The practice o

Mortgage application process

The process of gathering information and collecting documents to determine the best solution for the borro
Application process
The basic steps in this are: Step 1: Qualify the buyer and the property (Discovery story) Step 2: Review the
submit the loan application Step 4: Close the transaction
Qualify the buyer and the property (The discovery story)
What is step 1 in the application process
Review the market for a suitable lender and product
What is step 2 in the application process
Prepare and submit the loan application
What is step 3 in the application process
Close the transaction
What is step 4 in the application process
Timely manner
From the beginning, set the expectation that it is the borrower's responsibility to provide any required docu
any funds until the required documents are received, and that it is not your job to chase after them
Discovering the story
Stages in this are: Validating referrals, developing rapport, discussing needs and goals, verifying identity, c
performance, and initial evaluation
Validating referrals, developing rapport, discussing needs and goals, verifying identity, collecting core docu
initial evaluation
Stages in the discovery story
Discovery story
Important ground rules to keep in mind when engaging with borrowers in this stage: - Stories are not alway
Keeping the end goal in sight
First face-to-face meeting/ during the first interaction
When should you verify identity?
Untrustworthy borrowers
What can this be an indication of: A borrower calls stating that they need a mortgage and have all the requ
you can get this one done, I have 10 more deals for you right away"
Referral sources
- Word-of-mouth referrals - Through the network of another brokerage licensee - As a result of proactive m
Referral fees
Typically paid between brokerages Not a business matter between individuals
Referral fee or other form of compensation
In cases where a ___ is expected in return for a referral, the following applies: - If the referral source is an
another brokerage, not directly to the licensee - If the referral source is an unlicensed individual, then the _
Soliciting mortgages without a license
An unlicensed referral source that sends frequent referrals may be seen as this. It is not just the frequency
you are paying an individual who should be licensed but is not, then you cannot give them a fee
The fee is paid directly
How is the fee paid in this instance: Where a referral does not occur between two industry professionals; fo
In writing
Referral fees must be fully disclosed to the applicant in what form?
Building rapport
- Building a comfort level between between you and the borrower. - Includes developing mutual trust and u
expertise, and establishing credibility
Mutual trust and understanding
Once you establish a comfortable rapport with the borrower, you will be able to quickly and efficiently draw
service to the borrower and the lender, while the borrower will feel that their needs have been understood
Give-and-take process
Building rapport is this. It is a dialogue, during which relevant information is both acquired and disclosed. It
questions and receive answers. It needs just the right amount of social pleasantries and a high degree of p
Selling expertise
It is important to remember that as a mortgage broker, you are selling your expertise to those who come to
you every time they need some aspect of mortgage financing, not just once for a particular product or situa
Establishing credibility
In order to sell your expertise, you must first ___ as an expert. This happens in a number of ways - many o
Developing rapport
Tips for doing this: 1. Make a good first impression 2. Introduce yourself and start a dialogue 3. Guide the c
Present yourself as polished, prepared and personable
Three Ps
Non-verbal red flags
Some ___ can include behaviors such as the following: - Evasiveness in providing answers, nervous laugh
a reasonable question - Shifting in the chair, or signs of discomfort when asked a question - Scripted or rec
details
Discovering their story
Discussing a borrower's specific financial needs and goals is the purpose for ___
Needs and goals

Questions for discussing ___: 1. What sources of mortgage information has the applicant used 2. What is t
borrower want (or already have)? 4. How much does the borrower want to spend? 5. What is the borrower
general credit status and debt load 7. What is the borrower's personal status? 8. What is your general impr

Sources of mortgage information

Common ___ include family and friends, the internet, newspapers, ads, banks, brokers, etc.
Their finances, the real estate and mortgage marketplace, the costs and obligations involved in a mortgage
Finding out how many and what types of information a borrower has already used will give you an idea of h
What sources of mortgage information has the applicant used
From this question, you can decide how much background detail to provide. It will also give you an indicati
point to red flags. For example, has the borrower already applied elsewhere and been turned down?
What is the reason for the loan request?
The straightforward answer to this question relates to the type of mortgage transaction: pre-qualification or
type of financing required dictates how to proceed in terms of lenders, products, and documentation Know
the borrower's underlying intentions
What kind of property does the borrower want (or already have)?
The general answers to this questions speak to the type of mortgage transaction (purchase, refinance, ren
documentation. The type and quality of a property determine whether it is an appropriate security for the lo
How much does the borrower want to spend?
The answer to this question points to the borrower's expectations and means This line of questioning open
Discussing this is your first opportunity to determine whether the borrower's income and down payment are
Lowest rate
Rate seekers may be unaware that the ___ often comes with restrictions such as: - Limited prepayment op
them with a remaining amortization at renewal when rates may be much higher; therefore trapping them w
What is the borrower's ability to make mortgage payments?
The answer to this question relates to income level and overall financial security. Information such as lengt
of the borrower's stability. Their type of occupation may be an indicator of the borrower's ability to make pa
What is the borrower's general credit status and debt load?
Leaning this and past behavior is often a strong indicator of future behavior
What is the borrower's personal status?
The answer to this question relates to the borrower's stability and potential for risk of default. For example,
immigrant? A student?
What is your general impression of the borrower?
After spending some time talking to the borrower, you will form the answer to this question The answer to t
represents a good risk for a mortgage loan and whether a deal is feasible The answer to this may contribu
borrower
Verifying identity
- Required for compliance reasons as well as for anti-fraud purposes - This may happen in stages. In gene
contractual obligation, but it is best practice strategy to performed a detailed verification of this as soon as
Verifying identity
Minimum requirements for this: 1. Obtain the borrower's full name 2. Record the type, serial number and e
should include a photo 3. Check that their name, address and ph. # appear in the phone book or a credible
meeting 5. Inform the applicant they will need to bring the above-mentioned two pieces of ID to the first me
matches the borrower 6. Explain to them that other documentation will be required as the process moves f
Legal documents
An important part of qualifying a buyer and a property because they provide proof or verification of such th
credit performance, property ownership, and property value
Borrower
In most cases, a ___ is someone who is (a) just starting to look for or inquire about a mortgage, or (b) som
Individual or corporate
Types of borrower
Residential/ condominium, commercial/ industrial, or agri-business
Types of properties
Prime, near-prime, sub-prime, private
Types of lenders
Purchase, renewal, refinance, borrower equity
Types of transactions
Applicant identity documents
2 government ID, SIN, cleared personalized cheque, utility bill w (with name and address of borrower), list
divorce decrees, marriage certificates, power of attorney
2 government ID, SIN, cleared personalized cheque, utility bill w (with name and address of borrower), list
divorce decrees, marriage certificates, power of attorney
Applicant identity documents
Letter from employer, play stubs or direct deposit statements, T4 slips, CRA NOA, employment insurance
investment income documents, pension documents, alimony payments, child support payments, AOI
Proof of income and/ or employment (Two or more from the list)
Proof of income and/ or employment (Two or more from the list)
Letter from employer, play stubs or direct deposit statements, T4 slips, CRA NOA, employment insurance
investment income documents, pension documents, alimony payments, child support payments, AOI
Proof of equity or existing mortgage, proof of savings, inheritance, or investments, gift letters
Proof of down payment (Two or more from the list)
Proof of down payment (Two or more from the list)
Proof of equity or existing mortgage, proof of savings, inheritance, or investments, gift letters
OTP and MLS or feature sheet (for purchases), mortgage or payout statements (refi), leases or rental agre
documents, Real Property Report, property or house insurance, mortgage statements, statement of adjust
Property documents (One or more from the list)
Property documents (One or more from the list)
OTP and MLS or feature sheet (for purchases), mortgage or payout statements (refi), leases or rental agre
documents, Real Property Report, property or house insurance, mortgage statements, statement of adjust
Core documents
What happens when this isn't reviewed: - When mortgage applications are sent to a lender without the mor
the information provided but later found that the income is not as the borrower stated, then the deal doesn'
property
Income and down payment confirmation
Two main reasons why deals are declined after an approval has already been given
Faster approval
If you are pre-underwriting and sending a "good" application, reviewing the documents ahead of time may
Make disclosures
It is important to educate the borrower and ___. This involves the following: - Timing, records, and privacy
material risks - Reviewing the process and future expectations
Making disclosures
Educating the borrower about these aspects of taking out a mortgage is known in legal terms as ___. This
relationships and duties between the borrower, the mortgage associate (or brokerage), and the lender, wh
order to make responsible and informed decisions. "These aspects" being: - Timing, records, and privacy -
material risks - Reviewing the process and future expectations
Ethical and legal
Because many people do not understand how mortgages work, what mortgage brokers do, and what the m
provide as much information as is necessary to help the borrower understand. This means discussing how
Disclosure documents
1. Consent form to obtain consumer credit history (mandatory) 2. Mortgage borrower relationship disclosur
(mandatory) 4. Cost of credit disclosure (or Fair Trading Act (FTA))
Final stages
Although you will typically introduce and make disclosures early in the mortgage transaction process, it is n
you have signed copies ready for the loan file and for submission to the lender
Written consent
A lender does not need to see an applicant's ___ in order to approve or decline a mortgage application; ho
mortgage transaction (including a signed consent form) must be included in the loan application file, which
to RECA during audits and/ or investigations
borrower information
If there is any ___ that you have not verified as part of preparing the loan application, you need to disclose
application
Cost of credit disclosure
Extra fees must be included in the ___. While the borrower should be provided a ___ (Same word as abov
Additionally, the borrower may receive a ___ (Same word) form from the mortgage broker
Disclosure statement
A mortgage broker will be required to provide a ___ when: - The lender does not enter into credit agreeme
the ___ (first word of this term) duties of the credit grantor are imposed on the mortgage broker - The lende
business, and the credit grantor deducts the mortgage brokerage fee from the loan. In many jurisdictions, h
disclosure on every transaction
Cost of credit disclosure
The ___ is not always supplied by the mortgage broker. Often, the lender supplies the ___ to the borrower
brokerage) is required to make a cost of credit disclosure, ensure that a copy of the document is included i
the end of the transaction
Cost of credit disclosure
The ___ explains the costs (over and above interest costs) incurred to arrange mortgage financing as well
that the borrower will pay once the costs for arranging the mortgage are factored into the loan amount. In o
Two business days
The legal timing to make the cost of credit disclosure is at least ___ before the earliest of the following: - A
from a person for assisting the person in obtaining a mortgage from a lender until the following conditions h
to fund the mortgage, accepted by the borrower and the commitment has been provided to the borrower or
agent has provided the person with an initial disclosure statement and at least ___ (same as above) have
person or the person has waived the time period for delivery in accordance with the Consumer Protection A
closing
Although the cost of credit is usually introduced to the borrower early in the process as part of disclosing co
disclosure is often not completed until ___ because that is when closing costs (including lender or brokerag
Verbally and in writing
Cost of credit information must be disclosed in what way
Brokerage
Cost of credit: The ___ makes this disclosure if it is charging a fee to the borrower
Lender
The ___ makes this disclosure when no brokerage fees are being charged or when the lender is chargin a
has all the necessary information for the disclosure)
Lawyer
The ___ for the borrower makes this disclosure to the borrower and maintains a record of it in cases where
Brokerage fees
If the ___ is chargin a fee, you must carry out the following: 1. Determine the closing costs 2. Calculate the
with the Cost of Credit Disclosure document 5. Allow the borrower a 48-hour "cooling- off period" to consid
48 hours
How long the borrower is allowed for a "cooling-off period" to consider the information before singing? With
without penalties or charges. They can also choose to waive the cooling off period and sign right away
1. Determine the closing costs 2. Calculate the total cost of credit 3. Calculate the APR 4. Present the appl
borrower a 48-hour "cooling- off period" to consider the information before signing
If the brokerage is charging a fee, you must carry out the following:
1/8 of a percent
When the cost of credit disclosure is a compliance issue, the APR must be calculated to within ___. It is pr
decimal places is acceptable
Cancel the agreement or to receive statutory damages
If the information in a disclosure document is not complete or correct, the borrower may be entitled to eithe
Fair Trading Act and the Real Estate Act, whereby failure to disclose certain information may result in disci
continue to practice
signed consent
Checking credit performance: This may or may not happen during your first interaction with the borrower, b
essential before you can access someone's credit information. The ___ (same as above) must then be sup
verifying that the process was followed and consent obtained prior to any credit check
Audio or written consent; signed by the applicant
Different regulations and credit report providers have different requirements for what is considered accepta
requires consent ___
In written form on a formal document provided by the brokerage, signed and dated by the borrower
What is the highest standard of consent
Equifax or TransUnion
What are the two credit bureaus
non-Canadian citizen
To obtain a credit report on a ___, contact the credit reporting agency directly rather than going through the
debt obligations
Why check credit performance? Lenders want to be assured of a borrower's inclination to meet ___. Perfor
unlikely to succeed, thus saving you from investing more time in the transaction
lender and product
As you check over the items in the borrower's credit report, you need to read with a view to eventually mat
Credit score
Also called a BEACON, Empirica, or FICO score
Credit score
One of the first indicators used to assess credit performance
Payment history, amounts owed, length of credit history, new credit, types of credit used
A credit score is based on what

What weighting does payment history have on the credit score

What weighting does amounts owed have on the credit score

What weighting does length of credit history have on the credit score

What weighting does new credit have on the credit score

What weighting does types of credit used have on the credit score
Payment history
What is the highest impact on credit score
300-900
What do credit scores range from
650 or higher
For a conventional mortgage, what is generally considered acceptable for a credit score
Pay off the mortgage
The higher the credit score, the more likely it is that the borrower will ___
Possible
It is ___ for a borrower to have no credit score., and there are several possible reasons for this. It does not
management, but it is considered to be a very high risk
Is not
The bottom line is that on its own, a credit score ___ a reliable indicator of a borrower's credit as either goo
Poor credit score
A ___ directs you to an opportunity to help someone improve their credit performance and, in the process,
Evaluating initial information
What step in the discovery story is the decision chair in
The decision chair
This analogy is for once you have met with and otherwise interacted with the borrower several times to dis
establish whether the loan request is feasible
Income, equity, credit, property
What are the four legs of the decision chair
The loan request
What does the chair represent in the decision chair
Decision chair
It has four legs: income, equity, credit, and property. If one of the "legs" is weak, then the "chair" (the loan r
legs are weak, the chair will fall over
Evaluating initial information
At this step of the discovery story, you have already done the following: - Validated referrals associated wit
borrower - Discussed the borrower's financing needs and goals - Verified the borrower's identity - Collected
credit check
Income
Questions for this part of the decision chair: How does the borrower's ___ seem? If the details are verifiabl
to be stable?
Equity
Questions for this part of the decision chair: How does the borrower's ___ seem (and, specifically, down pa
for the type of mortgage requested?
Credit
Questions for this part of the decision chair: In terms of ___ use, what did your initial credit check show? If
length and type of credit history? Do they seem to use ___ appropriately and responsibly?
Property
Questions for this part of the decision chair: What does the property show? If the details are verifiable, doe
request? Does it appear to have future marketability
One weak leg
In relation to the decision chair, the more personal resources the borrower has put towards a down payme
property is slightly below standard.
One weak leg
In relation to the decision chair: If the deal appears to be feasible at this stage, then you need to proceed to
which include making disclosures and obtaining consents; performing affordability calculations; gathering a
doing a final, detailed evaluation of the borrower's credit worthiness and the property value
Two or more weak legs
In relation to the decision chair, if your evaluation shows that there are ___, then the borrower may not be
your job is to provide the borrower with information about improving their financial standing so that they ma
person from time to time to see how they are progressing towards being ready to purchase a property. You
take measures to strengthen areas of weakness, or you may refer them to someone in your professional n
additional assistance
Pre-approval/ pre-qualification
If the borrower is looking for ___ before shopping for a property, you probably have enough information at
still need to do affordability calculations (to help verify the information) and make the appropriate disclosure
what additional documentation will be needed, you may be able to succeed in securing a rate from a lende
Identify potential financial options
After qualifying the applicant and the property, the next step is to ___ available to the borrower
needs and wants
Your job is to determine what option best suits the borrower's ___
Different
Appropriate financing options for different borrowers are ___ as each indivivdual's circumstances
fixed rate over a variable rate
There are numerous reasons why one consumer will want a ___ and vice versa. These may include variab
moves, absences from work, upgrading education, upcoming vehicle purchases, potential renovations, inc
Risk level
Knowing the borrower's ___ with borrowing money is imperative. As with investing, some people only wan
"Will a floating rate keep you awake at night?" How they answer will help you determine which product is b
Fixed rate over a variable rate
Taking a ___ is akin to an insurance policy. The borrower is paying a premium for the security of knowing w
the first one, you are taking the risk that rates could go up, but you are leaving yourself open to a lower rate
Fixed-term mortgages, variable rate mortgages, and secured personal line of credit
What are the three kinds of mortgages
Fixed term
- Terms can range from 6 months-10years, and the rate doesn't change for the term chosen - Can be open
three month's interest (b) interest rate differential (IRD); pick whichever is higher
Open term
The mortgage can be paid in full at any time with zero penalty
Closed term
A penalty will be assessed if the mortgage is paid in full before maturity
Whichever is higher
How do you decide between the fixed term mortgage payout penalty: Three month's interest, or interest ra
Variable rate mortgages (VRM)
- Will vary with the prime rate - Have a special policy in that they can be converted to a fixed-term mortgag
privilege provides the borrower with more flexibility than a fixed-term mortgage - Has an open and closed f
is typically limited to three month's interest
Bank of Canada overnight rate
How is the prime rate set
Secured Personal Line of Credit (PLOC) and Home Equity Line of Credit (HELOC)
- Are revolving products - The first type is readvanceable and can be paid out at any time with no penalty -
first type is registered as a standalone product (i.e. an amortizing mortgage not attached to it), the maximu
options are monthly, non-accelerated weekly, non-accelerated bi-weekly, semi-monthly, accelerated week
readvanceable and can be paid out at any time without penalty
Second mortgage
When there is a mortgage registered on title and a mortgage is registered behind the first
Variable rate and PLOC/ HELOC
Can be converted to a fixed-rate at any time during the term without penalty
Loan security
First mortgage: The property that has been mortgaged Second mortgage: Any proceeds remaining from th
has been repaid
Mortgage priority
First mortgage: Highest priority (after any outstanding property taxes and condo fees are paid) to be repaid
exists that there will be insufficient funds to repay the loan
Interest rate
First mortgage: Typically carries a lower interest rate Second mortgage: Typically carries a higher interest
Qualifying
First mortgage: Requires full borrower and property qualification Second mortgage: If arranged through the
Payments
First mortgage: Single loan payment per month (on whatever chosen payment frequency) Second mortgag
chosen payment frequency)
Fixed-rate
What kind of mortgage is not appropriate when you know that the borrower will be inheriting a large sum o
that they know will be coming
Amortization period
- The actual number of years it will take to repay a mortgage in full. This may go beyond the term of the mo
of the mortgage, but the payments will be higher. The longer this is, the more interest you will pay over the
Mortgage term
The period of time over which the interest rate, prepayment, and other mortgage conditions are set. At the
Have up-to-date information on mortgage company products, underwriting policies, and special niches ava
Mortgage companies offer a great deal of information on their products, such as product manuals, publicat
the most important reason is so you, the mortgage professional, ___
Rate sheet
It is different for insured, conventional, rental, switch or transfer clients, as well as the amortization period t
Lender list
What action is it where you review the brokerage's preferred lender list (if there is one) and/ or review the m
situation. Then, review and understand that lender's underwriting guidelines. Only send your files to the "rig
Lender products
What action is it where you review the chosen lender's products to ensure that there is a product that is a f
understand that product's underwriting guidelines. If the product isn't a good fit, look elsewhere
Loan application
What action is it where you thoroughly review every aspect of your borrower's loan application. Confirm all
Shortcomings and advantages
Explain any shortcomings and highlight advantages of the situation in a summary note to the lender (either
story
Documentation
Ensure that the documentation does not misrepresent the applicant, that all documents are included in the
any red flags
Correct format
Use the lender's preferred format for packaging and submitting the loan file. Arrange the documents in a lo
they need
Prepare and submit the loan application
1. Create a new mortgage application file 2. Specify the application type and purpose 3. Enter the borrowe
costs for the deal 5. Complete initial disclosures (specifically the Cost of Borrowing/ Cost of Credit Disclosu
minor adjustments to any information that may have changed since you began the transaction process 8. R
with a particular lender and product 9. Enter any final information and notes or comments to the lender to m
electronic loan application file to a lender
Create a new mortgage application file
What is step 1 in preparing and submitting the loan application
Specify the application type and purpose
What is step 2 in preparing and submitting the loan application
Enter the borrower's personal details, identity information, etc.
What is step 3 in preparing and submitting the loan application
Estimate closing costs for the deal
What is step 4 in preparing and submitting the loan application
Complete initial disclosures (specifically the Cost of Borrowing/ Cost of Credit Disclosure, if applicable)
What is step 5 in preparing and submitting the loan application
Double-check your files for accuracy
What is step 6 in preparing and submitting the loan application
Make minor adjustments to any information that may have changed since you began the transaction proce
What is step 7 in preparing and submitting the loan application
Review your decisions around matching the applicant's needs with a particular lender and product
What is step 8 in preparing and submitting the loan application
Enter any final information and notes or comments to the lender to make the application file clear and com
What is step 9 in preparing and submitting the loan application
Submit the electronic loan application file to a lender
What is step 10 in preparing and submitting the loan application
24 to 48
Once you have submitted a mortgage application through the software system, you will generally receive s
Response time
Lender ___ varies, but it is generally related to business volume or your business relationships
24; 24
If a deal is strong and contains nothing that might cause a delay in the process, you can generally expect a
documents could be reviewed within another ___.
Conditions
When the lender/ underwriter comes back to you with questions or a requirement for more information on a
Approved, conditionally approved, suspended, declined
What are the four possible responses that you may receive to a borrower's mortgage application
Approved
This happens when the file is straightforward and carefully prepared: strong applicant, good property, com
guidelines, and no questions from the underwriter
Conditionally approved
This happens when the file is generally in order, but one or two conditions must be met before the deal can
verification or other documentation is required, or an action of some kind has to take place, such as the sa
Suspended
This is a variation on "conditionally approved," but indicates a higher degree of incompleteness or uncertai
significant amount of additional information that is required in order for the lender to consider the applicatio
Declined
If the lender feels that the file is poorly prepared, or is not a good match, or does not fit within the lender or
Declined
If the lender ___ the application, you need to first understand the reason it was declined. Some possible ex
because the file information was inconsistent with the format that that lender requires? This can be due to
but which this lender considers a critical piece of information. - Was the decline because of a credit policy i
property outside of the lender's usual (geographical) area? - Has the lender or insurer flagged the property
mean that there is a history on the property or the applicant of which you may not be aware. - Is the applica
embargo?
approval, conditional approval, or suspended
If you receive an ___ response, the lender then sends a commitment letter with an offer to fund the loan. If
one and provide proof of the lender that the conditions have been met
Rejected
There are numerous conditions for an application to be ____. The most common reasons are: 1. Unsatisfa
lacking 4. Property does not appraise 5. Short time on the job or newly self-employed 6. Lack of income 7.
does not meet lender's requirements
Excessive debt service, lack of income, short time on the job or newly self-employed
Wei has recently opened up a consultancy, and is seeking to purchase a new home with more office space
has opened up a business loan to launch his new venture. Wei's application for a mortgage was denied - w
Property does not appraise, owns too many properties, property does not meet the lender's requirements
Martin and Lydia are well-known for buying up homes in small communities near Calgary, renovating them
Cochrane, but it is in worse shape than they thought. Their application for a mortgage was denied - what a
Unsatisfactory credit, DP is lacking, short time on the job or newly self-employed
Kayla just graduated from university and landed a new job, and she is eager to buy her first home. She has
$12,000 while working to pay off her credit cards. Her application was denied - what are some possible rea
Underwriting
Assessing the risk of providing a mortgage to a prospective borrower on a specific piece of property in the
Character, credit, capacity, capital, collateral
5 C's of credit
Character
The applicant's attitude toward money and credit
Capacity
The ability to repay all current obligations plus the new mortgage cost
Collateral
The security a borrower provides to the lender to secure the loan
Capital
The amount of money that an applicant has
Stability and reliability
Lenders primarily care about an applicant's ___ because a person possessing these traits will likely make
character and credit.
Ability of an applicant to make payments
Secondly, lenders care about the ___ or the ratio between their income and debt obligations. In terms of th
recover their money
Lastly, lenders care about how they may ___ if the borrower defaults. In terms of the 5 C's, this relates to c
GDSR and TDSR
What are the two main ratios used to determine if a borrower can afford their mortgage
Gross debt service ratio (GDSR)
- The proportion of housing debt that a borrower is paying in comparison to their income - (Mortgage paym
gross income
(Mortgage payment + property taxes + utilities + 50% of condo fees) / monthly gross income
Calculation for GDSR
Total debt service ratio (TDSR)
- Considers if the borrower can afford the cost of their mortgage in addition to all other debts and loans - O
personal lines of credit, credit card debt, alimony, child support, or other mortgage payments - (Mortgage p
debt payments) / (monthly gross income)
(Mortgage payment + property taxes + utilities + 50% of condo fees + other debt payments) / (monthly gros
Calculation for TDSR
Underwriting process
From a lender's perspective, the information and documents collected from the applicant helps support the
personal information 2. The borrower's employment history for the past three years. 3. A completed financi
liabilities. 4. Credit check from Equifax and or TransUnion. 5. Detailed information on property being pledg
mortgage application, supporting documents must be available and submitted to the lender at the time of s
Up-to-date personal information, employment history for the past 3 years, completed financial statement, c
security in turn for mortgage, supporting documents
What documents help support the underwriting process from a lender's perspective
full name, DOB, marital status, ph. #, email, home addresses for the past 3 years
What is included in the borrower's up-to-date personal information
Salaried, hourly wage, or commission, as well as schooling, university, college, maternity leave, or disabilit
What is included in the borrower's employment history for the past 3 years
Assets and liabilities
What does a financial statement consist of
Assets
Includes: - Cash, RESPs, RDSPs, RRSPs TFSA, non-registered accounts, stocks, bonds, mutual funds - V
estate - Artwork and jewelry are not considered
Artwork and jewlery
What is not included in asset value, because their value is too subjective
Liabilities
Include: - Vehicle loans and leases, credit card debt, personal lines of credit both secured and unsecured,
Two-year tax history
A full ___ is required for any income that fluctuates from year-to-year
Self-employment

