you kicked out of here.

I believe most readers will be perceptive enough to realize that even the information you disagree with have some value in terms of promoting further self-definition and insight. This site is a smorgasbord of material...Take what you wish and click or scroll right past that which doesn`t interest you.

Truth needs no defending, but sometimes questioning things are what brings about discussions.
By all means if you want to play the `sandbox` game, and gather your toys and friends and go home, then so be it.

 

[RedlineBrett]

Please check your private message folder.Thanks.
BT

QUOTE (MONEY @ Mar 31 2008, 06:02 PM) Job? Someone who is licensed to provide information, and can`t back it up with truth/facts. What is wrong with asking for verifiable FACTS?





I`m sorry that you feel that way. But that is YOUR CHOICE of view. If for you, you feel it is `venomous`, then you will only see that side of things. Again, I`m sorry that you feel that way, But I am not the controller of your own feelings or views.
I also did not realize that this was a MEMBERS ONLY FORUM.



I believe most readers will be perceptive enough to realize that even the information you disagree with have some value in terms of promoting further self-definition and insight. This site is a smorgasbord of material...Take what you wish and click or scroll right past that which doesn`t interest you.

Truth needs no defending, but sometimes questioning things are what brings about discussions.
By all means if you want to play the `sandbox` game, and gather your toys and friends and go home, then so be it.

 

[joeiannuzzi]

QUOTE (RedlineBrett @ Mar 31 2008, 03:34 PM) If you can`t find it in you to treat the forum with more respect I`ll speak with other regular users and petition to the admins to have you kicked out of here.

Hi Brett. You have my full support on this matter!!!

 

[GarthChapman]

QUOTE (MONEY @ Mar 28 2008, 11:42 PM) Which law is that? Please direct me to the statute.

Money,

I can`t tell you what the statute is but I can tell you what my lawyer told me when I got into this business - that being that in Alberta a lender can not come after the Borrower for any shortfall in a foreclosure action on a residential mortgage. I think it originated with farmers losing their land to the banks during the depression of the 1930`s, and the reactions to that by the then Provincial government. This statute was somewhat responsible for lenders in Alberta allowing mortgages to be assumed. Lenders took cases to the Courts over the years and lost them all, so they gave up and allowed the assumptions.

The CMHC personal covenant over-rode the Provincial Law because CMHC is a Federally governed institution. That is why GE Capital lobbied for the same treatment a couple of years ago, and succesfully. Before then mortgages insured by GE did not have a personal covenant contained within the mortgage, leaving them less able to collect in events of default. Given the high rates of fraud prevalent in Alberta by unscrupulous people (created largely because of the assumability of residential mortgages in Alberta) this put them at a distinct dis-advantage.

So I would suggest that the recent heavy push away from mortgage assumptions in Allberta is directly attributable to the fraudulent actions of a few people, who created massive losses for the banks and a bit of a black eye for real estate investors in general.

Hope that answers your question,

 

[MONEY]

QUOTE (GarthChapman @ Mar 31 2008, 05:49 PM) Money,

I can`t tell you what the statute is but I can tell you what my lawyer told me when I got into this business - that being that in Alberta a lender can not come after the Borrower for any shortfall in a foreclosure action on a residential mortgage. I think it originated with farmers losing their land to the banks during the depression of the 1930`s, and the reactions to that by the then Provincial government. This statute was somewhat responsible for lenders in Alberta allowing mortgages to be assumed. Lenders took cases to the Courts over the years and lost them all, so they gave up and allowed the assumptions.

The CMHC personal covenant over-rode the Provincial Law because CMHC is a Federally governed institution. That is why GE Capital lobbied for the same treatment a couple of years ago, and succesfully. Before then mortgages insured by GE did not have a personal covenant contained within the mortgage, leaving them less able to collect in events of default. Given the high rates of fraud prevalent in Alberta by unscrupulous people (created largely because of the assumability of residential mortgages in Alberta) this put them at a distinct dis-advantage.

So I would suggest that the recent heavy push away from mortgage assumptions in Allberta is directly attributable to the fraudulent actions of a few people, who created massive losses for the banks and a bit of a black eye for real estate investors in general.

Hope that answers your question,

Hey Garth,
Thanks for the update. It`s greatly appreciated. It`s interesting that the mortgage industry tends to blame the fraudulent activities, yet there was more mortgage fraud conducted in the 80`s when people were walking away from their properties. Yet the industry did nothing about the assumable sitation back then.

I was wanting to know the statute because many people tend to pass on information by osmosis, and I was never aware of any direct law on assumables.

Plus in the 80`s I was able to assist in the design of the `Prohibition Order and Competition Law Agreement` which became a compliance policy for the Canadian Real Estate Association. Thus the reason I tend to again, ask/look for the facts.

 

[GarthChapman]

Money, regarding "It`s interesting that the mortgage industry tends to blame the fraudulent activities, yet there was more mortgage fraud conducted in the 80`s when people were walking away from their properties. Yet the industry did nothing about the assumable sitation back then." I submit that the banks would have had a tough time in the Courts at a time when the economy had imploded, as they would have been seen as the big uncaring banks being heavy handed on the poor consumers who were losing their homes. Judges go with the flow too. So now, with times being very good, it is much easier for those same banks to act.

And please accept a comment on your `asking for the facts`. You are right to do so, as to question what one hears or reads will result in more complete knowledge and in better decisions, but a more tactful approach will probably get you more reasoned responses, and therefore will deliver to you those important benefits.

Regards,