We’re all making lifestyle changes that we’ve been forced into by COVID-19. Many businesses are shut down, while others are forced to make major changes to accommodate the new ‘temporary’ way of life. The mortgage industry is no exception here. This is something that we’re all in together, and we all have to work together to make our way through it.

Major changes are being made to ensure everyone’s mortgage needs are accommodated. The biggest issue lies with people who have new purchases closing and have been laid off, or facing significant reduction in income.

 

What Happens If You’ve Been Laid Off And You Have A Home Purchase Closing?

Providing that you entered into a binding purchase agreement, and have received a mortgage commitment prior to March 25th, then the income documents that you originally provided will still be considered, regardless of your current employment status. This applies to all purchases closing prior to September 30th, 2020. Applications that do not fall within these parameters will be reviewed on a case by case basis.

Note that if you have recently been laid off and are looking at purchasing, then you’ll need to wait until you are back to work before your income would be considered. The above applies to those who have already purchased. If you are considering purchasing and if you think that the future of your employment is questionable, then you’ll definitely want to hold off purchasing for now.

 

Appraisals

Real estate appraisals have generally required the appraiser to inspect and photograph the home. The appraisal industry, as well as mortgage lenders, have now approved a new policy allowing the appraiser to rely on photos provided by the borrower or listing agent to be used in their reports. While appraisers will not be required to enter your home in most cases, they will still do a drive by inspection, which may include a walkaround of your home. In some cases, the appraiser may require a recorded video conference call with the homeowner as well.

 

Signing Legal Documents

In order to minimize the spread of COVID-19, the mortgage industry is doing as much as they can to eliminate personal contact. Real estate lawyers, as well as title insurance companies such as FCT and FNF (who facilitate mortgage switches and refinances) are now conducting their signings via video conferencing platforms such as Zoom. All in person contact has been eliminated. This would have been unheard of prior to the pandemic.

 

Mortgage Deferrals

More than 1.5 million Canadians have applied for EI since the start of the pandemic, and many others are facing significant losses to their income. This puts many into a tough position when it comes to making mortgage payments. As you can imagine, the customer service departments of all mortgage lenders are overwhelmed with inquiries. In fact, some of the banks have been receiving up to 20,000 calls per day. Needless to say, I would not expect to get timely responses from them. In some cases, it can take anywhere from a few days to over a week to get a response. If you have any questions, my team and I will always be happy to answer them for you in a timely manner.

All mortgage deferrals will be looked at on a case by case basis. The program is for those who are facing immediate financial crisis. Unfortunately, lenders are getting many inquiries from those who are just looking for a payment break and who are not facing any income disruption. This is making it harder for those who are truly facing tough times to get through. Unless you’re facing immediate financial distress, it’s best not to contact your lender at this time.

The deferral program is costing lenders millions, so they’ll want to ensure that you are truly facing financial hardship before they will approve you for deferral. To date, more than 500,000 deferral applications have been approved with the big banks alone. This represents as much as 10% of their entire mortgage portfolio…and this is only a few weeks after the deferral program was announced.

No mortgage lender wants you to be in a situation where you are not able to make your payments. As long as you communicate with them, something can generally be worked out. This will not have any negative affect on your credit score.

These are challenging times for everyone. Borrowers and mortgage lenders alike. The mortgage industry has been overwhelmed over the past few weeks and we are working extremely hard to ensure everyone is taken care of. Please bear with mortgage lenders if you are having trouble getting through. Fortunately, things are starting to subside, and the wait times are not quite as long as they were a couple of weeks ago.

 

Mortgage Rates

COVID-19 has created many unprecedented events, some of which having heavy influence on mortgage rates. We saw the Bank of Canada cut their overnight rate by a whopping 1.50% within just a few weeks. Fixed rates were plummeting into mid-March, only to have them do a complete reversal, literally within hours. Prime rate dropping, yet fixed rates going in the opposite direction. While this can happen, it’s unprecedented to see it happen to this extent.

While there have been many increases in mortgage rates over the past few weeks, fixed mortgage rates are starting to come down again. While mortgage lenders had been slashing their discounts off prime rate, they seem to have stabilized… for now. There are currently still 5 year variable rates available as low as prime -0.50% (1.95%).

 

 

Paul Meredith is the author of the Amazon #1 best selling book, Beat the Bank
– How to Win The Mortgage Game in Canada, and has ranked as one of the top
75 mortgage brokers in Canada since 2016. He was a finalist for Mortgage
Broker of the Year in 2018, and can be seen as the exclusive mortgage broker on
season two of TV’s Top Million Dollar Agent.