- Require 2 years personal income tax returns, supporting T-slips, NOAs from the CRA. Ensure encome ta
through the T1 Generals - If incorporated, verify the most recent financial statements for the last 2 year-end
company. The corporation must be an active company. These individuals that do not file income tax return

Commission
A 2-year average determined by T4's, T4A's, full T1 General Tax Return, and NOA proves income
Sole proprietorship
- The previous two years of income tax returns (T1 Generals) complete with all schedules are required. Ad
from the Canada Revenue Agency (CRA) for the same years. If there are income taxes unpaid to the CRA
payment has been made and zero balance owing is required.
Salary
A LOE states the applicant's date of hire, job title, annual gross salary and permanent full-time status
Hourly wage
A LOE stating hourly wage and guaranteed hours per week. If there are no guaranteed hours, then a two-y
Support payments
If an applicant is receiving alimony and or child support, a copy of the executed separation agreement is re
alimony and or child support.
Two years of personal income tax returns along with the NOA's from the CRA
Any income that is not guaranteed or varies from year-to-year typically requires ___
Three months' worth of bank statements reflecting the applicant's financials
Down payments are typically verified by supplying ___. This will be checked for both availability and credib
source and validity - A gift letter and confirmation of receipt to the applicant are required if large deposits a
deposit is typically considered to be over $1,000, but it varies depending on the total down payment
MLS feature sheet
1-2 page printout of a property listing that contains property detail, and should be available from the real es
feature sabout a listing
Purchase contract
A copy of the ___ must be included when the mortgage type being issued is a purchase mortgage. This is
the subject property
Agreed upon price, closing date of the transaction, names of the purchasers, any special terms
The purchase contract is a legally binding document that lists important information about the subject prop
Subject property
A copy of the executed purchase contract is required, along with the MLS feature sheet for the subject pro
Credit report
Every application needs a ___ from either Equifax or TransUnion from the past 30 days. If it is over 30 day
the proper written authorization on file
Priorities and the product guidelines
Just as you did, the file underwriter looks at the applicant's employment, income, down payment, expenses
particular attention to the lender's ___
Lender
___ carefully analyze documents to determine if they are legitimate. A ___ will: - Google the employer to e
applicant's current and past employment history are the same on the application - Phone the employer and

Per Canadian law, lenders can only provide financing to qualified homeowners with at least a ___ down pa
a mortgage by having it insured against default
Mortgage default insurance
A vehicle available to protect lenders if the borrower defaults on their mortgage. It does NOT protect the bo
lower premiums
Over the past years, different default mortgage insurance providers have introduced online and automated
precise. The benefits of automated systems come in the form of ___, making the cost of borrowing for first-
low risk
Automated default mortgage insurance approval is granted to situations that are deemed extremely ___, s
2. High credit score 3. Salaried income (no variable income) 4. Stable employment 5. Down payment from
single-family dwelling or freehold in a major city (not a condo) 7. Debt servicing ratios in the mid range 8. C
lending value
Insured or insurable
When completing applications for lenders, keep in mind that insurers are also looking for a particular set of
Security property
Typically, private lenders emphasize the ___ rather than the borrower's covenant. They prioritize ensuring
private lenders are more stringent on the property than institutional lenders as they know this is their only r
Credit
- Comes from a latin word meaning to believe or to accept as true - In general terms, it refers to an arrange
while deferring payment at the time. The arrangement is based on the creditworthiness of the first party in
Credit bureau
An agency that collects, maintains, and sells information about any person who has a bank account, credit
information is sold in the form of a credit report.
Credit report
A historical record of an individual's use of credit and repayment behaviour for the past six years, as report
information that a mortgage broker can access about a person's creditworthiness
Credit report
Indicates the individual's credit management style and inclination to meet debt obligations.
Personal information, credit info, banking info, public records, collection info, consumer statement, credit re
A credit report includes what
Personal information
Name, current and previous address(es), SIN, phone $, DOB, current and previous employer(s)
Credit information
Credit or retail cards, lines of credit, loans, or mortgages; with credit limits, current balances, on-time and la
Banking information
Current bank accounts. May report NSF cheques. This may be a restricted view for brokers but not for ban
and history are allowed to see mortgage information reported by other lenders.
Public records
Information on the public record such as bankruptcy, credit-related court judgments, or secured loans (bac
Collection information
Unpaid debts that have been referred to a collection agency for payment.
Consumer statement
Any statement made by the individual to explain a particular situation, such as a dispute with a financial ins
Credit report inquiries
A list of everyone who has inquired about the individual's credit (for example, the individual, a lender, or an
Credit report
Unless the lender has provided a written statement that it is NOT a requirement, as a broker, you are respo
applicant(s) and guarantor(s).
Medical history, purchases not made on credit, debts for which the individual is not personally liable, debts
personal factors (such as race, religion, ethnicity, gender identity, sexuality, or political affiliations)
Credit reports do NOT include
Good credit report
A ___ typically shows a variety of credit and loans from various lenders over several years with consistent,
Bad credit report
A ___ typically shows some credit and loans, several "maxed-out" credit cards, and a pattern of failing to m
borrowing—perhaps to cover living expenses—or even bankruptcy
Signed consent form
Obtain a ___ from the applicant, stating that they agree to release their credit history information to you an
use the generic form available through your mortgage application software.
Name, address, and DOB
The minimum amount of personal information required to obtain a credit report includes ___. (If the applica
that is also helpful. However, no one is required to give you a SIN.)
SIN
If a client chooses not to give this, make a note in the mortgage application that the applicant chose not to
the number and type of lenders that may be willing to fund the loan.
guidelines
The information in an applicant's credit report always identifies if they fit a lender's and insurer's ___
Creditworthiness
To determine an applicant's ___ as a broker: 1. Obtain and read the applicant's full credit report 2. Verify th
information in the mortgage application 3. Address all inconsistencies and red flags in the credit report and
the credit report 4. Evaluate the applicant's overall creditworthiness and determine the type of credit risk th
the client has told you and the credit report, question the client further.
Credit score
Describes an individual's credit performance, and it is used as an overall indicator of financial risk—specifi
the higher the score, the more likely it is that the borrower will pay off their debts, and the less likely the bo
300-900
Credit scores assigned by Equifax range from ___
150-934
Credit scores assigned by TransUnion (called "Empirica scores") range from ___
FICO scores
Credit scores are sometimes generically referred to as ___. Both Equifax and TransUnion use this model t
data in the calculations as well
Payment history
The pattern of repayment over time, looking at whether payments have been made in a timely manner, how
last payment, how many past due items are on file, etc.
Amounts owed
The total amount owing to all credit compared with the total amount of credit available (credit limits). Accou
score.
Length of credit history
The amount of time the consumer has had established credit
New credit
Considers how often the consumer requests new credit and for how much, and whether they is repaying th
of credit following credit problems.
Types of credit used
Account types and amount of debt, including credit cards, retail accounts, installment loans (such as car pa
Credit scores
Other important factors that can influence ___ include the following: - The number of recent credit inquiries
judgments - Tax liens - Foreclosures - Bankruptcy

Lenders typically set cut-off scores that reflect the amount of risk they are willing to take. For a conventiona
acceptable. However, the number of willing lenders for that mortgage decreases as credit scores fall below
varies depending on the mortgage (or insurance) product.
Validation odds
- Credit categories and cut-off scores are not arbitrarily chosen. They are determined using a statistical too
applicant will default. - These are the statistical percentage of the general population within a particular cre
within the next 24 months on one or more credit card or loan accounts
<500; 500-649; 650-749; 750+
___ is considered very poor credit, ___ is considered poor to average credit, ___ is considered good credit
No score or zero score
Possible reasons for this: - The result of inaccurate information - New credit - No recent credit experience -
no longre show on the bureau - New to the country, with no credit history in Canada - Out of the country fo
applied for any credit
Very high

Regardless of the reason for a no score or zero score (credit score), lenders consider this to represent a _
repayment performance and credit management behavior without a credit history. Therefore, lenders have
score. They generally need a minimum 15% down payment, and in most cases, the down payment must b

1. The applicant's age and when their credit file started 2. The reason why the applicant has no credit scor
If your applicant has no credit score or a credit score of zero, you need to consider
Suggest that they consider taking out a Registered Retirement Savings Plan (RRSP) loan. Suggest that th
If you have an applicant who has no credit score, you can suggest the following two ways to build (or rebui
Four
Credit reports with scores always cite the top ___ reasons why the score is not higher, so it is important to
necessarily an indication of poor credit
Explanation
Credit scores are not the sole dictating factor in qualifying. Other considerations such as income or equity
applicant's file to a lender, you must include an ___ for a low credit score. If you don't, the lender may not c
Consumer referral telephone number
On the Equifax credit report, what section tells the credit grantor where consumers can call if they are deni
Consumer file alert
On the Equifax credit report, what section is any important messages regarding the applicant's file, such as
FN/UN
On the Equifax credit report, what section is internal Equifax file number and unique number (internal use o
Safescan warning
On the Equifax credit report, what section is a fraud alert message to warn readers of potential application
Credit score and reason codes
On the Equifax credit report, what section is the applicant's credit score and reasons for the score
Identification information
On the Equifax credit report, what section is personal information about the applicant
Inquiries
On the Equifax credit report, what section is credit information that has been requested on the applicant an
Employment
On the Equifax credit report, what section is employment history on the applicant (and spouse, if applicable
Credit summary
On the Equifax credit report, what section is an overview of the applicant's credit information
Public records or other information
On the Equifax credit report, what section is bankruptcies, collections, and judgments against the applican
Trade information
On the Equifax credit report, what section credit cards and other revolving credit
Banking information
On the Equifax credit report, what section is the applicant's banking information
Narrative section
On the Equifax credit report, what section is statement of explanations by the applicant or consumer about
Safescanned &
On the Equifax credit report, what section means the inquiry was run through the Equifax fraud database a
End of report
On the Equifax credit report, what section indicates no more pages to follow. If this is not visible at the bott
Individual's name (and spouse's name, if applicable), current and former addresses, alias names (AKA), D
The personal identification information part of a credit report provides the following
Confirm all personal identification information matches the info on the mortgage application and other docs
you collected
How do you verify that the credit report matches your applicant in the personal identification information se
Applicant's age
Take note of the ___. Even though lenders cannot refuse a loan application based on age, it is still a factor
credit and income potential. In looking at a credit report, you need to consider whether the person's credit h
also need to consider whether certain products will be appropriate or even available to the applicant. Lend
age, and some have age-related restrictions on certain products. For example, certain insurance products
prohibitively expensive.
Second credit report
If an AKA (alias name) is listed, then a ___ under the AKA may also exist. Be sure to pull all available cred
Applicant moved
How often has the ___? Take note of how often the individual has moved. Length of time at a residence is
lack of stability). Remember that the credit report only shows information from the past 6 years, so several
Marital status
Cross-check information about ___. If a spouse or partner is listed in the credit report, cross-check this info
Suppose the application states that the applicant is single, but a spouse is listed on the credit report. In tha
child support payments that could affect the applicant's debt ratios.
Length
Note ___ of credit history. The identification section also indicates when the credit file was started and whe
applicant's credit experience and how active the person is in using and managing credit.
Part of the country where the SIN was received by the applicant
The first digit of the SIN identifies the ___

If a SIN starts with a ___, you need to verify the expiry date on the card. SINs that begin with this are issue
permanent residents, and have expiry
Atlantic provinces
Where is a SIN number starting with a 1 from
Quebec
Where is a SIN number starting with a 2 or 3 from
Ontario
Where is a SIN number starting with a 4 or 5 from
Prairie provinces and Northwest Territories and Nunavut
Where is a SIN number starting with a 6 from
British Columbia and Yukon
Where is a SIN number starting with a 7 from
Inquiries section
The ___ of a credit report shows how many inquiries the credit agency has received from other institutions
recent inquiries
If you notice several ___ from other brokerages, it may indicate that the applicant is "shopping" for a broke
inquiries from other credit-granting groups (car sales, furniture, etc.) may provide insight into the applicant'
behavior can affect the chance of mortgage financing.
credit report
Companies and financial institutions can pull an individual's ___ for several reasons, including employmen
their own credit reports to see who has been making inquiries into their credit history. Personal inquiries ar
individual's credit score.
Hard
Inquiries made concerning loan or credit applications are calculated in credit scoring models and do affect
as "___" inquiries or "___ pulls."
Soft
Inquiries by companies to which the individual has not applied may also appear on the credit report. These
or institutions want to check someone's credit before they offer particular goods or services. These are con
purposes, or reasons other than applying for credit or financing. ___inquiries do not affect the credit score.
30-day
It's important to be aware there is a ___ delay in updating the inquiries section of a credit report. Credit inq
(those related to financial or credit applications) are also not included if they were made in the last ___. (Al
45 days
Hard inquiries made in the last ___ are counted as one inquiry. For example, multiple inquiries from lender
related to an applicant "shopping" for rates. The group of inquiries is therefore treated as a single inquiry a
Second
Lenders have the right to (and often do) pull a ___, more recent credit report before advancing any mortga
information in the second report shows there is a significantly increased risk in lending, the lender may cha
altogether. Lenders or insurers may also pull a report from an alternate bureau. With this in mind, make it c
not add any new credit or debit obligations that might affect their qualifying status, even if everything seem
INQS
This alert appears if there have been three or more inquiries within the past 90 days. An alert showing thre
individual who has routinely applied for credit and appears to have managed it well. On the other hand, if th
investigate. Is the person experiencing financial difficulties and looking for credit to remedy the situation? A
unmanageable in the future? Perhaps they have been a victim of identity theft and are re-establishing cred
in a short period could indicate that the applicant is shopping around for the best mortgage rate, or it could
lenders have denied the applicant a mortgage, they may be simply amending the mortgage application from
situation that warrants further investigation.
Bottom below list of all INQS
Where does the total number of inquiries made since the file was established show up? If it is "#INQS-27",
established
2 years
How long do inquiries usually remain on the credit report for
Employment information
The ___ section of a credit report provides information about the individual's employment history (and the s
this because it indicates one aspect of an applicant's level of stability, or lack thereof, and the amount and
assessing risk and income potential
Lenders consider occupation when ___. When reviewing the employment information in a credit report, cro
supporting documentation such as employment letters, paystubs, etc. (if applicable). Make sure that every
Existence of a spouse or partner and whether they are co-applicant - Period(s) of unemployment and whet
ES (Employment subject)
In the employment history section, this code means: Applicant's current employment. EMP mm/dd means
that is when it was verified
EF (Employment, former)
In the employment history section, this code means: The applicant's former position
E2 (Employment, second former)
In the employment history section, this code means: Describes the next oldest employment position
EC (Employment co-subject)
In the employment history section, this code means: This describes employment information about a co-su
Quebec, no co-subject information would be provided
Oldest and newest dates that the individual used credit
This information tells you the oldest and most recent use of credit by the individual in the past 6 years
Public records
These include bankruptcies, judgments, foreclosures, liens, and collections
These include bankruptcies, judgments, foreclosures, liens, and collections
What is included in public records
Foreign credit bureau information
This information lets you know whether the person has any recorded credit history outside of the country
Number of trade lines and ratings for each
These may be credit cards, loans, lines of credit, etc.
Highest credit used and credit limit
Although the applicant may have credit card balances well below the maximum limit, it is important to note
High credit information is important to know, especially if the individual is on the borderline of qualifying an
maximum amount available to him or her. This may affect his or her ability to qualify
Was a supervisor at McDougall's Haulage in Calgary. His current employment began January 2019 and w
What does this mean in the employment history section: ES - SUPERVISOR. MCDOUGALL'S HAULAGE,
01/19-04/22 - The individual first used credit in Jan 2019, and most recently used credit April 2022 in the p
FB-NO - Report does not contain any foreign bureau information. If it did, it would be FB-Y Total-3 - Means
HC$3K-5K - The highest amount the individual has ever owed on one credit card or other credit account ($
indicates that for one account, payment was made within 30 days and not more than one payment past du
payment was made after more than 60 days but within 90 days and there have not been more than three p
means payment expected within 30 days after which, if other arrangements are not specifically m
Analyze and explain each part of this: "SUMMARY 01/19-04/22, 4-PR/OI. FB-NO, TOTAL-3, HC$3K-5K, 1
SUMMARY 02/15-12/22, 2-PR/OI. FB-NO, TOTAL-3, HC$4K-5K, 1-ONE, 1-THREE, 1-OTHER
Write how it would be written in the summary section of a credit report the following information: They first
credit in December of 2022 They have 2 public record items or other information on file They do not have a
accounts on file The highest amount they have ever owed on one credit card or other credit account is $4,0
payment was made within 30 days and not more than one payment was due for this account For another t
90 days and there have not been more than three payments past due with this particular account For anoth
arrangements are not specifically made, will be classified delinquent
Public records
The ___ section of a credit report contains information about an individual's recent financial history that has
court. This may include bankruptcies, unpaid collections, credit-related court judgments, tax liens, foreclos
blank
Ideally, the public records part of an individual's credit report should be ___.
6-10 years
Public records remain on the credit report for ___. If public records are listed, the more recent the item, the
rating.
Bankruptcy
A voluntary legal proceeding involving a person or business unable to repay outstanding debt. All assets o
The proceeds are then divided among the creditors. The assets may not pay off the entire debt, but the de
significant negative impact on credit rating and a lender's impression of the person's ability to manage and
for a copy of the final discharge and a list of creditors as proof of discharge. Note that if the list of creditors
second chance if there was a written-off account.
Bankruptcy in March 2017 Unpaid collection in Sept 2018 Secured loan in April 2018 Satisfied judgment in
Analayze and explain each part of this: PUBLIC RECORDS OR OTHER INFORMATION 03/17 BKRPT 47
$1,500. SUBJECT, IND, DISCHRGD 12/17 09/18 UP CL EQUIFAX COLLECTIONS. $1250,CG BRN-ANY
CASE NO-CASE NO-TRANS CANADA CREDIT 450 1 ST SW CAL 3600, MAT 04/22 03/18 ST JD CAL S
CAL, SATISFIED 11/18
6 years after the creditor has legally released the borrower of any further financial obligations
In Alberta, bankruptcies are kept on file at the credit agency for ___ (in other words, after the bankruptcy h
12 to 24 months
Someone with a bankruptcy on file may find it difficult to re-establish the necessary credit history and stabi
takes ___ from the date of discharge to re-establish credit after bankruptcy.
re-establish

Some strategies you might suggest to help an applicant ___ his or her credit after bankruptcy include the f
period of time. - Establish a relationship with the bank or institution housing the savings account, and apply
Pay the loan back promptly. - Obtain a low-limit credit card, use it regularly for small purchases, and pay th
in a short period of time will affect his or her credit score, so when seeking a low-limit credit card, do not ap
- Bankruptcy recorded in March 2017 - Type of action: Bankruptcy - Court code is 472VF22 - Case numbe
owed $55,000 when they declared the bankruptcy (LIAB $55,000) - At the time of filing, the person had $1
who filed for the bankruptcy (SUBJECT) - The type of bankruptcy (IND), meaning that it was an individual (
bankruptcy was discharged in December 2017 (DISCHRGD 12/17)
Analyze this 03/17 BKRPT 472VF22, 456789 ABC ASSOCIATES, LIAB $55,000, ASSETS $1,500. SUBJE
03/17 BKRPT 472VF22, 456789 ABC ASSOCIATES, LIAB $55,000, ASSETS $1,500. MICHAEL SCOTT,
Write the record and how it would show for the following information: Type of action: Bankruptcy Filed: Mar
456789; ABC ASSOCIATES Liabilities owed was $55,000 at the time of declaration Assets owned was $1
for bankruptcy It was a personal (individual) bankruptcy Discharged in December 2017
Consumer proposal
A legally binding, negotiated settlement made between a debtor and his or her creditors. With the help of a
her creditors for no more than five years. The remaining debt is discharged at the end of the period, althou
discharged, the person receives a Certificate of Full Performance to prove that it has been completed.
from when the proposal is filed until three years after the payments are completed
A consumer proposal note remains on the credit record ___
Collections
Overdue debts that have gone to a third-party collection agency. Can either be unpaid or paid
- Collection was recorded in September 2018 - Type of collection, in this case, the collection is unpaid (UP
Collections - Original amount of the collection: The individual owes the creditors $1,250 - Name and branc
was in December 2017 - The person owes $1,260 as of September 2018
Analyze this 09/18 UP CL EQUIFAX COLLECTIONS. $1250,CG BRN-ANY CO., DLA-12/17. BAL$12600
09/18 UP CL EQUIFAX COLLECTIONS. $1250,CG BRN-ANY CO., DLA-12/17. BAL$12600
Write the record and how it would show for the following information: Type of action: Collection Recorded:
agency: Equifax Collections Original amount of collection: $1,250 Date of last consumer activity: Decembe
Secured loans
Backed (secured) by an individual's personal property as collateral and registered with the provincial gover
mortgages, registered loans, or registered liens. Although they appear in the public records part of a credit
Secured loan
If an individual took out a ___ in Ontario (which is a province that reports ___), the item will appear on his o
however, the item will not appear on his or her credit report because Alberta does not report ___ to the cre

- The secured loan was recorded in April 2018 - Type of record: Secured loan (SECLN) - Name of reportin
Registered by the central registry of Calgary (CENT REG CAL) - Industry type of creditor: Through a financ
mainstream lender (FP) - Case number, name, and address of creditor: TransCanada Credit at 450 1 Stre
2022
Analyze this 4/18 SECLN CENT REG CAL, FP CASE NO-CASE NO-TRANS CANADA CREDIT 450 1 ST
4/18 SECLN CENT REG CAL, FP CASE NO-CASE NO-TRANS CANADA CREDIT 450 1 ST SW CAL 360
Write the record and how it would show for the following information: Type of record: Secured loan Filed in
finance company/ personal loan company Creditor is TransCanada Credit at 450 1 Street SW in Calgary A
Judgment
A credit-related court order instructing the credit holder to pay monies owing to a creditor. If this is on the c
courts have ruled in the creditor's favour. This means that the credit holder is ordered to pay a certain amo
"satisfied" and is no longer active. A ___ status may also be reported as "unsatisfied" or "disposition unkno
conditions.
6 years from the date it was filed
In Alberta, judgments remain on the credit report for ___
- Granted or filed in March 2018 - Judgment status: ST indicates it was a satisfied judgment, meaning it is
JD) - It was made in Calgary in small claims court (CAL SM CL CT) - Amount was $255 - Defendant in the
Judgment number: 1234/05 - Plaintiff was the City of Calgary (CITY OF CAL) - Satisfied in November 2008
Calgary
Analyze this 03/18 ST JD CAL SM CL CT. $255 DEF-MICHAEL DENTON, 1234/05, CITY OF CAL, SATIS
03/18 ST JD CAL SM CL CT. $255 DEF-MICHAEL DENTON, 1234/05, CITY OF CAL, SATISFIED 11/18
Write the record and how it would show for the following information: Satisfied judgment Filed or granted in
$255 Defendant was Michael Denton Judgment number is 1234/05 Plaintiff was the City of Calgary Satisfie
Trade information
This section of a credit report shows an applicant's purchase and repayment behaviour with credit cards, lo
grantors such as credit card companies, auto finance companies, and retail outlets that have their own cre
Trade lines or lines of trade
Open credit accounts (such as credit cards, lines of credit, car loans, and home mortgages) are referred to
important indicator of risk or stability to a lender.
number and type
Lenders look at the ___ of open trade lines and the length of time each account has been open. Lenders a
history for each account. In general, lenders prefer that an applicant has three to five active trade lines tha
have credit limits of at least $1,500 to $2,500, with no exceeding the credit limits and consistent, on-time pa
credit activity and repayment behaviour.
Thin credit
What do they call it when there are two trade lines or fewer that have been reporting for less than two year
letter and number codes
Credit bureaus use ratings and payment scales consisting of ___ to report the lenders' rating for each trade
Type of credit the individual is using
What do the letters stand for from credit bureaus
The frequency of payment and the number of payments past due
What do the numbers stand for from credit bureaus
I
What letter represents an 'installment credit'
O
What letter represents 'open status credit'
R
What letter represents 'revolving or recurring credit'
M
What letter represents 'mortgage loan'
Installment credit
Definition: The client borrows money for a specific period of time. They make regular payments in fixed am
Installment credit
What type of credit or account is a car loan an example of
Open status credit
Definition: The client can borrow money when they need to, up to a certain limit
Open status credit
What type of credit or account is a personal line of credit an example of
Revolving or recurring credit
Definition: The client may borrow money up to their credit limit on an ongoing basis. They make regular pa
account
Revolving or recurring credit
What type of credit or account is visa, MasterCard, and retail store credit cards an example of
Mortgage loan
Definition: This information may be included on the client's credit report
Mortgage loan
What type of credit or account is a mortgage an example of

What number code is: - Too new to rate - Approved, but not yet used

What number code is: - Paid within 30 days of billing - Paid as agreed

What number code is: - Late payment: 31 to 59 days late

What number code is: - Late payment: 60 to 89 days late

What number code is: - Late payment: 90 to 119 days late

What number code is: - Late payment: more than 120 days late, but not yet rated "9"

What number code is: - This code isn't used

What number code is: Making regular payments using one of the following debt management options: - A c
proposal, or - Debt management program with a credit counseling agency

What number code is: - Repossession

What number code is: - Written off as a "bad debt" - Sent to collection agency - Bankruptcy
- Too new to rate - Approved, but not yet used
What is the frequency of payment and number past due for the number code 0
- Paid within 30 days of billing - Paid as agreed
What is the frequency of payment and number past due for the number code 1
- Late payment: 31 to 59 days late
What is the frequency of payment and number past due for the number code 2
- Late payment: 60 to 89 days late
What is the frequency of payment and number past due for the number code 3
- Late payment: 90 to 119 days late
What is the frequency of payment and number past due for the number code 4
- Late payment: more than 120 days late, but not yet rated "9"
What is the frequency of payment and number past due for the number code 5
This code isn't used
What is the frequency of payment and number past due for the number code 6
Making regular payments using one of the following debt management options: - A consolidation order - O
management program with a credit counseling agency
What is the frequency of payment and number past due for the number code 7
- Repossession
What is the frequency of payment and number past due for the number code 8
- Written off as a "bad debt" - Sent to a collection agency - Bankruptcy
What is the frequency of payment and number past due for the number code 9
Pattern of repayment
Of all the information contained in a credit report, an individual's ___ (also called manner of payment) is wh
person has paid debts on time and in full, lenders view that positively. If delinquent payments appear on th
depending on the circumstances behind the delinquencies.
This individual has been more than 120 days late with a loan payment
What is the meaning of this rating code and account holder: I05 (or I5) rating from ABC bank
I05 (or I5) rating from ABC bank
What is the rating code and account holder for "This individual has been more than 120 days late with a lo
This source of revolving credit has been paid within 30 days
What is the meaning of this rating code and account holder: R01 (or R1) rating for a credit card from ABC R
R01 (or R1) rating for a credit card from ABC Retailer
What is the rating code and account holder for "This source of revolving credit has been paid within 30 day
The applicant has been making his or her mortgage payments within 30 days
What is the meaning of this rating code and account holder: M01 (or M1) rating with ABC Mortgage
M01 (or M1) rating with ABC Mortgage
What is the rating code and account holder for "The applicant has been making his or her mortgage payme
This revolving credit account has been paid on time
What is the meaning of this rating code and account holder: R01* (or R1) rating from ABC Department *Th
must be paid in full within 30 days such as a furnace oil delivery account The R1 and M1 ratings above wo
repayment behaviour. If the applicant can provide a reasonable explanation for the I5 rating, the lender ma
R01* (or R1) rating from ABC Department
What is the rating code and account holder for "This revolving credit account has been paid on time"

*: Indicates the info was updated by an accounts receivable tape or electronically BUS/ID AND CODE: The
on which the acc was last reported OPND: The date the account was opened H/C: High credit, which can m
credit limit on the account TERMS: The min monthly payment amount BAL: The balance owing as of the re
manner of pmt 30/60/90: The number of times payment on the account was 30/60/90+ days late MR: Mont

Explain each vertical column means below on the trade information section of a credit report (Each column
H/C -- TERMS -- BAL -- P/D -- RT -- 30/60/90 -- MR -- DLA
Banking information
The ___ section of a credit report provides information about an individual's history with banking institution
ROYAL BANK (403) 943-1171: The name and phone # of the banking institution 09/16: The date the item
(chequing) 601BB4559: The client's member number 09/15: The date the account was opened L4F: Appro
the low four figures 4NSF: The number of "not sufficient funds" occurrences 2017: Date last reported
Analyze and explain each part of this banking information section: ROYAL BANK (403) 943-1171 09/16 CH
Consumer narrative
The ___ section of a credit report includes any information added by the credit holder. Consumers can add
to be interpreted negatively by lenders (such as late payments, defaults, disputes, or fraud alerts). Lenders
credit report. For example, Janice suffered a serious physical injury that prevented her from working for ov
pay her debts on time. Her credit card accounts slipped to R3 and R4 ratings, and eventually, her car was
Janice had always met her debt obligations in the agreed-upon manner, so these delinquencies were very
a narrative in the ___ section. The explanation may put lenders in a more sympathetic frame of mind when
would only see serious delinquencies.
Consumer narrative. It explains that late payments are due to unemployment. It also indicates that the indi
that the statement will be purged from the report in March 2024.
What section is the following statement an example of and what does it mean: NARRATIVE RPTD 09/18 P
ACCOUNTS DUE TO UNEMPLOYMENT**SAFESCANNED &
Consumer narratives
What can also be used in cases where an individual has fallen victim to identity theft. Credit holders can ad
authorization from the applicant, or they can explain debts showing on the report that were a result of ident
Fraud alert
If a credit holder has added a ___ on his or her credit report, lenders must do the following: - Contact the c
holder using only the information provided in the consumer narrative - Note: This also means that the cred
contact information changes
- Contact the credit holder directly before granting credit - Contact the credit holder using only the informat
that the credit holder must notify the credit reporting agency if his or her contact information changes
What must lenders do if a credit holder has added a fraud alert on his or her credit report
Fraud alert
What does this consumer narrative indicate: NARRATIVE RPTD 09/18 PURGE 03/24 ****WARNING****C
APPLICATIONS HAVE BEEN SUBMITTED USING THIS NAME / IF YOU ACCESS THIS FILE AS PART O
CUSTOMER THA TIT IS LEGITIMATE BEFORE EXTENDING CREDIT / PHONE (123) 456-7890 SAFESC
Ampersand (&)
What has to be at the end on a credit report
Indicates the end of the report. Every report should have this concluding note. If there is no ampersand, yo
What does the ampersand (&) symbol indicate on a credit report
Closing costs

All of the expenses associated with obtaining a mortgage Could potentially include: - Appraisal fees - Lega
premiums - Registry fees (title search, property tax search, land registration fee) - Real property report and
Homeowner insurance - Prepayment penalty for early renewal or refinance - Lender fees - Mortgage broke
only) - Estoppel certificate (condominium transactions only) - Home inspection fee - Utility deposits - Movin
coverings, and garden tools And adjustment costs such as: - Property tax adjustments - Utility bill adjustme

Borrower
In Alberta, lenders and insurers require the ___ to show proof of funds available to cover any possible clos
price, and the funds must be separate from the down payment amount.
May be required as part of disclosing fees
(State the reason) In some cases, closing costs are accounted for early on in the transaction: Where the le
costs must be included in the total cost of credit (TCC) and annual percentage rate (APR). Both the TCC a
May be required as part of proof of dp
(State the reason) In some cases, closing costs are accounted for early on in the transaction: Some lender
and equity verification documents included with the application file. Often, the recommended amount need
price
May be a lender's condition for approval
(State the reason) In some cases, closing costs are accounted for early on in the transaction: Some lender
approval in the commitment
Interest adjustment
(State the type of adjustment) Adjustment costs, mentioned in the closing costs above, are subject to chan
Explanation: Many lenders prefer payment on the 1st or 15th day of the month, so there may be a gap betw
interest for this period, lenders calculate interest for the number of days and deduct the amount from the ad
Property tax adjustments
(State the type of adjustment) Adjustment costs, mentioned in the closing costs above, are subject to chan
Explanation: If property taxes for the year were paid in advance by the seller, the applicant must reimburse
the whole year, the adjustment can be a significant cost
Utility bill adjustments
(State the type of adjustment) Adjustment costs, mentioned in the closing costs above, are subject to chan
Explanation: If the seller has already paid for any portion of the utility costs past the date of closing, the app
Origination points
Sometimes called lender's feels. Represent the fees a borrower pays to a lender for evaluating, processing
are negotiable and varied among lenders

One point (origination point) typically represents ___ of the mortgage loan
$3,000 (1.5% of $200,000)
If a mortgage loan is $200,000 and the lender is charging the borrower 1.5 origination points, how much w
Total cost of credit (TCC)
Sometimes called the cost of borrowing. It is the anticipated dollar cost of a loan over its term. It is calculat
as a result of a credit agreement, and the value of what the borrower must eventually pay back." (Cost of C
Difference between the value received by a borrower as a result of a credit agreement, and the value of wh
Calculation for TCC
- Interest charged on the loan, and - Various fees associated with arranging a mortgage - How the interest
There is a difference between the amount received and repaid by the borrower due to:
All fees associated with arranging a mortgage billed to the buyer
The TCC includes ___
Requires that consumers who borrow or receive credit are fully informed of the cost and conditions of borro
In Alberta, the Cost of Credit Disclosure is a regulation that___
$6,000; $98,000; $8,000 ($6,000 (interest) + $2,000 (fees);

If an applicant takes out a loan for $100,000 at an annual interest rate of 6% simple interest, with no princip
borrow) would be ___ If lawyer's fees and title insurance for the deal came to $2,000, the applicant would r
out of the loaned funds. Repayment, however, would still be interest and balance on the loan of $100,000

Interest on the loan

If an applicant chooses to pay all the fees and closing costs themselves, their only cost of borrowing is the
Costs that the applicant has no control over or receives no continuing benefit from
Those costs that are included in the calculation of the TCC (and therefore APR) are ___
Costs that the applicant does have control over or does derive continuing benefit from
Those costs that are excluded from the TCC are ___
I; E; I; E; I E; I; I; E; I; E; E E; E; I; I; I; I; I

Indicate whether the following costs are included (I) or excluded (E) in the calculated of TCC: - Mortgage in
party use - Appraisal - copy NOT given to applicant by lender - Legal fees and disbursements - applicant s
selection of lawyer - Title insurance - owner policy - Title insurance - lender policy - Registry fees - title sea
report or survey - copy given to applicant - Real property report or survey - copy not given to applicant - Mo
Homeowner insurance - Prepayment penalty (incurred as part of early renewal or refinancing) - Property ta
property tax account on high-ratio loans - Mrotgage default insurance application fee and premiums - Lend
secure, administer, or renerw a mortgage - Mortgage brokerage fees (if applicable) - Share purchased to jo

Annual percentage rate (APR)

The ___ is the total cost of borrowing money beyond the interest rate. It is always equal to or higher than th
Total cost of borrowing / amount of loaned money actually received
How do you arrive/ calculate the annual percentage rate (APR)
Annual percentage rate (APR)
The ___ is related to both the effective annual rate (EAR) and the total cost of credit (TCC). Like the EAR,
frequency, and like the TCC, it includes both the interest and non-interest costs on the loan.
TCC
If the lender or broker charges any fees as part of the mortgage transaction, ___ must be determined to ca
APR
___is higher than the nominal interest rate and EAR because the ___ factors in the non-interest costs of th
interest rate and the effective annual interest rate
APR
___ is the "true" interest rate for the loan. It represents the interest costs plus the non-interest costs incurre
it takes into account all of the following: - Original loan amount - All additional non-interest charges over wh
continuing benefit - Nominal annual interest rate - Compounding frequency - Total number of payments (am
Subtracted
Just as compounding interest over time increases the interest rate on a loan, so does adding fees and othe
closing costs as part of arranging a mortgage, those costs are ___ from the sum of money the applicant ac
the entire amount.
$106,000; $98,000; 8.2% (TCC/ loan amt = $8,000/$98,000)
Example: Assume a negotiated loan amount of $100,000, a quoted (nominal) interest rate of 6%, and no p
interest costs would total $6,000. Therefore, the applicant would have to repay ___ at the end of the year N
same loan. These costs have to be paid upfront, so they are subtracted from the loan amount. Therefore, t
however, interest is still charged on $100,000. When you factor in the interest and non-interest costs assoc
and closing costs), you can see that the applicant is actually paying $8,000 to borrow $100,000 but only re
$106,000, which reflects the interest and balance on the $100,000 contract. What is the APR
6.87 Steps (on mtg calculator): 1. (THIS STEP IS ON THE COVER OF CALC) Clear calculator > enter loa
rate (6.75 -> int) > calculate monthly pmt (pmt) *Note: use total loan amt, not gross amt for loan amt 2. Cal
as future value/ remaining bal (= -> shift -> loan amt) 3. Enter mtg value (287,000 -> - -> 1,250 -> =) > set a
term) > Calculate APR (Int) **Note: do not clear calculator after any of the steps
You have secured a conventional mortgage for your client, Ali. The non-interest costs to arrange the mortg
to pay these costs. If Ali's mortgage is for $275,000, at a nominal interest rate of 6.75%, with a three-year t
borrowing)?
3.36% Steps (on mtg calculator): 1. (THIS STEP IS ON THE COVER OF CALC) Clear calculator (shift > x)
> Cdn MI) > Enter int rate (2.65 > Int) -> calculate monthly payment (Pmt) 2. Calculate remaining balance a
value/ remaining balance (= > shift > Loan amt) -> Add fees and costs (2,700 > + > 1,500 > =) -> Add amo
> =) -> Set amt as mort value (Loan amt) -> Enter term as five yrs (5 > term) -> Calculate APR (Int)
You have arranged a high-ratio mortgage for your clients, Lilia and Matko. The loan amount is $270,000, a
2.00% mortgage insurance premium. The terms of the loan are 2.65%, five-year term, and 25-year amortiz
brokerage fees and $1,500 in legal, appraisal, and title insurance fees. What is the APR on Lilia and Matko
- Gathering all the necessary information and documents - Verifying the authenticity of the information and
documents are not available - Explaining any shortcomings in the application to provide the lender with the
Preparing an application and loan file for submission to a lender (also referred to as packaging the loan or
- A handwritten signature in a digital format - Digital signatures provided from a secure application - Verbal
person - The name and title of a person shown as text at the end of an email message
Forms of electronic signatures include
1. Mortgage loan application form 2. Broker's summary/ lender notes 3. Copy of void cheque 4. Lawyer info
content and disclosure documents (must be signed)
Every loan file package should contain the following sections of information
Validating and correcting details
Once you have assembled your mortgage application package, you must go through the process of ___ in
Accuracy Completeness Authenticity Lender and insurer qualifications
In preparation for submitting the mortgage loan application, review the information and documents to ensu
Inaccurate verification
Some brokers indicate "not verified" as a standard indicator to avoid the potential risk of ___
Mortgage commitment
At this stage in the mortgage application process you have completed the application, defined closing cost
to your request. This approval comes to you in the form of a ___ It is a document from the lender that state
Mortgage commitment
Usually provides details on: - Total mortgage amount - Interest rate - Insurer fees (if applicable) - Amortiza
prepayment (open) or closed - Prepayment privileges - Payout penalties - Conditions of approval
Conditions
What the lender deems necessary to fund the mortgage commitment. They can and are varied. Here is a li
of all necessary documents - Satisfactory home appraisal - Proof of homeowners insurance - Ability to pay
underwriting approval
Private lenders
Who typically includes the lender fee and attaches the disclosure form to the commitment
Institutional lenders
Who typically, but not always, submits the disclosure form with the mortgage instructions to the lawyer
Conveyance
What is a lawyer's role in mortgage transactions. It is the legal process of transferring property from party t
- Copy of the contract (OTP) - Copy of title for subject property - Photo ID - Home insurance policy - Real p
A lawyer typically requires the following documents
1. Understanding the lender's outstanding outstanding conditions 2. Clearly communicating those condition
prove that the conditions have been met 4. Submitting those documents to the lender for review and appro
To fulfill the condition of approval is the process of:
Outstanding conditions
Before meeting with the borrower, verify that you understand what the lender is requesting. If unsure, conta
they require and the timeframe.
Income
Defined as money earned on a regular basis from year to year. Capital gains is not considered to be this a
Verification of income
___ is any document from a third party that details income such as: - Paystub - T4 tax forms - Personal inc
agreements - Alimony agreements - Investment income - Pension income
Verification of dp
___ is the capital a borrower is putting towards the purchase of a property. This can be verified using: - Th
family member (parents/ grandparents) - Inheritance, showing on a copy of a will that the borrower is a ben
agreement - Sale of real estate property
Property type
Can be verified using the MLS feature sheet, or the legal description of the property sourced from the prop
Property value
Can be determined by an appraisal completed by an independent appraiser, who provides an estimate of t
Credit history
Can be documented using a credit report sourced from Equifax and or TransUnion
3 years
12(1)(m) requiring licensees and former licensees to keep records and books of account and respecting th
which they must be kept and the time for which they must be kept which, in the case of a former licensee, m
former licensee;
- Complete and accurate - Property stored to protect against improper access to clients' personal informati
In compliance with requirements from the Real Estate Council of Alberta (RECA), the Canada Revenue Ag
must be:
Application file or loan application
A mortgage ___ refers to the paper or electronic mortgage application form which includes consent forms,
documents for a particular loan application.
Separate loan file
Brokerages are required to maintain a ___ for each mortgage loan application, per s.105 of the Real Estate
or not.
Everything
So, what does a broker need to keep in terms of paperwork? ___. You must keep all records created and r
application is successful, even if you haven't reached the point of signing a service agreement.
All files
A brokerage must retain ___ and provide them immediately upon request to the Real Estate Council of Alb
3 years after the end of the mortgage term
RECA requires mortgage brokerages to retain mortgage deal records for ___. However, if RECA has open
the required retention period. Even transactions that are ultimately cancelled, not approved, or otherwise u
the brokerage per s.105 of the Real Estate Act Rules.
Hard (paper) copies or virtual (electronic) copies; Alberta
The Real Estate Act Rules set out comprehensive record-retention requirements but allow brokers the flex
systems. Records may be stored as ___ and must be stored securely within ___. All files must be identified
policies and procedures
Brokers have a duty to communicate the brokerage's ___ about records retention to associates, associate
brokerage's policies and procedures.
physical and electronic documents
There are requirements for maintaining both ___ documents. Brokerages must maintain a separate physic
keep everything that pertains to the application, including but not limited to the following: - The application
and verification documents. - All notes. - Correspondence (including email). - Photocopies of all original do
insurance (application/acceptance/waiver/indemnification certificate).
Brokerage
Document maintenance and privacy are the responsibility of ___. However, the requirements around main
conscientious about record keeping for all of your transactions.
- Turning over all documents, notes, emails, etc. to the brokerage for storage and maintenance. - Destroyin
devices in accordance with brokerage policy.
At the end of each transaction (whether the transaction was approved or not), you are responsible for the f
Commercial; Private
Brokerages that deal in ___ mortgages and many brokerages in ___ (different than term above) lending do
reasons for this: - Most origination software is designed to manage residential applications. The lower volu
generally warrant the cost of integrating the necessary data fields for those applications. - Private lenders h
not require the complexity or functionality of a mortgage origination program. - There is a cost associated w
operations is cost-prohibitive.
compliant and efficient
At the brokerage level, mortgage origination software allows brokers to monitor their mortgage associates'
brokerage is ___

1. Create a new loan application file 2. Enter the application type and purpose 3. Enter the applicant's pers
liability info 7. Enter asset info 8. Get written consent and pull borrower's credit report 9. Get property detai
details 12. Add qualifying details 13. Add the applicant(s) assigned to this mortgage 14. Recalculate and u
with the borrower 15. Enter the lender submission information 16. Add lender notes 17. Validate the file an

Steps to create a mortgage application file (there are lots, try to remember all but briefly)
Information Protection and Electronic Documents Act (PIPEDA); Personal Information Protection Act of Alb
As a mortgage broker, you will regularly collect, use, and disclose personal client information. There are a
this, what are they?
Personal Information Protection and Electronic Documents Act (PIPEDA)
At a federal level, the collection, use, and disclosure of personal information to organizations engaged in c
Personal Information Protection Act of Alberta (PIPA)
Outlines requirements and obligations related to the collection, use, and disclosure of personal information
Real Estate Act Rules
Dictate specific obligations around the collection, use, and disclosure of personal information related to rea
Mortgage broker
In recent years, brokerages have moved from storing records in paper files to storing records electronically
convenience, the ___ is responsible for using best practices in electronic document security to protect the
Electronic document storage
Some advantages to this: - Access anywhere, anytime. - Provides transparency on when a document was
location. - Ability to store many documents and versions of documents. - Easy sharing of documentation
Electronic document storage
Some negatives to this: - Unencrypted information can be stolen or misdirected. - Information may be retai
removed. - Storage must adhere to federal and provincial privacy regulations. - Users may not have a thor
Breaches of privacy
Incidents that qualify as ___ include such things as the following: - Loss or theft of a USB stick, computer,
access to client data because of a cyberattack on the brokerage's computer systems. - Submitting or trans
channels. - Mistakenly emailing, faxing, or mailing client data to someone not authorized to have it.
Canadian Anti-Spam Legislation (CASL) and the Personal Information Protection and Electronic Documen
What are the two pieces of legislation that defined what would be considered acceptable behavior, what rig
protections to their personal information as it was collected and prior to it being shared.
CASL
Under ___ regulations, brokerages and associates had to modify email campaigns to ensure they had exp
There must be a clear 'unsubscribe' button. Brokerages and associates had to ensure they created docum
emails.
PIPEDA
___ provided strong protection for consumers to understand who had access to their personal information,
___ (same as 1st) being in force, associates moving from one brokerage to another would generally take c
responsibility of that departed brokerage to demonstrate they had explicit permission from the consumer to
meant adding language to consent forms at the beginning of the transaction or going to past clients to seek
would be trying to seek permission from a client they dealt with several years ago.

Small fines (several thousand dollars) to very large (hundreds of thousands to millions of dollars), professio
Failure to comply with PIPEDA and CASL can involve consequences ranging from ___
RECA
Who is responsible for handling complaints, investigations, hearings, and discipline regarding the complian
interest of transparency, they publish a regular newsletter containing summaries of all disciplinary cases an
lender; the brokerage
As the mortgage transaction comes to a close, you are entitled to receive your compensation for the deal.
___, compensating you for your work
split
Typically, you will split your commission with your brokerage. The portion of the commission that you recei
brokerage. Fee splits vary from brokerage to brokerage and are based on various factors such as years of
your contribution to the brokerage
Of total commission, brokerage pays associate 90% and keeps 10% for the brokerage
what does a 90/10 split mean
Basis point (abbreviated as bp and pronounced as "beep")
The general "unit" of compensation for mortgage brokers and associates is the ___. It is pre-set by the len

There are ___ basis points in 1%

$500 ($100,000 x 0.005)
If the finder's fee on a $100,000 deal is 50bp, the brokerage will receive ___ for that deal
commission-based
Within the industry, there are several different ___ compensation models, including the following: - Referra
fees - Volume bonus - Value bonus/ efficiency or funding-ratio bonus - Lender incentives
Referral fee
A one-time fee paid by one brokerage to another for referring a client whose mortgage is ultimately approv
not individual industry members
Brokerage fees
As you know, some brokerages charge additional fees to the applicant, depending on the brokerage's corp
the applicant, part of those fees may be paid to you as part of your compensation.
Finder's fees (also called upfront fees)
One-time, lump-sum payments from lenders to brokerages based on the loan amount and term length. The
___. The brokerage typically splits this with the broker or associate based on their employment and compe
and then split with the broker or mortgage associate
Trailer fees

Based on a model by which an individual receives a smaller lump-sum finder's fee when a deal closes but
of the deal for the lifetime of the loan. For example, the lump-sum payment might be about 75 basis points
the initial term. Then, if the borrower renews the mortgage with the same lender, there is another small, lum
applicant purchases an insurance product with the mortgage, there may also be a ___ Paid to the brokerag
lenders like or offer this model of compensation, however. Because borrowers tend to stay with the same l
did not have to invest time or money to secure), many lenders would prefer not to continue paying a mortg

Trailer fees
Advantages and disadvantages to this: - New brokers may not like to be paid by these because their incom
industry members and those nearing retirement may prefer these because they provide a guaranteed strea
with ___ keeps building on that stream of income. Another benefit of having a residual income is that it is v
Some brokerage owners like these because they can show a quantifiable dollar value for the brokerage. T
having just a book of clients (who may or may not be "worth" money to the brokerage).
Volume bonuses (sometimes called the aggregate volume model)
Mainly offered at the brokerage level. An individual at a brokerage is compensated based on the company
at the individual broker level, in which case an individual is compensated based on the volume of business
agreement and brokerage policy, a volume bonus may or may not be split between the mortgage associate
Value bonuses
Related to your efficiency rating or funding ratio. With this model of compensation, an individual is paid bas
deals submitted to a particular lender. If the number of successful deals is high in relation to the number of
not qualify
Regardless of the expected efficiency rating or funding ratio, a low level of efficiency in your submitted app
the lender might refuse to work with you in the future.
Lender incentives (also called loyalty programs or loyalty incentives)
Come in many forms and are intended to encourage mortgage associate performance and lender loyalty. F
discounts on some products, equipment, choices from catalogs of retail items, or even a marketing spendin
- Number of associates - Geographic range - Compensation model - Origination or payroll software
While an individual brokerage may have variations on their specific process, it's typically based on factors
Compliance
What begins when an application closes. The associate completes an application and closes a transaction
their origination software to ensure they accurately record any last-minute details so the application is up-to
successfully. This will indicate to the brokerage's compliance or payroll officer the brokerage should expec
compliance package
During the application's life cycle, the associate will collect and supply documentation for the consumer to
associate is responsible for organizing all documents required by the brokerage into a single ___. In the se
Individual brokerages may have specific requirements regarding what documents they expect and in what
Compliance officer
What is the name of the role with this responsibility/ job: Once the associate updates information on the ap
notified that an application has closed and a compliance package is available for their review. Depending o
of record, an individual designated by the broker or record, or a full-time ___ (same). Their job is to ensure
supplied a complete compliance package containing all required or pertinent documents to support the app
officer noting the associate should be paid their commission. If the compliance package does not meet req
mistakes.
Payroll officer
This person confirms the compliance officer has validated the compliance package and determines the ass
Funds have been advanced
The transaction is not closed until the mortgage ___, the compliance process is complete, and you have re
Soft
___ marketing techniques that you can use soon after closing to follow up with your client and acknowledg
Asking for referrals
- Customer surveys - Close-out packages - Asking for referrals
What are some soft marketing techniques that you can use soon after closing to follow up with your client a
Private mortgage lenders
Provides uninsured mortgage loans directly through their own financial resources or mortgage syndication
Private lenders
Non-institutional lenders who do not have access to mortgage default insurance through the Canada and M
groups of syndications, individuals, or partnerships
Private mortgage lenders
Provides funds where traditional financial institution lenders cannot or will not
- Construction and land development. - Multiple mortgages. - Business-for-self programs. - Bridge and inte
- Bankruptcy and credit challenges. - Non-conforming property. - Job loss. - Short-term loans
Private lenders specialize in financing areas such as:
efficiency and flexibility
When used correctly, private lending can provide ___. In some instances, it may be cheaper than other len
- Open mortgage with no penalty to payout. - Quick-close funding. - Short-term funds. - Financing on distre
loans.
Private lenders can afford flexibility with terms such as:
- If a transaction closes too quickly for a typical financial institution - May have less strenuous document re
need a second or third mortgage to pay off or consolidate debt, including property tax and income tax arrea
institutional counterparts won't entertain, such as property condition, vendor take-back, foreclosures, etc.
Advantages of private mortgages vs. traditional lenders (/ traditional lender barriers):

The Criminal Code also protects consumers from any interest rates (APR) that exceed ___
- Rates are typically higher - The private lender may not renew (higher risk than with traditional lender) - Co
the previous lenders may not approve secondary financing.
Risks of private lending to the borrower
Individuals, syndicated mortgages, mortgage investment corporations (MIC's), mutual fund trusts
What are the main groups of private lending
Individual investors
- Lend their own funds in the form of mortgages which can be done through a registered or non-registered
RRSP; TFSA, or self-directed pension plan
A registered loan's funds come from ___
Syndicated mortgage
An arrangement whereby more than one investor agrees to lend money using real estate security to secur
Mortgage investment corporations (MICs)

- Pools shareholder capital and lends across multiple mortgages. They are corporations formed under the
Act requires that 100% of a ___ annual net income be distributed to its shareholders in the form of a divide
owns >25% of the entity - 50% of assets are in residential mortgages - Cannot develop[ properties - All ass
from the ___ responsible for raising capital, attracting mortgage opportunities, and managing assets. The A

Mutual fund trusts

- A structure using a corporation, partnership, or trust where investors are issued units instead of shares. -
interest, dividends, and capital gains to the investor without income tax implications to the trust. - Require m
RRSPs, TFSAs, LIRAs, and self-directed pension plans.
Provincially
In Canada, the real estate and securities industries are ___ regulated
Canadian Securities Administrators (CSA)
The is an association of all provincial securities regulators.
Securities
In 2010, the CSA redefined mortgages as ___. In the case of default, a lender can take legal action to reco
change, individuals or corporations raising capital for mortgages must become licensed by their provincial
Mortgage investment entities
The Canadian Securities Administrators define private lenders like mortgage syndicators, MICs, mutual fun
Registration
___ is required to be licensed as an exempt market dealer and raise capital as eligible, accredited or perm
Consumer Protection Act
Private mortgage lenders must comply with the ___ by disclosing the terms of the mortgage transaction.
Liensed
As a mortgage broker, you must be ___ to sell mortgages
brokerage
If a consumer wants to hire a broker to represent them, the mortgage professional they hire cannot be with
- Any conflicts of interest - Whether they are lending their own funds - Whether they are lending a family m
latter two scenarios, the broker clearly cannot represent both the consumer's or investor's best interest.
The appropriate disclosure and service agreement forms must be signed, and mortgage brokers must dec
- Knowing private lenders - Exit strategy - Knowing your borrower
What are the key points to gathering information
- Application form - Income - Credit bureau - Property info - Lender's notes
What is included in private loan documentation
Commitment
Private lender mortgage commitments typically include the lender fee and attach the disclosure form to the
Determine property value
The overall goal of property appraisal is to ___ in terms of how it compares to other properties in the area,
area, location, amenities, and other factors.
The overall goal of property appraisal is to determine property value in terms of how it compares to other p
Neighborhood, the property located within the neighborhood, the exterior site influences, landscape, curb a
and other features.
The appraiser collects data regarding the ___ They also collect interior data regarding ___
1. Cost approach 2. Income approach 3. Sales comparison approach
With the property data, the appraiser may use one or more of the following three approaches to conducting
Cost approach to value
In this approach, a property is valued based on a comparison with the cost to build a new or substitute pro
in the property
Income approach to value
- In this approach, an appraiser analyzes a property's capacity to generate future benefits, and uses the po
depends on anticipating future conditions. The procedures used in the income approach analyze comparab
noted in the cost approach - Particularly useful when considering the commercial proprety
Sales comparison approach to value
This approach is the process in which an appraiser applies quantitative and qualitative techniques to comp
- Check the report was ordered per lender preferences and guidelines. - Ensure the appraiser's opinion of
supporting documentation. - Verify the property meets the lender's underwriting requirements. - The source
description - Description of improvements - Cost approach to value - Sales comparison approach to value
Things to check when verifying appraisal reports
- Client (the lender) - Real estate appraiser - Subject property address - Applicant name - Purpose of the a
Appraisal reports contain a number of key details, all of which should be complete in a valid report. These
Neighborhood description
This section of the appraisal examines the subject property's community, describing the type of district, ave
general price range for real estate. It identifies desirable features like schools, transit, and shopping in the
have some general knowledge to compare with the data in this section.
Description of improvements
This section of the appraisal looks at improvements to the land, specifically the house on the property. The
interior features, including room allocation, improvements, and the condition of features that may affect ma
Remaining economic life - Amortization period - Physical characteristics - Gross living area (GLA) - Comm
- Land value (Should specify whether or not it includes the site improvements) - Indicated value (Chk that t
with the final opinion of value)
In an appraisal, using a cost approach to value, this section is somewhat technical so you may only want to
- Selection of comparables (Structure, location, timing) - Addresses of comparables - Conclusions and ass
In an appraisal, using a sales comparison approach to value, this section is somewhat technical so you ma
- An approved appraiser list - An appraisal management company (AMC)
Based on lender instruction, you may order an appraisal through:
Blind model and preferred partner
What are the two types of an appraisal management company (AMC)
Blind model
The lender indicates their approved appraisal management companies. The broker places an appraisal ord
Preferred partner
The lender indicates their approved appraisal management companies. The mortgage broker places an ap
Upfront
The appraisal fee is paid ___
does not
Your client ___ receive a copy of the appraisal
As soon as possible
Place an appraisal order ___ to meet condition dates
Online
Most appraisals can be ordered ___
mortgage administration
In general terms, ___ involves the administrative processes associated with collecting and remitting mortga
servicing mortgages.
- Record-keeping. - Coordinating with lawyers. - Funding the mortgage. - Collecting monthly payments. - C
Ensuring property insurance is in place. - Default management.
Duties in mortgage administration involve:
lender; mortgage brokerage
The ___ often performs mortgage administration. However, there are circumstances where a ___ performs

1. Receive an executed commitment letter or agreement between lender and borrower 2. Instruct the legal
diligence items 4. Make arrangements with the lender for the advance amount and the funding date 5. Adv
6. The day funds are received, wire money to the broker and remit all fees and payments to the appropriat
to the lenders 8. Confirm taxes are collected and paid before the deadlines each year 9. Confirm the prope

As a broker, practicing proper mortgage administration procedures requires collecting necessary informatio
- Calculate variable and fixed-rate mortgages. - Collect interest-only payments. - Collect fixed principal rep
to generate amortization schedules and annual mortgage statements for the lender and the borrower
For mortgage administration, the mortgage software you use must be able to:
Canadian mortgages; GST collection
It is very important to select a mortgage software system that supports ___ and ___
Key agreements
Prior to servicing a mortgage in conjunction with a lender, a set of ___ between the lender and the broker m
declaration, a disclosure statement, and an inter-lender agreement between the multiple lenders and the b

Servicing agreement, a trust declaration, a disclosure statement, and an inter-lender agreement between t
lender on the loan.
Prior to servicing a mortgage in conjunction with a lender, a set of key agreements between the lender and
- Name of the lender. - Name of the broker. - Date of entering the agreement. - Responsibilities of each pa
broker. - Process and timelines of remittance payments from the broker to the lender. - Reporting requirem
of termination of the agreement, including compensation. - Fees associated with servicing the mortgage.
Service agreements include the following information:
monthly
The general trust account, which is enacted by the trust declaration document, should be reconciled ___
under-funded
The general trust account may not at any time be ___. No banking fees may be charged to the trust accou
sent.
Borrowers
Once a mortgage has been approved and finalized, ___ are responsible for regular payments (monthly, se
with the lender
4 days
Monthly payment collection should start no later than ___ before month-end
1. Interest bills are system-generated and reviewed by the broker. 2. Interest bills are sent via online delive
detailing the amount of the monthly payment. 3. On the payment due date (typically the first of the month),
(established during the funding of the loan). 4. Prior to remitting the payments to the lender, the broker ded
based on the loan servicing agreement. 5. The broker remits all loan payments to the lender on the next da
statement detailing the loans and the payments sent.
The payment collection and remittance process follows these steps:
2 days prior
Interest bills are sent via online delivery methods to the borrower at least ___ to collections detailing the am
municipality
When securing a new loan, determine the property's ___, as location determines the schedule of property
throughout the year or split up between property and school taxes with different due dates. If the borrower
to the broker and lender within 30 days.
30 days
If the borrower requests to pay their taxes, they must provide proof of payment to the broker and lender wi
amount collected
If the broker collects taxes with the monthly payments, they determine the ___ each month. The broker hol
payment.
15 days prior to the tax due date
The broker sends payment to the municipality for taxes on behalf of the borrower no later than ___. The br
borrower and lender at the end of every tax year.
Certificate of Insurance (COI)
To do with property insurance: A ___ is collected and approved by an insurance consultant at the time of fu
Annually, at the time of COI maturity)
___, the borrower provides the broker with a renewed policy for the loan
Broker's
The ___ responsibility to do with property insurance is to review the policy and verify there are no changes
etc.
- Taking all action to ensure the borrower and all others under contractual agreement remedy the default. -
remedies concerning the loan and the loan security, as is permitted by law and as may be directed by the l
reinstate the loan if it's still early enough in the proceedings. - Notifying the lender of any offer of partial rein
When a loan is in default, a mortgage broker has a specific set of duties to carry out. These include:
As early as possible
The broker must contact the borrower ___ when outstanding debt develops since delays in following up on
development of a worsening situation.
- Initiating the appropriate legal action - Pursuing legal proceedings in a timely and effective manner. - Ens
property and that there are no unacceptable lease arrangements. - Obtaining a judgment against the defau
appropriate unless otherwise advised by the lender.
In the mortgage recovery process, a broker is responsible for:
Apply for a final foreclosure order and possession
Where foreclosure proceedings are in motion, the broker is required to ___ of the mortgaged property at th
the lender.
discontinue
After foreclosure proceedings are in motion, the broker may ___ the action if costs and all payments in arre
postpone or discontinue the action if the borrower has made satisfactory arrangements to remedy the defa
valid and enforceable judgment
In addition to realizing the mortgage security, the broker must obtain a ___ for the outstanding debt under
guarantees of a guarantor. They must assign all such judgments to the lender.

- Any guarantors - Any party who is legally responsible for the outstanding debt - Any individuals as require
Canada Mortgage and Housing Corporation (CMHC) insured. - When the borrower is a shell company, the
assets represented by the project), and, if applicable, the covenant of the parent company (where the cove

The broker should seek judgment against:

Total debt or deficiency outstanding
If the borrower has a strong covenant, the broker should obtain a judgment for the ___. However, the brok
the legal action. Before judgment is rendered, the broker must request approval of any proposal to settle fr
request.

The ___ is responsible for adhering to all applicable laws affecting the property, including provincial statute
released from their covenants. (In terms of the mortgage recovery process)
maturity dates
The broker must keep a record of the ___ of all loans they manage
3 months prior to maturity
At least ___, the broker should communicate with a borrower to determine if they will repay the loan at mat
1. Communicate with the lender and determine any additional underwriting required to approve a renewal.
letter to be issued and executed by the borrower. - The broker provides a copy to the lender and the borrow
instances where amendments to the legal documents are required. - The broker then collects and remits th
If a borrower requests a renewal, the broker's responsibilities are to:
Renewed
The loan is considered ___ till the new maturity date
Commercial mortgage
A mortgage loan using a business or income-generating property as the loan security
Commercial mortgage
This is secured by properties such as a retail complex, apartment block, office, industrial commercial buildi
Purchase transactions, refinance transactions, construction loans for development of property
What are the types of commercial mortgages
new or existing properties
Commercial purchase transactions buy ___. Commercial refinancing transactions may involve the followin
property - Buying out a partner's share of a business or property - Leveraging a commercial property for ta
development
Industrial, office, multi-family, retail
Commercial property is defined by subcategories based on use. What are the subcategories
Industrial
Properties for manufacturing, production, distribution, and logistics. These properties can vary from small m
foot Amazon distribution centre.
Office
Properties intended to provide space and amenities to businesses. The differentiating factors for ___ prope
amenities.
Multi-family
Residential properties with five or more separate dwellings. Examples include single high-rise towers, expa
residences. Note that apartment and townhome developments are considered traditional multi-family, while
Retail
Properties intended to market and sell consumer goods and services. Examples include grocery-anchored
small convenience retail, and free-standing retail such as fast food.
Commercial property
Other types of property classified as ___: - Vacant land zoned for commercial development (serviced or un
spas, sports and recreation centres, campgrounds, golf courses, etc. - Healthcare properties such as nursi
etc. - Other property categorized as commercial under local land-use bylaws.
Portfolio diversification
Commercial mortgages provide investors with ___. If an investor had $1 million in cash, they could either:
Or purchase four properties worth $4 million, combined with 75% loan-to-value (LTV) mortgage financing (
Capital stack
- The financial structure of debt lenders and equity investors use to acquire a commercial property - Conta
and equity investors
Senior debt lenders
What is the name of the primary debt lenders in capital stack
Mezzanine and subordinate debt lenders
What is the name of the debt lenders that are second to receive payment and earn a slightly higher rate of
Equity investors
What is the name of the debt lenders that typically receive all excess proceeds, if any. They earn an unres
well. Conversely, they are the first to lose money if the property investment performs poorly.
Leverage
Uses debt financing to potentially increase the rate of return and access bigger deals and opportunities tha
increases the volatility of the return
Positive and negative
What are the types of leverage
Cost of capital and rate of return
The ___ on the investment are the two main factors that determine if a leverage is positive or negative
Positive leverage
The rate of return on the investment (capitalizatino rate) is higher than the interest on the mortgage. The in
Negative leverage
The interest rate is higher than the rate of return, and the investor earns a lower return on their equity
negative
Investors typically don't buy properties where they expect a ___ leverage unless they see considerable up
Owner-occupied property
- If a commercial real estate owner intends to occupy a unit of their commercial property for the use of their
property applicants to lease the remaining units to arms-length third parties at market-level rates. If the ow
lender assumes ownership of the property along with the tenants.
qualifying standards
Both the applicant and the property must meet ___ in residential mortgages. Residential lenders prioritize t
employment income.
qualify
Commercial mortgages similarly require the applicant and property to ___. Commercial lenders, however,
qualification. There are certain situations and lenders where the borrower's credit strength is a more impor
Commercial lenders
___ have their own qualification guidelines that specify the types of situations they prefer to lend on. As be
preferences and underwriting procedures, as well as the needs, goals, and financial situation of your comm
Income, equity, and credit brhavior
For residential mortgages, lenders largely structure their underwriting guidelines around factors related to t
- Property valuation - Cash flow - Ability of the property to generate income - Applicant's ability to service th
For commercial mortgages, lenders largely structure their underwriting guidelines on:
service ratio (GDS), total debt service ratio (TDS), and loan-to-value ratio (LTV)
As discussed in Mortgage Fundamentals, residential qualifying ratios are the ___
Loan-to-value ratio (LTV), and the debt service coverage ratio (DSCR)
Commercial qualifying ratios are the ___
Loan-to-value (LTV)
The ratio of the total loan amount of the commercial mortgage to the purchase price or appraised value of
Debt service coverage ratio (DSCR)
The ratio of revenue remaining after paying property operating expenses (Net Operating Income (NOI)), di
benchmark used to determine if an entity generates enough revenue to cover debt payments
higher
The ___ the DSCR, the easier it is to obtain a loan
larger
Commercial mortgage loans are typically much ___ than residential loans, ranging in value from hundreds
mortgage loans, however, they are generally repaid through blended monthly payments of principal and in
Residential applicants
Usually individuals who want to buy property as a place to live
Commercial applicants
Typically experienced investors, often businesses, with an interest in the investment or income-generating
Sole prop., Partnership, corp., Limited liability company, limited partnerships
Types of business for of commercial applicants
Sole proprietorship
One owner is responsible for all assets and liabilities of the company. If necessary, the owner's personal a
There is no severance between the owner's personal assets and the business's liabilities
Partnership
The owners are responsible for the assets and liabilities of the business. There is no severance between th
However, in this, there is joint ownership between two or more individuals
Corporation
Legal entities recognized under law as an individual. The people running this are typically not liable for deb
severed from the business portfolio
Limited liability company
Owners, directors, and stakeholders' personal assets are protected from the company's debt obligations. In
accordingly) in a manner more like sole proprietorships or partnerships than corporations
Limited partnerships

Common when groups assemble an investment in a real estate development. Requires a written agreeme
the limited partners. Each limited partner invests in the partnership expecting an agreed-upon return on inv
partners up until a certain limit. After that point, the limited partners will receive a lesser share than the gen
the ___ by the general partners. The ___ may not participate in management decisions of the partnership

corporations
Commercial lenders prefer to lend to ___ and may require an applicant to be, or become, incorporated. In
borrowing
Personal guarantee
A promise made by a business owner obligating them to honor the debts incurred by the business. The len
to and including the total value of the mortgage loan amount
personal assets
When a lender has a personal guarantee, they can pursue the owner's ___ if they default on the loan and t
personal guarantee depends on factors such as the loan-to-value, quality of cash flow generated by the pr
would not likely ask large companies with significant net equity and cash flow and a lower loan-to-value to
Residential mortgages
With ___, the relationship between you and your applicants may be somewhat personal. They are not just
attachments. Your services reflect that understanding
Commercial mortgages
With ___, you generally deal with experienced applicants working with a business portfolio. They are conce
commercial properties. Given the overwhelming and complicated process involved, building a trusting relat
commercial mortgage deals
While residential mortgage deals tend to be similar from one to the next, any two ___ generally have little i
investment opportunities associated with each
complicated
Additionally, commercial mortgage deals are ___ transactions compared to residential mortgages. The am
time-consuming to obtain and review. Permit delays, environmental issues, and even partner disputes can
longer
Commercial mortgages generally have a ___ turnaround relative to residential mortgage closure periods. I
two months or longer to complete depending on the size and complexity
Additional conditions

One of the reasons it takes longer to underwrite a commercial mortgage is the ___ lenders specify. Here a
always required, and because of the increased depth and scope of a commercial property appraisal, it can
reports may take a month or more to arrange and complete. A Phase I Environmental involves a map revie
request further phases - Commercial building inspections (referred to as Building Condition Assessments o
the buyer and typically required as a finance condition from the lender - Due diligence involves assessing t
detailed review of financial statements, rent roll, budgets, leases, actual utility, property tax statements, etc

Posted rates
Lenders base interest rates for residential mortgages on their ___. Although some lenders allow discountin
applicants may reference and estimate their mortgage payments
commercial mortgages
Typically, ___ do not post interest rates because the transactions vary so widely from deal to deal. Lenders
they decide to proceed, they offer an interest rate based on the assessed risk for that particular transaction
175 to 250 basis points; 250 to 400 basis points
On average, expect ___ over the Government of Canada Bond yield with similar duration, depending on te
lenders and secured by stabilized, cash-flowing properties. Trust companies and alternative lenders with a
___ (different) range to account for lending on properties that traditional lenders would not consider.
BBB-rated
Note that commercial mortgage spreads generally correlate with ___ corporate bonds and are often analyz
Do not
For straightforward residential deals, most mortgage brokerages ___ charge extra fees. When the deal is c
brokerages may charge an extra fee to arrange a residential deal.
brokerage fee
Brokerages almost always charge a ___ for commercial deals. Given the significantly larger loan amounts
much higher than residential
higher
Closing costs for commercial transactions are significantly ___ for commercial properties because they ofte
brokerage fees, etc.
Commercial
Property which include smulti-family rental with more than 5 units
Residential
Single-family property
Commercial
Purchase, refinance, and construction
Residential
Purchase, refinance, borrow equity, switch, renew
Commercial
- Both applicant and property need to qualify - Main focus is the quality of the property, as defined by its ab
Residential
- Both applicant and property need to qualify - Main focus is quality of the applicant, as defined by proven i
repay)
Commercial
- Underwriting guidelines based on property valuation and quality of cash flow of the applicant and the prop
commercial owner-occupied properties - Ratios - For example LTV, DSCR, Cap Rate, Absorption rate - Lo
minimum loan amount
Residential
- Underwriting guidelines structured around applicant's employment income and credit behavior - Ratios - G
lenders may specify a maximum loan amount but rarely a minimum loan amount
Commercial
Usually experienced investors or an incorporated business buying, refinancing, or constructing a property f
Residential
Usually an individual buying or refinancing a property as a place to live
Commercial
Very personal relationship where trust is paramount to succeed
Residential
More personal, often involves a sense of emotional connection
Commercial
- Very complex and often unique - Involves property appraisals, financial statements and cash flow forecas
Residential
- Typically straightforward and similar from transaction to transaction - Required documentation is relatively
Commercial
Time to closing is two months or longer for larger and or more complex deals
Residential
One to two weeks to close, on average
Commercial
- Interest rates determined on a risk adjusted basis - Brokerage fees for most deals - Higher closing costs
Residential
- Posted interest rates, sometimes discounted - Brokerage fees for unusual, complex, or private lender dea
costs
zones
Land is divided into these that define the property type and its permissible uses. Lane use ___ and bylaws
the following: - The permissible use of a particular site - The process for approving a new development - D
municipal websutes
Land use bylaws and maps are typically found on ___ and municipal resource centres. Physical copies are
zoning research.
Geographic Information Systems (GIS)
Commercial real estate professionals should be aware of the respective ___ in their area of interest. For ex
interactive mapping system where you can reference land assessment and zoning information instantly
Industrial
What does the land use code "I" stand for
Residential
What does the land use code "R" stand for
Commercial
What does the land use code "C" stand for
C-N1
For example, in Calgary, ___ is the land use code for a commercial property zoned to offer small-scale reta
cater to pedestrian access (no additional or limited parking facilities) and are typically storefront businesse
monopolies by large-scale operations and preserve the integrity, look, and feel of a community.
C-N1 (Commercial neighborhood)
What is the zoning code for this: Details of permissible usage: Small storefront retail businesses. Caters to
sidewalks. Primarily services the immediate local neighborhood Example: Corner store
C-N2 (Commercial nerighborhood)
What is the zoning code for this: Details of permissible usage: Smaller retail businesses and services. Cate
available. Situated adjacent to residential properties (no setback from the street). Business size restrictions
negative impacts on residential areas. Primarily serves the local community Example: Neighborhood strip m
C-C1 (Commercial community)
What is the zoning code for this: Details of permissible usage: Small to medium-sized businesses. Set apa
setbacks from the street to minimize negative impact on residential areas. Caters to automobile and pedes
Grocery stores
C-C2 (Commercial community)
What is the zoning code for this: Details of permissible usage: Medium-sized businesses. Multi-property re
Larger parking facilities shared among building tenants. More landscaping and setbacks. Larger commerci
complexes (but not big-box retail)
C-COR1 (Commercial corridor)
What is the zoning code for this: Details of permissible usage: Small storefront businesses on both sides o
facilities apart from street parking. Buildings close to the sidewalk. Typically found in historic or revitalized
neighborhoods
C-COR2 (Commercial corridor)
What is the zoning code for this: Details of permissible usage: Small to medium-sized businesses situated
traffic areas Example: Multi-tenant retail and service plazas and complexes (but not big-box retail)
C-COR3 (commercial corridor)
What is the zoning code for this: Details of permissible usage: Small to medium-sized businesses situated
back from the street and have their own entryways (access), parking, and landscaping Example: Multi-tena
retail)
C-O (Commercial office)
What is the zoning code for this: Details of permissible usage: Site purposed for office space. Some retail b
spaces Example: Office buildings and businesses complexes
C-R1 (commercial regional)
What is the zoning code for this: Details of permissible usage: Large-acale retail operations. Typically sing
thoroughfares Example: Big-box retail
C-R2 (Commercial regional)
What is the zoning code for this: Details of permissible usage: Large-scale retail operations. Multi-tenant b
transit. Caters to automobile traffic and public transit traffic. Building centred on site with parking surroundi
C-R3
What is the zoning code for this: Details of permissible usage: Large-scale retail, dining, and entertainmen
Requires a large area of land Example: Large shopping malls, entertainment complexes
one aspect
Land use bylaws are only ___ of the legal permits that affect the development of a commercial site. Most p
construction or any other development component of a project. Obtaining permits typically require a signific
obtain several permits can greatly delay the progress of a commercial mortgage transaction. The general c
pulls permits on a project.
Development permit
A document issued under a land use bylaw to authorize a development. The permit may be approved or re
provide reasons for the refusal. If approved, the development authority may place conditions on approval
Building permits
Ensure that construction abides by municipal bylaws and is in accordance with approved plans
Physical condition, location, commercial tenants, commercial LTV ratios, mortgage default insurance
What are other factors lenders consider in commercial property when deciding whether or not to fund a mo
Physical condition
Directly impacts both its revenue-generating potential and its resale value. A building inspection is not only
- Appearance (curb appeal) - Access - Egress (exits) - Parking availability
Location is another prime consideration, as it:
Location
For a retail property, the ___ is of the utmost importance to attract both quality tenants, and customers and
Size an dstrength
When analyzing a property that has been leased to one or more commercial tenants, the lender considers
the property's ability to service debt payments.
favorable terms
A mortgage secured by a property leased to tenants with nationwide operations (e.g., Subway, Tim Horton
by the same property but leased to small, local tenants.
loan-to-value (LTV)
Commercial lenders vary greatly on the ___ they are willing to accept for a commercial mortgage. The type
acceptable ___ (same).

An LTV ratio of ___ is considered to be standard for most stabilized income-producing properties
lower
As a general rule, LTV ratios are ___ for commercial mortgages than residential mortgages. Commercial le
insurance for commercial properties. However, for multi-family rental properties, approved Canada Mortga
have access to mortgage default insurance.
default insurance programs
Lenders may be willing to consider financing up to a higher LTV if mortgage ___ are available. If mortgage
considerably higher than a standard residential transaction and there is an application fee for mortgage __
Mixed-use property
- Has two or more functions - Typical example is above building with retail stores on the main level and res
from both residential and retail tenants - Another example is an office building with an industrial warehouse
be zoned for both respective uses - Risk factors and LTV: Lenders vary widely in the LTV they will accept o
example, the income stream from the retail component of the property is less dependable than the income
insure ___ (same) multi-family residential and retail properties that meet a few requirements, such as the g
not exceeding 30% of the total gross floor area of the property.
multi-unit residential
- Has more than 4 residential rental units - Rental apartment buildings are the most common example of a
include student housing complexes, seniors' housing, or co-op housing - Properties with four units or less c
with residential mortgage default insurance (for which there is no application fee) - Risk factors: Most lende
Mortgage default insurance: There is a mortgage default insurance program available for ___ properties th
which greatly decreases the risk for lenders. Application fees are charged per unit on ___ (same) propertie
significant, especially on large properties with many individual units. If the building is insured, most CMHC-
an 85% LTV.
Office property
- Single-unit or multi-unit buildings designated for business use. Office properties are categorized into type
medical, and specialty research campus offices. - Risk factors: In general, most lenders are willing to finan
office leases generally are longer-term. This offers more income security and less leasing risk. Local econo
influencing the degree lenders may be interested in this type of investment
A
What class for office property is this: Likely newly-built, with high-end finishes, state-of-the-art construction
B
What class for office property is this: Generally former Class A properties that are well fitted but are dated c
C or lower
What class for office property is this: Includes fewer amenities and conveniences with small or no windows
have varying preferences and tolerances for the grades of office property they lend on
Strip malls, stand-alone storefronts, and large regional shopping malls
Retail property includes
Anchored or unanchored
Retail properties may be either ___
Anchored
Where a large, well-known tenant such as a department store or large supermarket draws consumers into
unanchored
A smaller strip mall or shopping plaza
best mortgage terms
As mentioned, properties that have a large, nationally-branded anchor tenant give lenders a sense of stabi
lenders tend to offer the ___ on retail properties with nationally-branded tenants.
decreases; increase
As brand recognition and information about the tenant ___, interest rates may ___ (different). For example
tenants is more likely to receive higher interest rates and possibly even lower amortization periods and a lo
stable and reliable
Lenders can be quite receptive or quite reluctant, depending on the type of business. For example, restaur
often "trendy" due to ownership changes that increase the instability in the income stream. In addition, the
higher than retail tenants. To maintain income and value, you must find a replacement tenant in the same
business (and consequently, the mortgage repayment) is less ___
Warehouses, distribution centres, storage facilities, manufacturing plants, research facilities, service shops
Industrial properties include: (May be single-tenant or multi-tenant buildings)
limited use in the event of a foreclosure; environmental issues
Two potential lender concerns about industrial property include ___ and ___ such as ground contamination
to resolve the issues before selling the property upon foreclosure
property owners
Environmental liability falls on all ___, and lenders will not lend on properties with environmental contamina

Chartered banks (prime or institutional lenders) typically accept LTVs up to ___ for industrial property.
Car dealerships, churches, gas stations, nursing homes, hospitals, sports facilities, hotels, motels, and oth
Special-use properties include things like (don't need to name all, just get the idea):
Reluctant
Many lenders are ___ to finance special-use properties such as churches or religious buildings. The appea
use for other purposes. There are, however, some funding sources open to lending churches, such as loca
Gas stations
___ are another special-use property that can be difficult to finance because of the potential for environme
assessment on all gas station transactions, which can be costly and time-consuming. Depending on the re
clean up site contamination and contamination of neighbouring sites. Franchise ones may be more accept
resources to maintain environmental standards, and leases usually include a covenant from the parent com
obtain commercial financing based on the strength of the brand. The brand (usually a larger oil company) t
lender, decreasing the lender's risk.
Lenders that fund residential properties and MICs
Who can also deal in commercial mortgages
Commercial mortgages
Unlike residential mortgages, where lenders offer specific mortgage products (e.g., cashback mortgages, n
products exist for ___. General underwriting guidelines exist, but the spectrum of criteria is broad. Underwr
Commercial lenders
Do not typically post fixed interest rates; the interst rates are risk-based, established as a spread over the c
of Canada bond. They are typically fixed a few days before funding
Underwriting guidelines
The ___ for commercial lenders are typically structured around the property. They consider the applicant's
property, the property's condition, and any professional reports or market events that determine the marke
min and max loan amt and the types and locations of commercial property
Commercial underwriting guidelines only outline variables such as ___ they are willing to invest in. The res
Institutional lenders, Mortgage Investment Corporations (MICs), Private lenders
What are the general types of commercial lenders
- Chartered banks, credit unions, life insurance and trust companies - Conduit lenders - Pension funds - Bu
development programs
Within the context of commercial mortgage lending, institutional lenders include the following groups: Thes
both the primary and secondary mortgage markets, as well as the government
Commercial transaction

Generally, a ___ is suited to an institutional lender if: - The applicant has a significant amount of equity (do
managing commercial properties. - The property is located in a market with a high demand for the property
borrowing (lower fees and interest rates). - The applicant does not require bridge financing, quick closing, z
great deal of flexibility. - The subject property is considered a high-quality, low-risk investment. I.e., it produ

Banks, credit unions, life insurance, and trust companies

Lend their "own" money from their client's savings deposits, premiums, and loan interest
Conduit lenders
- Get their money from the secondary mortgage market. They generate funds by selling commercial mortg
lenders - Differ from banks because they are not lending their own money - Have stricter property condition
because of the need to securitize the commercial mortgage investment
1. A commercial client is seeking mortgage financing 2. A conduit lender lends on behalf of investors to clie
The mortgages are pooled and securitized 5. The mortgage-backed securities are traded on the secondary
the mortgages
How conduit lending works (in steps)
higher
Conduit lenders are a major source of large, fixed interest rate term commercial loans, and they offer sligh
lend up to 80% LTV on certain property types.
Conduit lenders
The loan must be refinanced with another lender when the mortgage matures, as the ___ does not own the
Pension fund
___ dues are collected from employers and their employees. Collectively, these monies add up to large am
profit. As an investment vehicle, commercial mortgages represent a small percentage of the investment po
Pension funds
Because they are so large, ___ do not get involved in financing single-family residential mortgages. They t
packages of mortgages from primary mortgage market lenders. These lenders continue to manage the loa
Pension funds
Typically prefer to finance mortgages on large office buildings, shopping centres, and other commercial mo
low-interest rates on commercial mortgages. But they are very particular about the quality of the property.
income streams.
Business Development Bank of Canada (BDC)
Is a Crown corporation with a mandate to provide funds for commercial, industrial development, and some
exclusions, no-penalty prepayment options, and other less rigid features than other commercial lenders
Mortgage investment corporations (MICs)
- Lend money for residential and commercial mortgage transactions. They mainly invest solely in residentia
two - Under their federal guidelines, at least 50% of their mortgage investments must be in residential mort
mortgage assets would include single-family mortgage assets and multi-family mortgage assets - They are
Alberta Securities Commission or the applicable Securities Commission in their province
Short
Private lenders operate similarly in commercial transactions as they do in residential transactions. They off
around times, and may charge higher interest rates and fees.
bridge financing
Private lenders are often used for ___ to take advantage of time-critical opportunities or manage until the b
be interested in the deal at a lower rate or longer term. The following scenario presents an example of a tim
Private lenders
- Generally more flexible than institutional lenders in terms of what is acceptable to mitigate lending risk. Th
and creative solutions, such as using other applicant-owned property as collateral for a deal.
Private commercial lender
Generally, a deal is suited to a ___ if the following apply: - The applicant has a lower percentage of equity
accept a higher cost of borrowing (higher interest rates and lender fees) to obtain maximum mortgage amo
requires bridge financing, a quick close to the transaction, quick sale closing, some latitude to obtain perm
requires flexibility. - The applicant is financing a property that exhibits less than ideal cash flow due to high
requires time to stabilize the property's income and value with evidence of improving market conditions.
Private companies, individuals, and mortgage investment corporations (MICs)
Commercial private lenders include:
Private lenders
Range from individuals to privately capitalized corporations. As you recall, they are knowledgeable and exp
mortgages. They assess the applicant and property quality, evaluate the risk, negotiate the interest rate an
administer) the mortgage. In other words, they are solely responsible for all aspects of underwriting, arrang
illustrated here.
Lower interest rates, improved LTV, and title protection
Many commercial borrowers seek mortgage insurance for various benefits, including:
Canada Mortgage and Housing Corporation (CMHC)
Mortgage default insurance is available for certain commercial mortgages through the ___
CMHC
___ insurance influences the lender's minimum LTV ratio
insurance products
CMHC offers ___ for commercial properties
CMHC coverage
___ qualifies the applicant for a lower interest rate, often at least 1% less than conventional mortgages
1%; 6.25%
Insurance premiums vary from as low as ___ to ___ of the insurable mortgage amount. Fees are also varia
refinancing and $200 for construction loans
full amortization period of the loan
Also, note that CMHC insurance coverage is for the ___, so the insurance does not cease at the end of the

CMHC offers multi-unit mortgage default insurance applicable to new or existing rental multi-family residen
The applicant's net worth must be at least ___ of the loan amount to qualify.
title insurance
Like residential mortgage transactions, lenders and borrowers can purchase commercial title insurance. Co
buildings - Industrial buildings - Shopping centres - Multi-family rental buildings - Retirement and senior ho
development land - Vacant commercial land
1. Validating any referral sources 2. Developing rapport with the business owner 3. Discovering the needs,
and verifying preliminary documentation
The process in commercial mortgage brokerage is the same as a residential mortgage. You will need to cr
regarding your borrower, their business, and circumstances. This process involves the following:
due diligence
As you learned, appropriate ___ to validate the source is always required if you receive a referral from an u
be certain you have a first-hand, positive experience of that party's qualifications, personal ethics, and prof
dissatisfaction your client may have with the referred service
rapport
No matter who the commercial borrower is (individual, partnership or corporation), you must develop a com
Remember, you do not need to develop the same sense of personal connection as you would for residenti
goal
A commercial broker's __ is to achieve a professional, business-like dynamic and reassure the borrower's
two parties
- As always, remember that rapport building is a give-and-take process between to establish mutual trust a
ask questions and talk about their business goals. - During the discussion, establish limits around what ser
at this time, as brokerage fees for commercial transactions range from about one-quarter to two percent of
the risk, time, and effort required to complete the transaction. Given a typical commercial loan size, this ca
commercial borrowing can impact customer loyalty, it is important to emphasize the value and benefits you
trusting and transparent relationship for future business is essential.

1. Discussing the borrower's needs, goals, and intentions for borrowing and developing broker-client rappo
around consent, access to personal information, relationships, compensation, fees and other costs, and br
preliminary documentation to make initial assessments of the borrower and property to determine if the ap

For a commercial mortgage, the initial analysis to collecting and analyzing information occurs in these basi
financing
Commercial borrowers prioritize obtaining the best ___ available to meet their needs
borrower and their property
You should stay informed about what lenders prefer in a ___. The property type, degree of borrower exper
borrowers
open
Commercial lenders are usually more ___ to lending to borrowers who have experience owning and mana
net worth
Borrowers who demonstrate ___ over and above the equity and strong cash flow from their business holdi
amount.
conservative
If the borrower's cash flows and net worth do not exceed the equity, the lending offer will be ___. The lende
assets or resources to support the mortgage may require additional capital injection from another source, s
Lower
Higher risk = ___ LTV
1. Additional equity is required to reduce the lender's risk 2. Additional mtg security is required via a collate
guarantees, or a combination thereof 3. The lender declines the loan
All commercial loans carry a significant amount of lender scrutiny. However, there are generally three outc
Consent, relationship and compensation disclosure, cost of credit disclosure, brokerage fees, good faith de
guarantees
The AMBA private mortgage lenders forum have developed a disclosure form (this can be found on the me
details required for disclosure in commercial mortgage transactions.
Consent
The borrower must sign a written ___ before you can retrieve or share any personal or sensitive informatio
Relationship and compensation disclosure
You must discuss and complete both the ___ document with commercial and residential borrowers
Cost of credit disclosure
Unlike residential brokers, commercial mortgage brokers are not required by the Fair Trading Act (FTA) to
document when brokerage fees are charged. It is, however, best practice to inform commercial borrowers
Brokerage fees
Generally, these are standard in commercial mortgage transactions. A discussion of the expected amount
fees will impact the amount of financing and the complexity of the transaction, so if the borrower is not prep
are usually due once the borrower accepts the loan commitment from a lender.
Good faith deposits
Occasionally, brokerages require the borrower to submit a ___ in a trust account to be held by the brokera
Exclusivity agreements
Commercial mtg brokerages may require borrowers to sign this. This intends to prevent borrower loan "sho
lenders to find the best financing
Service agreements
- A formal agreement or understanding between the social worker and the client that specifies the goals to
roles and responsibilities of participants, practical arrangements, and other factors. - The brokerage draws
completed before you present a loan application to a lender. They are largely brokerage-specific, and the n
conditions in the service agreement.
Personal guarantees
- Often required for the principals of the borrower company. The paperwork for this is similar to that for a re
credit history, validation of assets supported by bank or investment statements, appraisals of properties ow
capacity to fulfill the ___ - You must obtain signed consent before accessing credit reports and other perso
companies
any type
Consent is a requirement for ___ of mortgage.
Exclusivity agreements
Not required on a residential mortgage and are often present on commercial mortgages
legal and formal
Residential disclosure has ___ components because many residential clients are unfamiliar with the proce
Experienced investors
Typically, commercial borrowers are ___ - often businesses rather than individuals. The type of borrower in
beginning
Brokerages specializing in commercial mortgages may use detailed paper application forms to gather infor
fields for information such as: - The corporation's shareholders and an organizational chart - The officers a
in the property to acquire and develop the property - A detailed outline of how they will use the funds - Esti
businesses owned by the shareholders and borrower - Details of any additional collateral that may support
commercial loan
Some typical documents required for ___ requests include: - Application documents such as the applicatio
as consent forms and disclosure documents. - Property documents including appraisal reports, building co
assessments. - Operating statements, rent rolls, leases, property tax, and utility statements. - Borrower info
financial statements, and current dated and signed net worth statements.
- The business (borrower) and its history in owning and managing commercial real estate - Identity verifica
key management personnel. - Information about the sum and sources of the down payment. - Detailed info
The type and amount of documentation required for commercial mortgages are complex. When you collec
the following:
- Company history and management team - Experience - Operations - Advisors - Joint ventures - Financia
Because the borrower in a commercial transaction is often a business, a significant part of your preliminary
management team. For example, lenders will want information about:
The history of the business and each of its executive officers and shareholders
What is included in the category "company history and management team"
The company's (and management team's) experience in operating income properties. Information about an
What is included in the category "experience"
Information about the company's general operations
What is included in the category "operations"
A list of the company's professional advisors (accountant, auditor, lawyer, banking references, etc.)
What is included in the category "advisors"
Information about any corporate joint ventures or other agreements or activities that may affect corporate d
What is included in the category "joint ventures"
Business plans, cash flow statements, operating statements, projected project budgets, and financial state
What is included in the category "financial"
Information about if and what other security may be required by the lender
What is included in the category "additional security"
Detailed information about the project, such as survey certificates, environmental reports, appraisal reports
What is included in the category "proposed purchase or project"
credit reports, T4s, and personal income statements
- Initial analysis in commercial mortgage includes reviewing the borrower's ___ - They still evaluate the bor
mtg pmts and support the personal guarantee, but this does not include detailed substantiation such as job
presently
Net worth and personal guarantees: This involves providing ___ dated and signed personal net worth state
assets and liabilities. Remember, the personal guarantee may be required to cover 50% or more of the mtg
borrower can provide that security
credit history
It is also possible to get ___ information about a corporation or business. You must go through a registry c
- 3 yrs of financial statements - Property income and operating statements for each property owned by the
The usual kinds of documents a lender may require to substantiate a corporate borrower's income include:
influencing factors
Down payment is an important element in the initial analysis, just as it is in residential mortgage brokerage
(LTV) they are willing to accept, and the type of business (borrower) and type of property to be mortgaged
high-dollar
Commercial mortgages are usually ___ figures, so the amt of DP required is also significant
Repayment terms
If the borrower borrowers money for the down payment (equity), the lender will want details of the ___. You
borrower's DP. Due diligence is important to avoid issues of fraud
priority
As you recall, the subject property in a commercial transaction is the ___ focus for the lender. The same do
commercial transaction to verify resale value. These documents include: Purchase contract (offer to purch
report (if uninsured) - Municipal property assessment notice - Property appraisal report - Building condition
statement or statement of the existing mortgage - Proof of general liability and property insurance - Title in
payment and the source
historical title search
Tip: If the title was recently transferred, it's due diligence to complete a ___ and review the history of owne
corporate transfers or difficult to justify increases in values with each transfer
property
In addition to resale value, both the borrower and lender are interested in verifying the income-generating p
income stream

Documents related to determining the actual or potential from the subject property include: - The building's
Business financial statements for a minimum of three years (if the property is owner-occupied). - Rent roll a
rental property). - Property appraisal report (taking care to review the limiting assumptions within the appra

Property appraisal
- Is generally required to qualify for a commercial mortgage. - If it is recent (i.e. no more than six months ol
to the lender), it might be acceptable. If not, the lender may order a new one to be paid for by the borrower
the appraiser to provide a transmittal letter
estimate
If no property appraisal is available, you may need to ___ the amount of revenue the property generates to
the lender returns a letter of interest based on the preliminary value figures, they may require a formal app
connecting the borrower w/ a suitable lender
If the preliminary discussions and documentation support a general decision to proceed, the next step is __
commercial lenders with the borrower's potential business.
Executive summary
- A ___ outlines why the borrower's mortgage application is suitable and desirable for the lender. If the lend
letter of intent, a discussion paper, or a terms sheet). A letter of interest is not a commitment to lend but rat
underwriting.
present, explain, and have it signed by the borrower
If and when you receive a letter of interest from a lender, you must ___ before the lender will proceed any
to emphasize to the borrower that the letter of interest represents a starting point, not a full commitment to
- The reason for the loan (pur, refi, construction, etc.) - A brief description of the borrower and prop - A mac
Analysis of the net operating income (NOI) and debt service coverage ratio (DSCR) - Analysis of the borro
experience and management capabilities
An executive summary usually includes:
30 days
Note: It can take some time (___ or more) to find a commercial lender who will provide a letter of interest, s
process
communicate between the lender and the borrower and provide and verify additional documentation as req
After the borrower accepts a letter of interest, you will be required to ___
appraisal and sale prices
Commercial property, like residential property, is subject to shifts in the real estate market. The market valu
significantly depending on the economy and the stage of the real estate cycle in a given location or market
Expansion, excessive supply, recession, and recovery
The phases to a real estate cycle IN ORDER are:
Expansion
When the economy in a particular area is on an upswing, showing strong job growth, the real estate marke
for residential space as job-seekers move into an area, and for commercial space as businesses grow
Excessive supply
Overbuild. During this phase, capital is easily accessible and as a result, supply exceeds the demand for s
Recession
As a correction to the previous phase, markets will experience this, during which rents and property values
Recovery
After the previous phase, which is usually much longer than the step before it, there is this phase, During t
increase until the market reaches an equilibrium of supply and demand. Then, once the demand outstrips
costly; time-consuming
Lenders almost always require a property appraisal to qualify for a commercial mortgage. Compared to res
___
few hundred; applicant
- A residential appraisal typically costs a ___ and is usually paid by the ___ - A commercial appraisal, on a
considerable higher depending on the scope of work and property value.
increase
The lender may have certain requirements to be addressed from the appraisal. If the lender requirements c
cost.
approved list
Commercial appraisals should be obtained through a firm or individual on the lender's ___. It is particularly
professional designations and experience with commercial properties.
income
Most often, commercial property appraisals use the ___ approach
Income approach
- Determines the value of a revenue-generating property using the principle of the anticipation of future ben
the mkt value of an income property and is often used in combination with the direct sales comparison app
Direct capitalization, discounted cash flow
The two primary methods of valuation using the income approach include:
Direct capitalization
Divide the stabilized net annual operating income (NOI) by a singular rate, taking into account the investme
Discounted cash flow
Calculate the PV of future cash flows over a specified period, including the potential proceeds of the revers
highest and best use

- Commercial appraisal reports should contain a detailed analysis of the ___ of the subject property - This
and produces the greatest net return - A commercial property's best use is sometimes more apparent than
is the best use for it agricultural or a subdivision - Determining this is integral to the appraisal process. All r

- An adequate description of the prop -A detailed description of the land and building - The land use govern
Current ownership - Recent sales or ownership history - Any limiting assumption or extraordinary condition
basis for the valuation of the asset
An appraisal report should be complete in full, including:
- An adequate depiction of the macro market - A description of the community and growth trends - Demogr
The factors impacting property value are numerous and should initially include:
limiting assumptions
Ultimately, the development of the pro forma and capitalization process should be supported by sound rea
appraisal report includes a "___" section. It outlines how the appraiser qualifies their opinion of value. The
clearly defined.
Return on Investment (ROI)
- A performance measure or measure of benefit related to the question "how much money will I earn on the
favorable
Income-generating and invstment properties must have a ___ ROI to interest buyers and invsetors. Adition
mtg pmts on the property
- The pmt of rent from prop tenants - Appreciation over the term of the investment - For leveraged assets, t
For example, the pp of an apartment building or an office prop is essentially a lump-sum investment. The R
rent
Rental property tenants pay ___ to a property owner, whether the subject property is an apartment building
retail stores. - This becomes the property owner's gross income or revenue and ROI - If the property owne
(same) for the space. The owner's ROI is the savings generated from not rending space elsewhere to cond
potential rental revenue
If the commercial real estate rental market were such that the owner could rent space elsewhere for less, t
property to another tenant.
Net operating income (NOI)
- The ___ of the asset forms the basis for an investment decision and for determining the estimate of value
The gross income generated by a property after deducting vacancy allowance and operating expenses
Net operating income (NOI)
Gross income
The total income generated by a property
The overall rent paid by the tenants for occupation of the suite
In the context of rental properties, gross income can be defined as
net
For commercial property, the gross revenue collected is dependent on the particular lease. Often, commer
rent, the tenant pays a proportionate share of operating costs.
gross
Conversely, a commercial tenant can simply pay rent on a ___ basis, which is more typical of lower-grade
1. Calculate the stabilized NOI 2. Calculate the capitalization rate
To determine commercial property value using the income approach:
1. Determining the potential gross annual income from all sources 2. Deducting an allowance for vacancy a
Determining the annual, stabilized NOI for the property involves:
Potential gross annual income
A revenue estimate accounting for all sources of revenue from the property. It assumes 100% occupancy f
Parking rentals, laundry facilities, or other income-generating areas associated with the subject property
Other income factored into the estimate of potential gross annual income includes:
Operating expenses
To determine NOI, determine which expenses are ___. Only ___ (same) payable by the landlord are includ
Operating expenses
The following list is examples of what?: - Property taxes - Fuel - Utilities (electrical, heat, and water) - Main
Operating expenses
The following list is examples of what?: - Property taxes - Fuel - Utilities (electrical, heat, and water) - Main
contributions - Management fees or salaries of on-site personnel - Property insurance - Misc expenses
Property taxes
- Usually the single largest operating expense - Actual expense based on municipal tax and assessment c
of year), this estimate may be adjusted for an inflationary increment
Fuel
- The cost of oil, gas, electricity or coal to operate the heating system - Estimated from three years of previ
Utilities (electrical, heat, and water)
- Sometimes the landlord pays all of this.; in other buildings, tenants are responsible for their share. Many
- Landlord's portion typically includes ___ for common areas, swimming pools, exterior lighting, laundry eq
years of previous statements - Based on actual statements, may represent an average or require an inflati
Maintenance and repair
- Maintenance includes cyclical items such as interior or exterior painting, decorating, cleaning, inspections
structural systems such as ventilation, heating, air conditioning systems, etc. - Can be estimated from serv
Reserve and replacement contributions
- Contributions into a reserve fund for rel=placement or major repairs are allocated as an expense - An allo
estimate
Management fees or salaries of on-site personnel
- Fees for management services such as rent collection, building operations, etc. - Owners who perform so
allocated as an expense - Also includes salaries, benefits, unemployment insurance, etc., not associated w
contracts and provincial employment standards
Property insurance
- Includes the cost of replacement due to fire loss, repaid or rent lost due to vandalism, sewage back-up, o
Estimated from insurance quotes or actual past insurance fees
Misc expenses
- Includes minor operational expenses such as supplies, advertising, licensing and permits, cleaning fees,
for the distribution of ___ between landlord and tenants
- Personal property (such as lawnmowers, tools, etc.)(unless such equipment is required to maintain the pr
Brokerage fees
Operating expenses typically do NOT include:
Deduction allowances
- A percentage of gross income, which may or may not reflect the number of vacant suites and occupancy
on market trends on balance with current or historical occupancy of the asset. These allowances are subtr
expenses
Potential gross income + other income - Vacancies and bad debts = Vacancies and bad debts - Operating
How to calculate NOI on calc
$138,750 Calculated on calculator: Potential gross income ($300,000) + Other income ($50,000 parking +
($363,750) - Operating expenses landlord ($225,000) = $138,750
- You have an applicant, Jorge, who is seeking to purchase the Lantern Building, a commercial building wi
units (residential units and retail storefronts) were completely rented, the rental income would total $300,00
another $50,000/year, with another $25,000/year from laundry machines. Jorge has calculated operating e
has had a residential vacancy rate of 3% for the past five years. This is in keeping with residential rental su
unpaid rents to date. - What is the NOI?
Vacant building
A ___ has no NOI - no tenants means no income stream. However, a v___ still has income-generating pot
market rates and occupancy levels of properties in the area is known as stabilizing the NOI.
market rent
Properties in similar locations with similar features and assets are the best estimators of ___
$138,750 On the calculator: Potential gross income (4 units x ($5,000 x 12) = $240,000) - Vacancy and ba
income ($228,000) - Operating expenses ($89,250) = NOI ($138,750)

Big Z is a strip mall with four retail storefront units. It recently underwent renovations to update the design a
for similar units is $5,000/month inclusive of all operating expenses. Occupancy rates for similar strip malls
average vacancy rate of 5%. Operating Expenses for operating the property which is to be paid by the Lan

capitalization rate
- Estimating overall property value by capitalizing the net income involves determining a ___ To - find this,
value
(I / R) = V I being NOI R being capitalization rate V being property value
IRV formula
Income / rate
Formula for property value
Value x rate
Formula for Income (NOI)
Income / Value
Formula for capitalization rate
Analyzing the sale data of similar properties
___ is the best method of determining an appropriate capitalization rate for your subject property
V=$1,500,000; LTV=75% Calculation NOI ($150,000) / Capitalization rate (R)(0.07) = Property value ($1,5
ratio (0.75 = 75%)
- You are arranging a commercial mortgage request for $1,125,000 for another client, Shapez Gym. The le
calculated the annual NOI to be $105,000, and the capitalization rate is 7%. - Next, estimate the property v
Calculate property estimated value (V) and LTV
Discounted cash flow (DCF)
- A valuation method used to estimate the value of an investment based on its expected future cash flows.
today, based on projections of how much money it will generate - Often used in the valuation of any large i
Reversionary value
Projected sale price of a property at the end of its holding period, i.e., the time from purchase to sale or tim
Determine the capitalization of the estimated NOI at the end of the holding period
To calculate the reversionary value, ___
Time value of money
- The concept that "a sum of money is worth more now than the same sum will be at a future date due to it
value
The present value of all the payments they will need to make over the term of their mortgage
When someone takes out a mortgage to buy an investment property, the time value of money equation is _
FV = PV x (1 + (i / n))^(nxt) FV = the future value of the money PV = the present value of money i = the inte
number of years
Formula for FV (time value of money)
Today
The discounted, or present value, is the value of the loan ___
Sinking fund
- A financial document that provides the basis for funding major repairs and replacement of the common el
reserve fund study, usually required by the condo association governing the project. An appraisal company
income and cash flow analysis
If the property valuation sufficiently meets the lender's criteria, the next step in approval is an ___. The lend
income or has sufficient cash flow or income to service the proposed mortgage debt.
Owner-occupied
- If a property is ___, analyze the financial statements of the business and projections for operations to ver
and the ability to make its mortgage payments.
Rental or investment
If the property is a ___ property, calculate the debt service coverage ratio (DSCR). You do not have to calc
understand how it works.
Debt service coverage ratio (DSCR)
Compares a property's annual net operating income to the annual mortgage payments, and the resulting v
cover the mortgage payments.
Net operating income / total debt service
Formula for DSCR
1.26 Calculation NOI ($950,000) / Total debt service (TDR)($750,000) = DSCR (1.26)
If NOI is $950,000 and the total debt service (annual principal and interest payments is $750,000, what is t
income or cash flor
The DSCR value reflects the ___ of the property
The property does not generate sufficient income or cash flow to support the loan payments
What does a DSCR <1.0 mean
The property only generates enough income or cash flow to meet the mortgage payments: most lenders w
What does a DSCR = 1.0 mean
The cash flow or income from the property covers the mtg pmts by 1.x. Commercial lenders vary in terms o
acceptable DSCR
What does a DSCR >1.0 mean
10 days to 3 weeks
The 48-hour "cooling-off" period applicable to residential mortgage agreements (noted in s.64(2) of the Co
brokerage. Commercial applicants must sign and accept the commitment letter within ___, depending on th
lawyer
After all conditions of the mortgage commitment are fulfilled, the lender will send mortgage instructions to t
for conducting the final steps in closing the transaction.
The applicant
Who pays for the lender's lawyer and their lawyer for commercial deals
closing
Closing costs, property tax adjustments, insurance, etc., are paid at ___ as expected in a residential transa
for key mandatory insurance.
closed
It is important to maintain contact with the applicant until the file is ___. Remember, the transaction is not _
compliance process is complete, and you have received your compensation
longer; 2 months
Commercial transactions take far ___ to close with a solicitor than residential transactions. Ensure you allo
commercial transaction to take ___ (different) at the legal stage.
the brokerage
Once all mtg instructions have been carried out, and the funds are advanced, the lawyer will send a chequ
RECA, the CRA, and federal and provincial privacy legislation
Your record keeping must be in compliance with the requirements from ___
unsolicited
Before sending any ___ email messages to former, current, or prospective clients, ensure you are complia
(CASL).
Mortgage fraud
The deliberate falsification or misrepresentation of information in part or in whole during the process of app
Mortgage fraud
The deliberate misrepresentation of information to obtain mortgage financing that would not have been gra
accurate and truthful
Borrowers have a responsibility to provide ___ information on a mortgage application. Providing false or in
part of fraud.
- Several transactions involving the same party or those undertaken by groups who may have links to one
unknown address or merely a correspondence address - Transactions which begin in one individual's nam
strongly interested in a quick transaction, in absence of a logical or valid reason
Mortgage fraud involves one or more common elements:
- Fraud for shelter - Fraud for profit - Fraud for money laundering - Fraud for title - Fraud for foreclosure
What are the categories of mortgage fraud
Fraud for shelter
- To apply for a loan application using false information. - The most common occurrence of fraud in the ind
Service Ratio (GDSR) and Total Debt Service Ratio (TDSR), employment and other income are among the
Employment and other income
(In fraud for shelter): If an applicant is outside the normal range of Gross Debt Service Ratio (GDSR) and T
common areas to misrepresent their status. The fraudster misrepresents their income or their level of debt
loan.
Fraud for profit
- The act of overvaluing property and obtaining financing for the inflated amount - Here, fraudulent buyers
neighborhood and obtain more financing than the property is worth. Later, they default on the loan, leaving
loaned out - This type of fraud is normally done with industry insiders and motivated by financial gain
Fraud for profit
Professionals possibly involved in this type of fraud include: - Real estate appraiser - Mtg broker - Lawyer -
investor - A seller or a "straw buyer"
Straw buyer

- A person who makes a purchase on behalf of another person. This in itself is not illegal. They may, for a p
a home. The real buyer then promises to make all payments and pay the straw buyer for the use of their id
unknowingly, accept the use of false personal or financial information, use inaccurate appraisals, or transfe
- These people are held legally responsible for the debt they take on for others. This person takes the risk

Fraud for money laundering

- A type of fraud for profit in which illegally obtained money is fraudulently transferred into "clean," legitimat
illegally obtained money is fraudulently transferred into "clean," legitimate funds. - Often use straw buyers
anonymity, uses another person's good credit, job security, income and complicates any efforts to seize as
Fraud for title

- Occurs when someone uses stolen identity, fake documents, and identification to change the title on a pr
to take out a mortgage on the victim's home. The institution lends money to the criminals under the victim's
change the home's title, they could leave the victim with mortgage debt. - Fraudsters could also take the ho

Foreclosure fraud

- Generally targets vulnerable, low-income individuals whose homes are in foreclosure or at risk of defaulti
approaches the legitimate owner of the house to propose a debt-consolidation scheme. 2. The owner pays
unwittingly) to the criminal. 3. The legitimate owner receives a cash payout from the fraudster to address im
"consolidated debt payments" to the criminal. 4. The criminal pockets all payments from the owner and ign
against the owner. 5. The criminal may remortgage or sell the property to an accomplice, leaving the owne

- Legal fees - Property restoration expenses - Property taxes - Utilities - Insurance

Other financial costs attributed to fraudulent activities include:
Indirect cost
An ___ of mortgage fraud is the potential decrease in a neighbourhood's marketability and property values
financial harm inflicted on the many individual victims of mortgage fraud.
real estate
Mortgage fraud has become increasingly sophisticated through the use of technology. Fraudsters can elec
price, and falsify identity documents.
monetary
Criminal activity adversely affects various individuals, industries, and society as a whole. Mortgage fraud is
___ damages as well as emotional, psychological, and social harm.
Mortgage fraud
___ impacts our public services, communities, individuals, businesses, and professions. It places stress on
care, resulting in higher taxes and strains on services.
legal system; safety services
- Mortgage fraud also places greater demands on our ___, involving regulators, investigators, police, cours
___, such as mold detection, air quality assessment, property remediation, and the public health care syste
pver-pay
Buyers may significantly ___ for a property, facing a financial loss when they sell. They may default due to
have purchased property legitimately can be impacted, such as losing property value from derelict properti
legal costs
Identity theft results in significant financial implications. There may be ___ of restoring their identity, credit,
losses creates a further financial and emotional drain.
physical
Even ___ consequences may result from mortgage fraud. Buyers can come to harm if they unknowingly pu
laboratories. This may expose them and their families to various environmental problems (e.g. toxic chemi
issues, electrical issues).
Emotional and psychological harm
- The invisible cost of mortgage fraud is the ___ done to victims. Individuals may suffer emotional or psych
hardship of being a victim of mortgage fraud. - Criminal fraudsters target the most vulnerable individuals to
illegal activities still makes them culpable. Participants may be vulnerable due to addictions, poverty, and in
out recent immigrants to Canada to assist with mortgage fraud and property purchase schemes.
99lenders and mortgage insurers
- Obvious financial victims of mortgage fraud schemes are ___ who insure the lenders against mortgage d
by consumers for residential, high-ratio mortgages increase due to the impact of mortgage fraud on these
high-ratio mortgages
___ have high loan ratios - usually, the loan value exceeds 80% of the property's value. The closer the loa
poses to a lender
fraud-for-profit
Criminal groups across Canada are involved in mortgage ___ schemes. They acquire properties for money
drug operations, etc.). They may generate illegal profits by manipulating the value or ownership of properti
specialized skills
Some criminal groups commit a limited number of mortgage frauds using relatively simple schemes. Some
operations involve numerous properties in a series of complex transactions. Fraudsters seek out individual
sophisticated fraudulent activity. Individuals in the real estate, mortgage brokerage, real estate appraisal in
their fraud. Whether they knowingly or unknowingly participate in fraud, their collusion makes them culpabl
mortgage fraud; industry members
Consequences of ___ for ___. These consequences will be proportionate to the offence and may range fro
consumer information and abilities to perform tasks related to the transaction. - Increased supervision by th
brokerage. - Lenders may refuse to accept applications from the associate. - Monetary fines. - Remedial e
Criminal charges.
RECA judgment
Example of ___: Calgary, Alberta—As of the date noted, the Administrator of the Real Estate Council of Al
suspended, the licence of an individual mortgage associate for: -Acting dishonestly - Making intentional, m
activities - Engaging in conduct that undermined public confidence in the industry, harmed the integrity of t

criminal offence
Apart from possible sanctions, the industry member could be charged with a ___. The Criminal Code of Ca
regulations of illegal and unlawful conduct in Canadian law.
fraudulent activity
In this instance, any fraudulent activity carried out when trading in real estate, dealing on mortgages, or pe
affect Canada's economic and financial landscape would be an indictable offence
Criminal Code
Mortgage fraudsters may be charged under several sections of the ___, including sections not mentioned,
against the individual.
False documentation
It is fraudulent to alter mortgage applications and supporting documentation to enhance the borrower's abi
applicants may alter documents to enhance income or withhold the amount of indebtedness. They may no
recent bankruptcy or other actions for debt against the borrower.
- Proof of earned income (T4s) - NOAs - RRSP statements - Bank statements - PS - LOE
Some of the more frequently altered or falsified documents include
False statements
Any ___ causing a lender to make a decision that would have not otherwise occurred is mortgage fraud. T
employee records
Non-occupancy fraud
- The availability of insured, high-ratio, financing for the purchase of residential property is typically restricte
requires written assurance that the potential borrower will reside in the property. However, a borrower may
truly intend to purpose it as a rental property. - Example: The borrower seeks an insured, high-ratio mortga
borrower declares that they will occupy the property. However, the borrower's true intention is to assume it
purpose, they would not have qualified the borrower for the same high-ratio mortgage. This is mortgage fra
Name manipulation
People with poor credit information may alter their name when applying for a mortgage to create a new cre
and middle names. For example, Margaret Ann Johnston may become Ann Johnston or Maggie A. Johnst
Identity theft
Sophisticated fraudsters can create fake identification and documents, or doctor existing ones. These may
statements - Investment portfolios They may also obtain enough personal information and forged documen
Assumable mortgage
- A type of financing arrangement whereby an outstanding mortgage and its terms are transferred from the
remaining debt, the buyer can avoid obtaining their own mortgage. - Occurs in both buying and selling a pr
Buyers; existing; mortgagor
When fraudsters are ___ in mortgage assumption fraud: - The criminals target properties with ___ (differen
to bypass the scrutiny of the traditional mortgage application process. The fraudster may have no intention
mortgage has been assumed. However, the fraudster may purpose it for their intended operations before t
being assumed has high-ratio default insurance, the ___ will be personally responsible for any deficiencies
interest to have their personal covenant released by way of the purchaser qualifying to assume the mortga
Sellers; inflated; unsuspecting; resell

When fraudsters are ___ in mortgage assumption fraud: - They attempt to trick others into assuming ___ (d
supplied by straw buyers, a false appraisal, or an inflated purchase price to fraudulently misrepresent the t
mortgages to be assumed by an ___ (different) buyer. Typically, buyers with poor credit are drawn to prope
otherwise qualify with a lender. - The buyer only realizes the fraud when they attempt to ___ (different the
assumed. The buyer is responsible for the outstanding balance on the mortgage, which is worth more than

mortgage fraud
To reduce the potential for ___: - Sellers can require the potential buyer to qualify for the specific terms of t
sale clause in the mortgage documentation that allows the bank to recall a mortgage even if the seller offe
time up to the completion date of the sale.
Private mortgage financing fraud
- The financing is raised by individual investors. As part of their investment, these investors are promised h
involve developing new real estate projects or refurbishing older projects acquired at attractive prices. The
fraudsters claim the ability to acquire, construct, and sell real estate developments at a substantial profit. -
possible because the managers claim to have a remarkable ability to acquire properties at prices substanti
Bankruptcy fraud
- Targets revenue-generating properties - First, the fraudster acquires the titles of multiple revenue-genera
mortgage assumption, seller financing, or new financing through straw buyers. - Next, the fraudster intentio
eventually go into foreclosure. As they are revenue-generating properties, the fraudster has collected lucra
for bankruptcy to delay foreclosure proceedings due to non-payment. In the meantime, the fraudster contin
properties.
US
Although debt consolidation or foreclosure schemes are more common in the ___, they still occur in Canad
Debt consolidation
- When several loans are replaced with a single, consolidated loan with a lower interest rate and possible a
Debt consolidation and foreclosure fraud
- The fraudster claims to provide interim financing assistance to help cash-strapped owners avoid foreclosu
claim they will only be holding the title temporarily to protect the property from being seized in a foreclosure
repaid. However, the victim is unaware that the perpetrator will never return ownership of the property to th
fraudster may refinance or even sell the property. - The victims lose the title to their property and their likely
evicted from the property.
Title fraud
- Involves the fraudulent transfer of a property title from a legitimate owner to another party. Higher value p
preferred target for title theft. This may also occur when property owners have rented their property to a fra
identity to place a large mortgage on the property or sell the property. - The fraudster receives the mortgag
previously clear title property. The fraudster may then sell the property to another individual. - In this case,
with the original owner.
Equity access fraud
- Fraudulently facilitating a property owner to mortgage the equity in their property. The owner seeks to acc
collateral. The owner's purpose for the funds may vary, such as home renovations, medical expenses, or t
accumulated significant equity in their property, such as seniors. Elderly consumers may be a preferred tar
financing options or the prevalence of fraud in the mortgage market. - The fraudster encourages the owner
transaction with minimal paperwork and no property appraisal. However, they misrepresent the mortgage t
payments to be unmanageable for the owner. The owner is likely to default on the mortgage and lose the p

Re-development scheme

- Involves converting an apartment building into condominium units or upgrading an older condo complex t
to purchase, the fraudster secures an inflated appraisal on the initial condo unit. To secure a high-ratio mo
remaining units in the building's value are inflated while often remaining unrenovated. Their sale price for u

Silent second mortgage fraud

- An undisclosed additional loan or mortgage fraudulently used as a down payment for a primary mortgage
and constitutes mortgage fraud. - In this scenario, the buyer is approved for the mortgage but doesn't have
a loan, or another form of debt and present it as their own funds. This act is fraudulent, as the buyers must
savings, inheritance, sale of existing property, a gift from a family member, etc. - The person(s) lending the
on the title. Typically, the silent second mortgages are registered long after the first mortgage has closed s
standard practice to pull the title on the property after the mortgage is funded, leaving the lender unaware t
systems to notify lenders regarding any other mortgages on title, in some cases, the secret second mortga
these cases, the lenders have no recourse for identifying the source of this fraud.
Air loan fraud

- A fraudulent loan advanced on a property that does not exist. It is a sophisticated scheme with considera
may require: False property documents, the fraudulent presence of the property in a listing database, false
more complex scheme, it may also include members of the real estate, mortgage brokerage, appraisal, an

Inflated appraisal fraud

- Involves the fraudulent inflation of the property's value, size, or degree of upgrading for the borrower to ob
one or an automated electronic one - Leads to the mortgage company over mortgaging the property they t
Automated appraisal systems
- Electronically generated property appraisals that rely on an extensive database of property information an
property and area - They ensure that a property's value aligns with comparable properties in a community.
provided reflect legitimate information - May appear easier to manipulate because there is no physical insp
by an accredited appraiser are not exempt from fraud
Vendor cash-back fraud
- Occurs when fraudsters write an inflated purchase contract on a property and later amend it to a lower pr
parties. - However, the fraudsters do not forward the amended price to the lender, allowing the lender to ad
value ratio than the lender would have approved per the accurate sale price of the property. - Example: Th
neighbourhood. The purchase contract reflects the average price level for that neighbourhood. The price o
reflect a more realistic value for the property due to its need for extensive renovations. However, the partie
price, and they fund the property over its true market value. This is fraud.
Kiting
The fraudulent use of a financial instrument to obtain additional credit that is not authorized
Contract kiting
- The use of fraudulent contracts to obtain a higher loan-to-value ratio. It requires writing two or more purch
Only one purchase contract is valid and reflects the agreed-upon price between buyer and seller. The othe
price for the property. - The fraudsters provide the illegitimate purchase contract to the lender as the true c
results in a higher loan-to-value ratio for the property than the lender would have approved if they had the
Straw buyer
The scheme: 1. The ___ is approved for a mtg and assumes the title 2. The fraudster quickly assumes the
to an unsuspecting buyer, usually with a small dp 4. The ___ (same) may receive their cut, but they remain
Straw buyers
___ may face many consequences for participating in mtg fraud. They may be responsible for: - A mortgag
fraudulently. - Legal fees related to the cost of the claim. - Any interest owing after the mortgage payments
the property and any damage to the property. - Mortgage default and foreclosure of the property.
landlord
A straw buyer who takes title to a rental property will become the ___ under Alberta's Residential Tenancie
responsibilities of a landlord under this Act, including returning the security deposit when tenant leaves
Property flip fraud

- Refers to two or more transactions on a property in a short period, with the subsequent sale(s) occurring
This practice is not illegal. - However, it is illegal to use___ to inflate the sale price of a property artificially.
quick, successive property sales, the sale price is inflated each flip to increase the property value. The frau
through successive sales between their associates. - This complex scheme requires the cooperation of ma
brokerage, and real estate appraisal industry members. - Industry members should recognize if they are ap
has a buyer, that this transaction may be part of of mortgage fraud intending to increase the price of the pr

Property flips
___ related to mortgage fraud may involve the following: - Fraudulent appraisals - Straw buyers - False loa
buyers or industry professionals
- Use a thank you (thank and ask referral source how they heard of you, what kind of business they do, wh
meeting for a day or two until you can find out more about the source of the referral and the applicant) - Try
company's correct ph. #) - Chk licensing or trade organizations
If the referral is unknown to you, there are a number of ways to gather more information before a meeting:
Referral sources
Red flags for ___: - Someone who seeks you out with high-value clients needing a quick transaction. Is it r
Someone not willing to provide information on their relationship with the borrower - A borrower who doesn'
for that referral source
Liability
When you refer business to another party (such as a lawyer), you are endorsing that the person will provid
___ for any dissatisfaction that your client may have with the referred service. Therefore, when you make a
positive experience of that party's qualifications, personal ethics, and professionalism.
non-verbal
Some ___ red flags can include behaviors such as: - Evasiveness in providing answers - Nervous laughter
reasonable question - Shifting in their seat or signs of discomfort when asked a question - Scriptied or reci
Original documents
What item should you check for these details?: No photocopies. Check for alterations or irregularities
Photo ID
What item should you check for these details?: Does the picture match the appearance of the applicant?
Full legal name
What item should you check for these details?: First, middle (if applicable), and last names. If the borrower
important when doing credit investigations
Birth date
What item should you check for these details?: Is it the same on all documents? Does the person look to b
Signatures
What item should you check for these details?: Do the signatures match on the ID, purchase contract, and
time as the application is signed so that you can accurately compare signatures
Name and address
What item should you check for these details?: Name and address should be the same as the gov't ID for e
of the applicant's residence. Also, investigate further if the address is a post office or PO Box number
Expiry dates
What item should you check for these details?: If a document is expired, find out why. All documents must
Blank or void cheque
What item should you check for these details?: Verify that the bank and bank branch exist
Cross-check phone numbers
What item should you check for these details?: Find the applicant's name, address, and phone number in a
sure it belongs to the applicant
- Notifying your broker - Putting the file on hold until the situation can be resolved - Documenting all interac
Red flags warrant further investigation by:
- Original doc on company letterhead - Position title, length, type of employment - Hourly rate and guarante
as well as their position title and contact info (employer info) - Signed and dated by the appropriate authori
A letter of employment must meet the following criteria:
Bank statements
- Another document used to verify orderly deposits of employment income. They must include the appropri
Bank statements
Red flags for this document: - An applicant reports a high income, but it is not reflected in their account - B
transactions or does not show interest payments or service charges
T4 slips, NOA
What are the tax documents
T4 slips
- Reflects total taxable income earned and deductions. These are issued by employers and processed by t
proof-of-income documents for traditional employment situations because they show a summary of how m
as the amount of income tax that was deducted. - Employment income represented on this includes salary
taxable allowances, and the value of taxable benefits and payment in lieu of notice. Lenders typically ask f
Notice of Assessment (NOA)
- The form that the CRA sends to all taxpayers after processing their income tax returns - It is a good proof
income
NOA
This document indicates the following: - Total income - Deductions form total income - Net income - Taxab
T-451 and T-452
What are the two different NOA forms
T-451
TERM
 IMAGE
A type of NOA form. Issued with direct deposit, nil valance, or taxes owing
DEFINITION
T-452
TERM
IMAGE
A type of NOA form. Issued only when the taxpayer receives a refund from the CRA
DEFINITION
full
TERM
IMAGE
If the NOA indicates the applicant owes tax payments to the CRA, it's important to let the applicant know th
overdue taxes are paid in ___
DEFINITION
Tax documents (T4s and NOAs)
TERM
IMAGE
Red flags with these:
- Mismatched fonts, misaligned columns, and mathematical errors
- Areas on the documents where information appears altered
DEFINITION
lenders
TERM
IMAGE
As discussed earlier in this course, ___ want verification that:
- The applicant appears to have the money on deposit.
- There is a clear audit trail to the source of the money.
- The down payment is from the applicant's own resources, not just temporarily in the account or being shu
DEFINITION
Down payments
TERM
IMAGE
Red flags ___:
- A letter from a financial institution stating that the applicant has a particular amount of money on deposit i
indicate the source of the funds. Ask for original account statements so that you can verify the orderly accu
- If the documents provided show that the account is newly opened, ask to see documentation from previo
- Compare savings account balances with the applicant's income. Make sure that the balance is realistic a
- Compare statements, and printouts to other documents such as blank cheques to verify that the account
- If the applicant provides a blank or void cheque, cross-reference the bank branch number to verify that th
DEFINITION
Down payments
TERM
IMAGE
Possible alterations or irregularities in this:
- Misaligned numbers in columns
- Inconsistencies in sequence of the dates
- Incorrect totals
- Discoloration of font
- Different font sizes and styles
DEFINITION
Gifts
TERM
IMAGE
Red flags for ___ as down payment. Since ___ (same) from family are not arm's-length transactions, you m
the following:
- Ensure that gift letters include all the necessary information.
- Verify the details of the donor's contact information and ID through phone listings or other sources.
- Make a copy of the gift cheque, if applicable.
- Make a copy of the proof of deposit to the applicant's account or of proof that the money was given direct
- If necessary, track the transfer of the gifted money from the donor into the applicant's bank account.
DEFINITION
multiple sources
TERM
IMAGE
Red flags for ___ of down payment. A down payment with more than one source must:
- Include an explanation to the lender
- Include verification that the total is equal to the down payment and includes sufficient funds to cover closi
- Include a copy of the cancelled cheque as supporting documentation for the down payment
DEFINITION
sale of assets
TERM
IMAGE
Red flags for ___ as down payment. You should review the following in this situation:
- Ensure that the applicant's name and address are identical on all documentation.
- If the down payment is from the sale of chattels, investigate the entire application thoroughly. Chattel sale
because it can be difficult to trace the sales back to the source and difficult to confirm the true value and ow
- On statements for RRSPs, stocks, or bonds, check for formatting alterations such as the following:
-- Round dollar amounts. Balances seldom calculate to round dollar amounts.
-- Misplaced dollar signs, commas, etc.
-- Misaligned data in columns. Computer-generated and printed statements seldom misalign data.
-- Incorrect balances and other calculation mistakes.
-- Date sequencing. Out-of-sequence dates are a strong indication of a forged or altered document.
DEFINITION
borrowing against assets
TERM
IMAGE
Red flags for down payment from ___. You should take note of the following in this situation:
- Investigate any recent, large deposits. Large deposits (e.g., inheritance monies) may be perfectly legitima
- Check large deposits to see if they coincide with credit inquiries on the credit report. If they do, it could me
may actually be from credit, which would affect their debt ratios.
DEFINITION
Rent equity
TERM
IMAGE
Red flags for ___ as down payment. Things to look for in this situation:
- Does the address on the purchase contract match the address on the applicant's driver's licence or other
reside at the property. If not, how can it be rent-to-own?
- When is the lease agreement dated? If the agreement dates back one year, does the accumulated amou
- Do the applicant's bank statements over a period of time show regular withdrawal of an amount of rent th
- Does the lease agreement include the purchase price, lease term, rent amount, and the portion going tow
- Does the seller acknowledge receipt of the down payment in advance?
DEFINITION
Property
TERM
IMAGE
The lender's security against the risk of default on a mortgage loan. They consider if the ___ (same) is wor
if there are legal impediments to the purchase or resale.
DEFINITION
- The property exists in the location reported to the lender
- The property is legally owned by the person(s) identified to the lender as the owner(s)
- The property is in the state or condition reported to the lender
- The property has appropriate current and future value
- The property is not affected by invisible or unreported conditions that may decrease its value or ability to
TERM
IMAGE
For every mtg transaction, lenders want to see documents that prove or verify the following:
DEFINITION
Purchase contracts
TERM
IMAGE
Red flags for ___. For every one, perform the following checks:
1. Does the purchase contract indicate who is holding the deposit
2. Are all amendments, schedules, and addenda accounted for and attached to the purchase contract?
3. Review and cross-reference dates on the purchase contract and the mortgage application
4. Are there conditions on the purchase contract regarding existing tenants?
5. Are the agent and witness the same on the offer to purchase?
DEFINITION
listing real estate office or lawyer
TERM
IMAGE
Who should be holding the deposit in regards to a purchase contract
DEFINITION
MLS listing sheets
TERM
IMAGE
Red flags for ___. Be sure to look for these details on this for the property:
- Are the real estate professional's name, brokerage, contact information, contract date, and expiry date dis
- If an ___ (same) has been provided, is the property listed on the MLS website? If this has been provided,
does not, it may indicate that it is forged
- Is it a private sale? If this is provided in a private sale situation, it should appear on the website as well. If
misrepresented as an MLS sale
DEFINITION
title documents
TERM
IMAGE
Red flags for ___. When checking these, look for the following details:
- Are there any encumbrances? If so, do the dates and amts of encumbrances make sense?
- Is the seller's name(s) on it? If not, they do not have the right to be selling the property. Further, ensure e
- Is there a spouse named on it? If there has been an estrangement, dower rights may affect the ability of t
DEFINITION
Refinance
TERM
IMAGE
- In this type of transaction, the applicant may be in the middle of their current mortgage term and want to e
off their mortgage and, for various reasons, want to ___.
- In these cases, lenders want documentation about existing mortgage details such as the outstanding bala
statements, and mortgage discharge documents (for mortgages that have been paid off in full).
DEFINITION
Property verification documents
TERM
IMAGE
Red flags for ___. In mortgage fraud schemes, property details are often altered and ownership misreprese
property as a down payment on another. During the process of property qualification, perform the following
- If you have any concerns about the validity of the property documentation, verify the listing history directly
- Is the property documentation clear, legible, and complete with all relevant information and signatures?
- Does the information match across documents (for example, property address and names)? Do signature
- Is the sale price reasonable for the area and the market?
- Is the sale a private sale?
- Is the lawyer or real estate professional acting for both parties?
- Is a numbered company involved? Or does the purchase contract designate a nominee?
- Are there any non-conforming or illegal suites in the property?
- If the buyer and seller have similar names, is a family member being used as a straw buyer?
DEFINITION
1. Retain all documentation
2. Write down everything about the transaction that has not already been documented
3. Refer the case to the broker, and follow the brokerage's internal reporting procedures
4. Report the case to the Real Estate Council of Alberta (RECA)
5. Report the case to the police
TERM
IMAGE
If you suspect mortgage fraud, it is your duty to make a report. You must (in order):
DEFINITION
any time
TERM
IMAGE
Remember, you can terminate the relationship at ___
DEFINITION
RECA
TERM
IMAGE
- Plays a significant role in investigating fraudulent transactions involving industry members.
- One of their primary purposes is to protect against, investigate, detect, and suppress mortgage fraud in it
- Only has jurisdiction over industry members. Other individuals involved in mortgage fraud are not under t
___ will make a report to the Law Society of Alberta.
DEFINITION
Industry members
TERM
IMAGE
Who does RECA have jurisdiction over?
DEFINITION
s.41 and s.42
TERM
IMAGE
The Real Estate Act Rules address the RECA standards of practice for industry members. The specific con
expected conduct when dealing with consumers and Council.
DEFINITION
- Act honestly
- Provide competent service.
- Fulfill their fiduciary obligations to their clients.
- Avoid and disclose any conflicts of interest to their clients.
- Cooperate with the Council.
- Comply with all real estate legislation.
TERM
IMAGE
Industry members are expected to:
DEFINITION
- Participate in the creation of a document or other form of communication that is false or misleading.
- Participate in the creation of a contract that does not reflect the agreements in place between the parties.
- Knowingly or recklessly misrepresent the potential market value and revenue potential of properties.
- Fail to act honestly and with integrity when dealing with non-clients.
- Participate in fraudulent and unlawful activities in connection with a real estate or mortgage transaction.
TERM
 IMAGE
An industry member must not:
DEFINITION
Guidelines for Mortgage Broker and Associate Originated Applications
TERM
IMAGE
In the absence of instruction from the lender, the ___ serves as the minimum standards of care and due di
of mortgage loan applications
DEFINITION
writing
TERM
IMAGE
- RECA and the Alberta Mortgage Brokers Association (AMBA) developed these guidelines based on an e
Canada (MPC).
- All mortgage brokerage industry members should comply with these guidelines unless advised in ___ by
a later stage in the underwriting process or waived by the lender altogether.
DEFINITION
contractual agreements between the parties and the laws of the applicable jurisdictions
TERM
IMAGE
The guidelines are not meant to define the legal responsibilities of the parties in a mortgage transaction. Le
DEFINITION
cooperate
TERM
IMAGE
Industry members are required to ___ with RECA investigations. The courts have held that those who beco
investigation of their conduct
DEFINITION
Cooperation
TERM
IMAGE
- Means providing truthful, complete responses promptly and constructively
- Also means making yourself available to the investigator, returning phone calls, attending interviews, reca
documents or other information that the investigator requests.
DEFINITION
- Ask anyone to answer any relevant questions
- Ask anyone to produce any books, documents, or records relevant to the investigation and make copies o
- Look into matters that are usually private but are directly related to the business being investigated
- Issue a production order to enable a person investigating to acquire the above information.
TERM
IMAGE
Under s.83.2 of the Real Estate Act, investigators appointed by the executive director of the Council may:
DEFINITION
unaltered
TERM
 IMAGE
Sometimes an investigator may request copies of cell phone records or bank statements held jointly with a
items, they must be provided in an ___ form, even though they are held jointly with another person who ma
only for purposes related to the investigation.
DEFINITION
suspension; $25,000
TERM
IMAGE
- As outlined in s.38(4) of the Real Estate Act, failing to cooperate with an investigator is a breach of the law
license and/or a fine of up to ___ (different).
- RECA has historically seen investigations where no evidence of conduct deserving of sanction was prese
significant sanctions.
DEFINITION
mortgage fraud
TERM
IMAGE
As a regulatory body, RECA has an important role to play in interacting with other organizations, agencies,
find and curb ___. This is absolutely essential to protecting the mortgage industry, and to ensure that cons
DEFINITION
Compliance audits (auditors in the blank spot)
TERM
IMAGE
As a standard procedure during the audit process, RECA's ___ meet with the broker and managers of the
brokerages can adapt their policies or practices to institute mortgage fraud detection systems.
DEFINITION
law enforcement
TERM
IMAGE
RECA notifies ___ agencies of cases of mortgage fraud involving industry members. They make copies of
investigations and encourage criminal prosecutions in such cases.
DEFINITION
Bank security
TERM
IMAGE
RECA investigators meet regularly with ___ representatives and law enforcement officials to discuss mortg
DEFINITION
Association of Real Estate License Law Officials (ARELLO)
TERM
IMAGE
RECA participates in the ___ database to share information about licensees with other regulatory jurisdicti
DEFINITION
tip sheet
TERM
IMAGE
In collaboration with Service Alberta, RECA created a consumer ___ on mortgage fraud to educate the pub
fraud schemes. The publication discusses the role of straw buyers, flipping property, the low down on dow
DEFINITION
media releases
TERM
IMAGE
RECA issues ___ when the license of an industry member is suspended or cancelled or when a licensee w
(lifetime suspension).
DEFINITION
Federal and provincial
TERM
IMAGE
As part of cross-Canada initiatives, RECA is entering into cooperative arrangements with ___ agencies to
enforcement and prosecutions.
DEFINITION
Title insurance
TERM
IMAGE
Protects a lender against title fraud - the misrepresentation of who has ownership of the title of the property
DEFINITION
Who ordered the appraisal?
TERM
IMAGE
Things to check with this possible red flag:
- If a party ordered the appraisal to the transaction, it indicates that the transaction process is not occurring
vested interest in or influence the transaction process, which may mean that there is an opportunity to infla
DEFINITION
Purchase price
TERM
IMAGE
Things to check with this possible red flag:
Is the pp substancially higher or lower than the predominant market price in the area? If so, why?
DEFINITION
Steep appreciation
TERM
IMAGE
Things to check with this possible red flag:
Has there been a significant appreciation in value in a short period? If so, why? Is it related to mkt conditio
the comments?
DEFINITION
Excessive depreciated costs
TERM
IMAGE
Things to check with this possible red flag:
Are there excessive depreciated costs for things like basement development, landscaping, garages, and e
credible source? Is the rate of accrued depreciation correct? Are there mathematical errors? Are there app
DEFINITION
Comparable properties
TERM
IMAGE
Things to check with this possible red flag:
Are the comparables used current and do they "bracket" the value of the subject property? Comparables th
the current mkt value and therefore may result in an inaccurate value for the subject
DEFINITION
credit holder
TERM
IMAGE
If a credit holder has added a fraud alert on their credit report, lenders must contact the ___ directly before
provided in the consumer narrative section of a credit report to contact them

This also means that the ___ (same) must notify the credit reporting agency if his or her contact informatio
DEFINITION
reported
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Remember that credit reporting agencies like Equifax and TransUnion do not actively seek the credit data
them. There may be information about your applicants that is either not in (or not yet in) their credit reports
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do not include
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Credit report red flags ___ issues related to the delayed reporting of credit information. They consist of disc
remember that not every piece of inconsistent or incorrect information points to mortgage fraud.

If you find inconsistencies for which no satisfactory explanation is provided, do not submit the application to
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DEFINITION
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Mortgage application process
The process of gathering information and collecting documents to determine the best solution for the borrower's needs
Application process
The basic steps in this are: Step 1: Qualify the buyer and the property (Discovery story) Step 2: Review the market for a suitabl
Qualify the buyer and the property (The discovery story)
What is step 1 in the application process
Review the market for a suitable lender and product
What is step 2 in the application process
Prepare and submit the loan application
What is step 3 in the application process
Close the transaction
What is step 4 in the application process
Timely manner
From the beginning, set the expectation that it is the borrower's responsibility to provide any required documents in a ___. Le
Discovering the story
Stages in this are: Validating referrals, developing rapport, discussing needs and goals, verifying identity, collecting core docum
Validating referrals, developing rapport, discussing needs and goals, verifying identity, collecting core documents, making disc
Stages in the discovery story
Discovery story
Important ground rules to keep in mind when engaging with borrowers in this stage: - Stories are not always linear (not in the
First face-to-face meeting/ during the first interaction
When should you verify identity?
Untrustworthy borrowers
What can this be an indication of: A borrower calls stating that they need a mortgage and have all the required documents rea
Referral sources
Referral fees
Typically paid between brokerages Not a business matter between individuals
Referral fee or other form of compensation
In cases where a ___ is expected in return for a referral, the following applies: - If the referral source is an industry licensee, th
Soliciting mortgages without a license
An unlicensed referral source that sends frequent referrals may be seen as this. It is not just the frequency of the referral but t
The fee is paid directly
How is the fee paid in this instance: Where a referral does not occur between two industry professionals; for instance, when a
In writing
Referral fees must be fully disclosed to the applicant in what form?
Building rapport
Mutual trust and understanding
Once you establish a comfortable rapport with the borrower, you will be able to quickly and efficiently draw out the informati
Give-and-take process
Building rapport is this. It is a dialogue, during which relevant information is both acquired and disclosed. It requires that both
Selling expertise
It is important to remember that as a mortgage broker, you are selling your expertise to those who come to you, not just finan
Establishing credibility
In order to sell your expertise, you must first ___ as an expert. This happens in a number of ways - many of them subtle - and i
Developing rapport
Tips for doing this: 1. Make a good first impression 2. Introduce yourself and start a dialogue 3. Guide the conversation 4. Be a
Present yourself as polished, prepared and personable
Three Ps
Non-verbal red flags
Some ___ can include behaviors such as the following: - Evasiveness in providing answers, nervous laughter - Looking away wh
Discovering their story
Discussing a borrower's specific financial needs and goals is the purpose for ___
Needs and goals
Questions for discussing ___: 1. What sources of mortgage information has the applicant used 2. What is the reason for the lo
Sources of mortgage information
Common ___ include family and friends, the internet, newspapers, ads, banks, brokers, etc.
Their finances, the real estate and mortgage marketplace, the costs and obligations involved in a mortgage
Finding out how many and what types of information a borrower has already used will give you an idea of how knowledgeable
What sources of mortgage information has the applicant used
From this question, you can decide how much background detail to provide. It will also give you an indication of how serious o
What is the reason for the loan request?
The straightforward answer to this question relates to the type of mortgage transaction: pre-qualification or pre-approval, pur
What kind of property does the borrower want (or already have)?
The general answers to this questions speak to the type of mortgage transaction (purchase, refinance, renewal, etc.) and how
How much does the borrower want to spend?
The answer to this question points to the borrower's expectations and means This line of questioning opens the door to discus
Lowest rate
Rate seekers may be unaware that the ___ often comes with restrictions such as: - Limited prepayment options - Locked in ag
What is the borrower's ability to make mortgage payments?
The answer to this question relates to income level and overall financial security. Information such as length of time at a prese
What is the borrower's general credit status and debt load?
Leaning this and past behavior is often a strong indicator of future behavior
What is the borrower's personal status?
The answer to this question relates to the borrower's stability and potential for risk of default. For example, is the borrower a
What is your general impression of the borrower?
After spending some time talking to the borrower, you will form the answer to this question The answer to this question will h
Verifying identity
Verifying identity
Minimum requirements for this: 1. Obtain the borrower's full name 2. Record the type, serial number and expiry date of two p
Legal documents
An important part of qualifying a buyer and a property because they provide proof or verification of such things as personal id
Borrower
In most cases, a ___ is someone who is (a) just starting to look for or inquire about a mortgage, or (b) someone who has alread
Individual or corporate
Types of borrower
Residential/ condominium, commercial/ industrial, or agri-business
Types of properties
Prime, near-prime, sub-prime, private
Types of lenders
Purchase, renewal, refinance, borrower equity
Types of transactions
Applicant identity documents
2 government ID, SIN, cleared personalized cheque, utility bill w (with name and address of borrower), list of borrower credit c
2 government ID, SIN, cleared personalized cheque, utility bill w (with name and address of borrower), list of borrower credit c
Applicant identity documents
Letter from employer, play stubs or direct deposit statements, T4 slips, CRA NOA, employment insurance documents, financia
Proof of income and/ or employment (Two or more from the list)
Proof of income and/ or employment (Two or more from the list)
Letter from employer, play stubs or direct deposit statements, T4 slips, CRA NOA, employment insurance documents, financia
Proof of equity or existing mortgage, proof of savings, inheritance, or investments, gift letters
Proof of down payment (Two or more from the list)
Proof of down payment (Two or more from the list)
Proof of equity or existing mortgage, proof of savings, inheritance, or investments, gift letters
OTP and MLS or feature sheet (for purchases), mortgage or payout statements (refi), leases or rental agreements, condo docu
Property documents (One or more from the list)
Property documents (One or more from the list)
OTP and MLS or feature sheet (for purchases), mortgage or payout statements (refi), leases or rental agreements, condo docu
Core documents
What happens when this isn't reviewed: - When mortgage applications are sent to a lender without the mortgage broker revie
Income and down payment confirmation
Two main reasons why deals are declined after an approval has already been given
Faster approval
If you are pre-underwriting and sending a "good" application, reviewing the documents ahead of time may result in this
Make disclosures
It is important to educate the borrower and ___. This involves the following: - Timing, records, and privacy - Obtaining consen
Making disclosures
Educating the borrower about these aspects of taking out a mortgage is known in legal terms as ___. This means revealing wh
Ethical and legal
Because many people do not understand how mortgages work, what mortgage brokers do, and what the mortgage applicatio
Disclosure documents
1. Consent form to obtain consumer credit history (mandatory) 2. Mortgage borrower relationship disclosure (mandatory) 3. M
Final stages
Although you will typically introduce and make disclosures early in the mortgage transaction process, it is not until the ___ of
Written consent
A lender does not need to see an applicant's ___ in order to approve or decline a mortgage application; however, all commun
borrower information
If there is any ___ that you have not verified as part of preparing the loan application, you need to disclose this to the lender a
Cost of credit disclosure
Extra fees must be included in the ___. While the borrower should be provided a ___ (Same word as above) form to the borro
Disclosure statement
A mortgage broker will be required to provide a ___ when: - The lender does not enter into credit agreements in the course of
Cost of credit disclosure
The ___ is not always supplied by the mortgage broker. Often, the lender supplies the ___ to the borrower through the lawyer
Cost of credit disclosure
The ___ explains the costs (over and above interest costs) incurred to arrange mortgage financing as well as the interest rate (
Two business days
The legal timing to make the cost of credit disclosure is at least ___ before the earliest of the following: - A brokerage must no
closing
Although the cost of credit is usually introduced to the borrower early in the process as part of disclosing compensation or fee
Verbally and in writing
Cost of credit information must be disclosed in what way
Brokerage
Cost of credit: The ___ makes this disclosure if it is charging a fee to the borrower
Lender
The ___ makes this disclosure when no brokerage fees are being charged or when the lender is chargin a fee to the borrower
Lawyer
The ___ for the borrower makes this disclosure to the borrower and maintains a record of it in cases where the lender specific
Brokerage fees
If the ___ is chargin a fee, you must carry out the following: 1. Determine the closing costs 2. Calculate the total cost of credit
48 hours
How long the borrower is allowed for a "cooling-off period" to consider the information before singing? Within this period the
1. Determine the closing costs 2. Calculate the total cost of credit 3. Calculate the APR 4. Present the applicant with the Cost o
If the brokerage is charging a fee, you must carry out the following:
1/8 of a percent
When the cost of credit disclosure is a compliance issue, the APR must be calculated to within ___. It is preferable to round to
Cancel the agreement or to receive statutory damages
If the information in a disclosure document is not complete or correct, the borrower may be entitled to either ___. Moreover,
signed consent
Checking credit performance: This may or may not happen during your first interaction with the borrower, but it should be do
Audio or written consent; signed by the applicant
Different regulations and credit report providers have different requirements for what is considered acceptable consent. The F
In written form on a formal document provided by the brokerage, signed and dated by the borrower
What is the highest standard of consent
Equifax or TransUnion
What are the two credit bureaus
non-Canadian citizen
To obtain a credit report on a ___, contact the credit reporting agency directly rather than going through the mortgage origina
debt obligations
Why check credit performance? Lenders want to be assured of a borrower's inclination to meet ___. Performing a quick credit
lender and product
As you check over the items in the borrower's credit report, you need to read with a view to eventually matching the borrowe
Credit score
Also called a BEACON, Empirica, or FICO score
Credit score
One of the first indicators used to assess credit performance
Payment history, amounts owed, length of credit history, new credit, types of credit used
A credit score is based on what

What weighting does payment history have on the credit score

What weighting does amounts owed have on the credit score

What weighting does length of credit history have on the credit score

What weighting does new credit have on the credit score

What weighting does types of credit used have on the credit score
Payment history
What is the highest impact on credit score
300-900
What do credit scores range from
650 or higher
For a conventional mortgage, what is generally considered acceptable for a credit score
Pay off the mortgage
The higher the credit score, the more likely it is that the borrower will ___
Possible
It is ___ for a borrower to have no credit score., and there are several possible reasons for this. It does not automatically mean
Is not
The bottom line is that on its own, a credit score ___ a reliable indicator of a borrower's credit as either good or bad
Poor credit score
A ___ directs you to an opportunity to help someone improve their credit performance and, in the process, win long-term clie
Evaluating initial information
What step in the discovery story is the decision chair in
The decision chair
This analogy is for once you have met with and otherwise interacted with the borrower several times to discover their story, y
Income, equity, credit, property
What are the four legs of the decision chair
The loan request
What does the chair represent in the decision chair
Decision chair
It has four legs: income, equity, credit, and property. If one of the "legs" is weak, then the "chair" (the loan request) will not be
Evaluating initial information
At this step of the discovery story, you have already done the following: - Validated referrals associated with the borrower - D
Income
Questions for this part of the decision chair: How does the borrower's ___ seem? If the details are verifiable, is it reasonable in
Equity
Questions for this part of the decision chair: How does the borrower's ___ seem (and, specifically, down payment)? If the deta
Credit
Questions for this part of the decision chair: In terms of ___ use, what did your initial credit check show? If the details are veri
Property
Questions for this part of the decision chair: What does the property show? If the details are verifiable, does its stated value a
One weak leg
In relation to the decision chair, the more personal resources the borrower has put towards a down payment (equity), the gre
One weak leg
In relation to the decision chair: If the deal appears to be feasible at this stage, then you need to proceed to the next aspects o
Two or more weak legs
In relation to the decision chair, if your evaluation shows that there are ___, then the borrower may not be ready or able to qu
Pre-approval/ pre-qualification
If the borrower is looking for ___ before shopping for a property, you probably have enough information at this point to know
Identify potential financial options
After qualifying the applicant and the property, the next step is to ___ available to the borrower
needs and wants
Your job is to determine what option best suits the borrower's ___
Different
Appropriate financing options for different borrowers are ___ as each indivivdual's circumstances
fixed rate over a variable rate
There are numerous reasons why one consumer will want a ___ and vice versa. These may include variables such as debt load
Risk level
Knowing the borrower's ___ with borrowing money is imperative. As with investing, some people only want guaranteed inves
Fixed rate over a variable rate
Taking a ___ is akin to an insurance policy. The borrower is paying a premium for the security of knowing what their payment
Fixed-term mortgages, variable rate mortgages, and secured personal line of credit
What are the three kinds of mortgages
Fixed term
- Terms can range from 6 months-10years, and the rate doesn't change for the term chosen - Can be open or closed, but most
Open term
The mortgage can be paid in full at any time with zero penalty
Closed term
A penalty will be assessed if the mortgage is paid in full before maturity
Whichever is higher
How do you decide between the fixed term mortgage payout penalty: Three month's interest, or interest rate differential (IRD
Variable rate mortgages (VRM)
- Will vary with the prime rate - Have a special policy in that they can be converted to a fixed-term mortgage (with the same le
Bank of Canada overnight rate
How is the prime rate set
Secured Personal Line of Credit (PLOC) and Home Equity Line of Credit (HELOC)
- Are revolving products - The first type is readvanceable and can be paid out at any time with no penalty - The rate varies with
Second mortgage
When there is a mortgage registered on title and a mortgage is registered behind the first
Variable rate and PLOC/ HELOC
Can be converted to a fixed-rate at any time during the term without penalty
Loan security
First mortgage: The property that has been mortgaged Second mortgage: Any proceeds remaining from the sale of the proper
Mortgage priority
First mortgage: Highest priority (after any outstanding property taxes and condo fees are paid) to be repaid Second mortgage:
Interest rate
First mortgage: Typically carries a lower interest rate Second mortgage: Typically carries a higher interest rate
Qualifying
First mortgage: Requires full borrower and property qualification Second mortgage: If arranged through the originator of the fi
Payments
First mortgage: Single loan payment per month (on whatever chosen payment frequency) Second mortgage: Additional mortg
Fixed-rate
What kind of mortgage is not appropriate when you know that the borrower will be inheriting a large sum of money, or if they
Amortization period
Mortgage term
The period of time over which the interest rate, prepayment, and other mortgage conditions are set. At the end of this, the m
Have up-to-date information on mortgage company products, underwriting policies, and special niches available for the marke
Mortgage companies offer a great deal of information on their products, such as product manuals, publications, and rate shee
Rate sheet
It is different for insured, conventional, rental, switch or transfer clients, as well as the amortization period they are seeking. K
Lender list
What action is it where you review the brokerage's preferred lender list (if there is one) and/ or review the market to determin
Lender products
What action is it where you review the chosen lender's products to ensure that there is a product that is a fit for your borrowe
Loan application
What action is it where you thoroughly review every aspect of your borrower's loan application. Confirm all facts yourself befo
Shortcomings and advantages
Explain any shortcomings and highlight advantages of the situation in a summary note to the lender (either paper or electroni
Documentation
Ensure that the documentation does not misrepresent the applicant, that all documents are included in the file, and that none
Correct format
Use the lender's preferred format for packaging and submitting the loan file. Arrange the documents in a logical order. Make i
Prepare and submit the loan application
1. Create a new mortgage application file 2. Specify the application type and purpose 3. Enter the borrower's personal details,
Create a new mortgage application file
What is step 1 in preparing and submitting the loan application
Specify the application type and purpose
What is step 2 in preparing and submitting the loan application
Enter the borrower's personal details, identity information, etc.
What is step 3 in preparing and submitting the loan application
Estimate closing costs for the deal
What is step 4 in preparing and submitting the loan application
Complete initial disclosures (specifically the Cost of Borrowing/ Cost of Credit Disclosure, if applicable)
What is step 5 in preparing and submitting the loan application
Double-check your files for accuracy
What is step 6 in preparing and submitting the loan application
Make minor adjustments to any information that may have changed since you began the transaction process
What is step 7 in preparing and submitting the loan application
Review your decisions around matching the applicant's needs with a particular lender and product
What is step 8 in preparing and submitting the loan application
Enter any final information and notes or comments to the lender to make the application file clear and complete
What is step 9 in preparing and submitting the loan application
Submit the electronic loan application file to a lender
What is step 10 in preparing and submitting the loan application
24 to 48
Once you have submitted a mortgage application through the software system, you will generally receive some kind of respon
Response time
Lender ___ varies, but it is generally related to business volume or your business relationships
24; 24
If a deal is strong and contains nothing that might cause a delay in the process, you can generally expect a conditional approva
Conditions
When the lender/ underwriter comes back to you with questions or a requirement for more information on a particular aspec
Approved, conditionally approved, suspended, declined
What are the four possible responses that you may receive to a borrower's mortgage application
Approved
This happens when the file is straightforward and carefully prepared: strong applicant, good property, complete documentatio
Conditionally approved
This happens when the file is generally in order, but one or two conditions must be met before the deal can be approved. For
Suspended
This is a variation on "conditionally approved," but indicates a higher degree of incompleteness or uncertainty. There may be s
Declined
If the lender feels that the file is poorly prepared, or is not a good match, or does not fit within the lender or product qualificati
Declined
If the lender ___ the application, you need to first understand the reason it was declined. Some possible examples could inclu
approval, conditional approval, or suspended
If you receive an ___ response, the lender then sends a commitment letter with an offer to fund the loan. If there are conditio
Rejected
There are numerous conditions for an application to be ____. The most common reasons are: 1. Unsatisfactory credit 2. Exces
Excessive debt service, lack of income, short time on the job or newly self-employed
Wei has recently opened up a consultancy, and is seeking to purchase a new home with more office space. His new company h
Property does not appraise, owns too many properties, property does not meet the lender's requirements
Martin and Lydia are well-known for buying up homes in small communities near Calgary, renovating them, and flipping them
Unsatisfactory credit, DP is lacking, short time on the job or newly self-employed
Kayla just graduated from university and landed a new job, and she is eager to buy her first home. She has her eye on a $250,0
Underwriting
Assessing the risk of providing a mortgage to a prospective borrower on a specific piece of property in the mortgage industry
Character, credit, capacity, capital, collateral
5 C's of credit
Character
The applicant's attitude toward money and credit
Capacity
The ability to repay all current obligations plus the new mortgage cost
Collateral
The security a borrower provides to the lender to secure the loan
Capital
The amount of money that an applicant has
Stability and reliability
Lenders primarily care about an applicant's ___ because a person possessing these traits will likely make regular debt paymen
Ability of an applicant to make payments
Secondly, lenders care about the ___ or the ratio between their income and debt obligations. In terms of the 5 C's. this relates
recover their money
Lastly, lenders care about how they may ___ if the borrower defaults. In terms of the 5 C's, this relates to capital and collatera
GDSR and TDSR
What are the two main ratios used to determine if a borrower can afford their mortgage
Gross debt service ratio (GDSR)
- The proportion of housing debt that a borrower is paying in comparison to their income - (Mortgage payment + property tax
(Mortgage payment + property taxes + utilities + 50% of condo fees) / monthly gross income
Calculation for GDSR
Total debt service ratio (TDSR)
- Considers if the borrower can afford the cost of their mortgage in addition to all other debts and loans - Other debt could inc
(Mortgage payment + property taxes + utilities + 50% of condo fees + other debt payments) / (monthly gross income)
Calculation for TDSR
Underwriting process
From a lender's perspective, the information and documents collected from the applicant helps support the ___. These docum
Up-to-date personal information, employment history for the past 3 years, completed financial statement, credit check, detail
What documents help support the underwriting process from a lender's perspective
full name, DOB, marital status, ph. #, email, home addresses for the past 3 years
What is included in the borrower's up-to-date personal information
Salaried, hourly wage, or commission, as well as schooling, university, college, maternity leave, or disability leave.
What is included in the borrower's employment history for the past 3 years
Assets and liabilities
What does a financial statement consist of
Assets
Includes: - Cash, RESPs, RDSPs, RRSPs TFSA, non-registered accounts, stocks, bonds, mutual funds - Vehicles, boats, travel trail
Artwork and jewlery
What is not included in asset value, because their value is too subjective
Liabilities
Include: - Vehicle loans and leases, credit card debt, personal lines of credit both secured and unsecured, student loan debt, m
Two-year tax history
A full ___ is required for any income that fluctuates from year-to-year
Self-employment
- Require 2 years personal income tax returns, supporting T-slips, NOAs from the CRA. Ensure encome tax is paid in full and tha
Commission
A 2-year average determined by T4's, T4A's, full T1 General Tax Return, and NOA proves income
Sole proprietorship
Salary
A LOE states the applicant's date of hire, job title, annual gross salary and permanent full-time status
Hourly wage
A LOE stating hourly wage and guaranteed hours per week. If there are no guaranteed hours, then a two-year history via T4's
Support payments
If an applicant is receiving alimony and or child support, a copy of the executed separation agreement is required, along with b
Two years of personal income tax returns along with the NOA's from the CRA
Any income that is not guaranteed or varies from year-to-year typically requires ___
Three months' worth of bank statements reflecting the applicant's financials
Down payments are typically verified by supplying ___. This will be checked for both availability and credibility. Large deposits
MLS feature sheet
1-2 page printout of a property listing that contains property detail, and should be available from the real estate associate. Th
Purchase contract
A copy of the ___ must be included when the mortgage type being issued is a purchase mortgage. This is a legally binding doc
Agreed upon price, closing date of the transaction, names of the purchasers, any special terms
The purchase contract is a legally binding document that lists important information about the subject property, such as
Subject property
A copy of the executed purchase contract is required, along with the MLS feature sheet for the subject property
Credit report
Every application needs a ___ from either Equifax or TransUnion from the past 30 days. If it is over 30 days old, you must run a
Priorities and the product guidelines
Just as you did, the file underwriter looks at the applicant's employment, income, down payment, expenses, debt obligations,
Lender
___ carefully analyze documents to determine if they are legitimate. A ___ will: - Google the employer to ensure they exist - R

Per Canadian law, lenders can only provide financing to qualified homeowners with at least a ___ down payment. If a borrowe
Mortgage default insurance
A vehicle available to protect lenders if the borrower defaults on their mortgage. It does NOT protect the borrower or the gua
lower premiums
Over the past years, different default mortgage insurance providers have introduced online and automated systems that make
low risk
Automated default mortgage insurance approval is granted to situations that are deemed extremely ___, such as a combinatio
Insured or insurable
When completing applications for lenders, keep in mind that insurers are also looking for a particular set of information. Insur
Security property
Typically, private lenders emphasize the ___ rather than the borrower's covenant. They prioritize ensuring the ___ is sufficient
Credit
- Comes from a latin word meaning to believe or to accept as true - In general terms, it refers to an arrangement by which one
Credit bureau
An agency that collects, maintains, and sells information about any person who has a bank account, credit card, or has had leg
Credit report
A historical record of an individual's use of credit and repayment behaviour for the past six years, as reported to and recorded
Credit report
Indicates the individual's credit management style and inclination to meet debt obligations.
Personal information, credit info, banking info, public records, collection info, consumer statement, credit report inquiries
A credit report includes what
Personal information
Name, current and previous address(es), SIN, phone $, DOB, current and previous employer(s)
Credit information
Credit or retail cards, lines of credit, loans, or mortgages; with credit limits, current balances, on-time and late payments
Banking information
Current bank accounts. May report NSF cheques. This may be a restricted view for brokers but not for bankers. For example, b
Public records
Information on the public record such as bankruptcy, credit-related court judgments, or secured loans (backed by an asset suc
Collection information
Unpaid debts that have been referred to a collection agency for payment.
Consumer statement
Any statement made by the individual to explain a particular situation, such as a dispute with a financial institution or a fraud
Credit report inquiries
A list of everyone who has inquired about the individual's credit (for example, the individual, a lender, or any other authorized
Credit report
Unless the lender has provided a written statement that it is NOT a requirement, as a broker, you are responsible for obtaining
Medical history, purchases not made on credit, debts for which the individual is not personally liable, debts with creditors that
Credit reports do NOT include
Good credit report
A ___ typically shows a variety of credit and loans from various lenders over several years with consistent, on-time repayment
Bad credit report
A ___ typically shows some credit and loans, several "maxed-out" credit cards, and a pattern of failing to make payments on ti
Signed consent form
Obtain a ___ from the applicant, stating that they agree to release their credit history information to you and the parties to th
Name, address, and DOB
The minimum amount of personal information required to obtain a credit report includes ___. (If the applicant is willing to pro
SIN
If a client chooses not to give this, make a note in the mortgage application that the applicant chose not to provide this, and in
guidelines
The information in an applicant's credit report always identifies if they fit a lender's and insurer's ___
Creditworthiness
To determine an applicant's ___ as a broker: 1. Obtain and read the applicant's full credit report 2. Verify that the information
Credit score
Describes an individual's credit performance, and it is used as an overall indicator of financial risk—specifically how likely a bor
300-900
Credit scores assigned by Equifax range from ___
150-934
Credit scores assigned by TransUnion (called "Empirica scores") range from ___
FICO scores
Credit scores are sometimes generically referred to as ___. Both Equifax and TransUnion use this model to calculate credit sco
Payment history
The pattern of repayment over time, looking at whether payments have been made in a timely manner, how much has been p
Amounts owed
The total amount owing to all credit compared with the total amount of credit available (credit limits). Accounts near or over t
Length of credit history
The amount of time the consumer has had established credit
New credit
Considers how often the consumer requests new credit and for how much, and whether they is repaying the new amounts. Th
Types of credit used
Account types and amount of debt, including credit cards, retail accounts, installment loans (such as car payments), and lines o
Credit scores
Other important factors that can influence ___ include the following: - The number of recent credit inquiries - The individual's

Lenders typically set cut-off scores that reflect the amount of risk they are willing to take. For a conventional mortgage, a scor
Validation odds
- Credit categories and cut-off scores are not arbitrarily chosen. They are determined using a statistical tool called ___, which l
<500; 500-649; 650-749; 750+
___ is considered very poor credit, ___ is considered poor to average credit, ___ is considered good credit, ___ is considered v
No score or zero score
Possible reasons for this: - The result of inaccurate information - New credit - No recent credit experience - Too little credit exp
Very high
Regardless of the reason for a no score or zero score (credit score), lenders consider this to represent a ___ risk. A loan underw
1. The applicant's age and when their credit file started 2. The reason why the applicant has no credit score 3. What proof of c
If your applicant has no credit score or a credit score of zero, you need to consider
Suggest that they consider taking out a Registered Retirement Savings Plan (RRSP) loan. Suggest that the applicant secure a cr
If you have an applicant who has no credit score, you can suggest the following two ways to build (or rebuild) his or her credit
Four
Credit reports with scores always cite the top ___ reasons why the score is not higher, so it is important to remember that hav
Explanation
Credit scores are not the sole dictating factor in qualifying. Other considerations such as income or equity may balance out hig
Consumer referral telephone number
On the Equifax credit report, what section tells the credit grantor where consumers can call if they are denied credit
Consumer file alert
On the Equifax credit report, what section is any important messages regarding the applicant's file, such as information that d
FN/UN
On the Equifax credit report, what section is internal Equifax file number and unique number (internal use only)
Safescan warning
On the Equifax credit report, what section is a fraud alert message to warn readers of potential application fraud
Credit score and reason codes
On the Equifax credit report, what section is the applicant's credit score and reasons for the score
Identification information
On the Equifax credit report, what section is personal information about the applicant
Inquiries
On the Equifax credit report, what section is credit information that has been requested on the applicant and by whom
Employment
On the Equifax credit report, what section is employment history on the applicant (and spouse, if applicable)
Credit summary
On the Equifax credit report, what section is an overview of the applicant's credit information
Public records or other information
On the Equifax credit report, what section is bankruptcies, collections, and judgments against the applicant
Trade information
On the Equifax credit report, what section credit cards and other revolving credit
Banking information
On the Equifax credit report, what section is the applicant's banking information
Narrative section
On the Equifax credit report, what section is statement of explanations by the applicant or consumer about any of the items o
Safescanned &
On the Equifax credit report, what section means the inquiry was run through the Equifax fraud database and is available to su
End of report
On the Equifax credit report, what section indicates no more pages to follow. If this is not visible at the bottom of the page, th
Individual's name (and spouse's name, if applicable), current and former addresses, alias names (AKA), DOB, SIN, date the file
The personal identification information part of a credit report provides the following
Confirm all personal identification information matches the info on the mortgage application and other docs, cross-check the i
How do you verify that the credit report matches your applicant in the personal identification information section
Applicant's age
Take note of the ___. Even though lenders cannot refuse a loan application based on age, it is still a factor that they consider w
Second credit report
If an AKA (alias name) is listed, then a ___ under the AKA may also exist. Be sure to pull all available credit reports on the indiv
Applicant moved
How often has the ___? Take note of how often the individual has moved. Length of time at a residence is of interest to lende
Marital status
Cross-check information about ___. If a spouse or partner is listed in the credit report, cross-check this information against the
Length
Note ___ of credit history. The identification section also indicates when the credit file was started and when the last activity w
Part of the country where the SIN was received by the applicant
The first digit of the SIN identifies the ___

If a SIN starts with a ___, you need to verify the expiry date on the card. SINs that begin with this are issued to temporary wor
Atlantic provinces
Where is a SIN number starting with a 1 from
Quebec
Where is a SIN number starting with a 2 or 3 from
Ontario
Where is a SIN number starting with a 4 or 5 from
Prairie provinces and Northwest Territories and Nunavut
Where is a SIN number starting with a 6 from
British Columbia and Yukon
Where is a SIN number starting with a 7 from
Inquiries section
The ___ of a credit report shows how many inquiries the credit agency has received from other institutions about the individu
recent inquiries
If you notice several ___ from other brokerages, it may indicate that the applicant is "shopping" for a brokerage. This may cau
credit report
Companies and financial institutions can pull an individual's ___ for several reasons, including employment, licensing, and loan
Hard
Inquiries made concerning loan or credit applications are calculated in credit scoring models and do affect the credit score. Inq
Soft
Inquiries by companies to which the individual has not applied may also appear on the credit report. These are called "___" or
30-day
It's important to be aware there is a ___ delay in updating the inquiries section of a credit report. Credit inquiries made within
45 days
Hard inquiries made in the last ___ are counted as one inquiry. For example, multiple inquiries from lenders or other installme
Second
Lenders have the right to (and often do) pull a ___, more recent credit report before advancing any mortgage funds, even if th
INQS
This alert appears if there have been three or more inquiries within the past 90 days. An alert showing three recent inquiries m
Bottom below list of all INQS
Where does the total number of inquiries made since the file was established show up? If it is "#INQS-27", it means there have
2 years
How long do inquiries usually remain on the credit report for
Employment information
The ___ section of a credit report provides information about the individual's employment history (and the spouse's employm
assessing risk and income potential
Lenders consider occupation when ___. When reviewing the employment information in a credit report, cross-reference the m
ES (Employment subject)
In the employment history section, this code means: Applicant's current employment. EMP mm/dd means that is when the cu
EF (Employment, former)
In the employment history section, this code means: The applicant's former position
E2 (Employment, second former)
In the employment history section, this code means: Describes the next oldest employment position
EC (Employment co-subject)
In the employment history section, this code means: This describes employment information about a co-subject such as a spo
Oldest and newest dates that the individual used credit
This information tells you the oldest and most recent use of credit by the individual in the past 6 years
Public records
These include bankruptcies, judgments, foreclosures, liens, and collections
These include bankruptcies, judgments, foreclosures, liens, and collections
What is included in public records
Foreign credit bureau information
This information lets you know whether the person has any recorded credit history outside of the country
Number of trade lines and ratings for each
These may be credit cards, loans, lines of credit, etc.
Highest credit used and credit limit
Although the applicant may have credit card balances well below the maximum limit, it is important to note the amount of cre
Was a supervisor at McDougall's Haulage in Calgary. His current employment began January 2019 and was verified in October
What does this mean in the employment history section: ES - SUPERVISOR. MCDOUGALL'S HAULAGE, CALGARY, AB. EMP 01/1
01/19-04/22 - The individual first used credit in Jan 2019, and most recently used credit April 2022 in the past 6 years 4-PR/OI
Analyze and explain each part of this: "SUMMARY 01/19-04/22, 4-PR/OI. FB-NO, TOTAL-3, HC$3K-5K, 1-ONE, 1-THREE, 1-OTHE
SUMMARY 02/15-12/22, 2-PR/OI. FB-NO, TOTAL-3, HC$4K-5K, 1-ONE, 1-THREE, 1-OTHER
Write how it would be written in the summary section of a credit report the following information: They first used credit in Feb
Public records
The ___ section of a credit report contains information about an individual's recent financial history that has been filed or reco
blank
Ideally, the public records part of an individual's credit report should be ___.
6-10 years
Public records remain on the credit report for ___. If public records are listed, the more recent the item, the more negative im
Bankruptcy
A voluntary legal proceeding involving a person or business unable to repay outstanding debt. All assets of the person or busin
Bankruptcy in March 2017 Unpaid collection in Sept 2018 Secured loan in April 2018 Satisfied judgment in Mar 2018
Analayze and explain each part of this: PUBLIC RECORDS OR OTHER INFORMATION 03/17 BKRPT 472VF22, 456789 ABC ASSOC
6 years after the creditor has legally released the borrower of any further financial obligations
In Alberta, bankruptcies are kept on file at the credit agency for ___ (in other words, after the bankruptcy has been discharged
12 to 24 months
Someone with a bankruptcy on file may find it difficult to re-establish the necessary credit history and stability of income to qu
re-establish
Some strategies you might suggest to help an applicant ___ his or her credit after bankruptcy include the following: - Make reg
- Bankruptcy recorded in March 2017 - Type of action: Bankruptcy - Court code is 472VF22 - Case number and trustee is 45678
Analyze this 03/17 BKRPT 472VF22, 456789 ABC ASSOCIATES, LIAB $55,000, ASSETS $1,500. SUBJECT, IND, DISCHRGD 12/17
03/17 BKRPT 472VF22, 456789 ABC ASSOCIATES, LIAB $55,000, ASSETS $1,500. MICHAEL SCOTT, IND, DISCHRGD 12/17
Write the record and how it would show for the following information: Type of action: Bankruptcy Filed: March 2017 Court co
Consumer proposal
A legally binding, negotiated settlement made between a debtor and his or her creditors. With the help of a licensed trustee, t
from when the proposal is filed until three years after the payments are completed
A consumer proposal note remains on the credit record ___
Collections
Overdue debts that have gone to a third-party collection agency. Can either be unpaid or paid
- Collection was recorded in September 2018 - Type of collection, in this case, the collection is unpaid (UP CL) - Name of the th
Analyze this 09/18 UP CL EQUIFAX COLLECTIONS. $1250,CG BRN-ANY CO., DLA-12/17. BAL$12600
09/18 UP CL EQUIFAX COLLECTIONS. $1250,CG BRN-ANY CO., DLA-12/17. BAL$12600
Write the record and how it would show for the following information: Type of action: Collection Recorded: September 2018 T
Secured loans
Backed (secured) by an individual's personal property as collateral and registered with the provincial government per the Pers
Secured loan
If an individual took out a ___ in Ontario (which is a province that reports ___), the item will appear on his or her credit report
- The secured loan was recorded in April 2018 - Type of record: Secured loan (SECLN) - Name of reporting government agency
Analyze this 4/18 SECLN CENT REG CAL, FP CASE NO-CASE NO-TRANS CANADA CREDIT 450 1 ST SW CAL 3600, MAT 04/22
4/18 SECLN CENT REG CAL, FP CASE NO-CASE NO-TRANS CANADA CREDIT 450 1 ST SW CAL 3600, MAT 04/22
Write the record and how it would show for the following information: Type of record: Secured loan Filed in April 2018 Registe
Judgment
A credit-related court order instructing the credit holder to pay monies owing to a creditor. If this is on the credit report, the c
6 years from the date it was filed
In Alberta, judgments remain on the credit report for ___
- Granted or filed in March 2018 - Judgment status: ST indicates it was a satisfied judgment, meaning it is a court directive that
Analyze this 03/18 ST JD CAL SM CL CT. $255 DEF-MICHAEL DENTON, 1234/05, CITY OF CAL, SATISFIED 11/18
03/18 ST JD CAL SM CL CT. $255 DEF-MICHAEL DENTON, 1234/05, CITY OF CAL, SATISFIED 11/18
Write the record and how it would show for the following information: Satisfied judgment Filed or granted in March 2018 Mad
Trade information
This section of a credit report shows an applicant's purchase and repayment behaviour with credit cards, loans, and other kind
Trade lines or lines of trade
Open credit accounts (such as credit cards, lines of credit, car loans, and home mortgages) are referred to as ___. These signifi
number and type
Lenders look at the ___ of open trade lines and the length of time each account has been open. Lenders also look for current a
Thin credit
What do they call it when there are two trade lines or fewer that have been reporting for less than two years
letter and number codes
Credit bureaus use ratings and payment scales consisting of ___ to report the lenders' rating for each trade line in a credit rep
Type of credit the individual is using
What do the letters stand for from credit bureaus
The frequency of payment and the number of payments past due
What do the numbers stand for from credit bureaus
I
What letter represents an 'installment credit'
O
What letter represents 'open status credit'
R
What letter represents 'revolving or recurring credit'
M
What letter represents 'mortgage loan'
Installment credit
Definition: The client borrows money for a specific period of time. They make regular payments in fixed amounts until they pa
Installment credit
What type of credit or account is a car loan an example of
Open status credit
Definition: The client can borrow money when they need to, up to a certain limit
Open status credit
What type of credit or account is a personal line of credit an example of
Revolving or recurring credit
Definition: The client may borrow money up to their credit limit on an ongoing basis. They make regular payments in varying a
Revolving or recurring credit
What type of credit or account is visa, MasterCard, and retail store credit cards an example of
Mortgage loan
Definition: This information may be included on the client's credit report
Mortgage loan
What type of credit or account is a mortgage an example of

What number code is: - Too new to rate - Approved, but not yet used

What number code is: - Paid within 30 days of billing - Paid as agreed

What number code is: - Late payment: 31 to 59 days late

What number code is: - Late payment: 60 to 89 days late

What number code is: - Late payment: 90 to 119 days late

What number code is: - Late payment: more than 120 days late, but not yet rated "9"

What number code is: - This code isn't used

What number code is: Making regular payments using one of the following debt management options: - A consolidation order

What number code is: - Repossession

What number code is: - Written off as a "bad debt" - Sent to collection agency - Bankruptcy
What is the frequency of payment and number past due for the number code 0
- Paid within 30 days of billing - Paid as agreed
What is the frequency of payment and number past due for the number code 1
- Late payment: 31 to 59 days late
What is the frequency of payment and number past due for the number code 2
- Late payment: 60 to 89 days late
What is the frequency of payment and number past due for the number code 3
- Late payment: 90 to 119 days late
What is the frequency of payment and number past due for the number code 4
- Late payment: more than 120 days late, but not yet rated "9"
What is the frequency of payment and number past due for the number code 5
This code isn't used
What is the frequency of payment and number past due for the number code 6
Making regular payments using one of the following debt management options: - A consolidation order - Orderly payment of d
What is the frequency of payment and number past due for the number code 7
What is the frequency of payment and number past due for the number code 8
- Written off as a "bad debt" - Sent to a collection agency - Bankruptcy
What is the frequency of payment and number past due for the number code 9
Pattern of repayment
Of all the information contained in a credit report, an individual's ___ (also called manner of payment) is what most clearly de
This individual has been more than 120 days late with a loan payment
What is the meaning of this rating code and account holder: I05 (or I5) rating from ABC bank
I05 (or I5) rating from ABC bank
What is the rating code and account holder for "This individual has been more than 120 days late with a loan payment"
This source of revolving credit has been paid within 30 days
What is the meaning of this rating code and account holder: R01 (or R1) rating for a credit card from ABC Retailer
R01 (or R1) rating for a credit card from ABC Retailer
What is the rating code and account holder for "This source of revolving credit has been paid within 30 days"
The applicant has been making his or her mortgage payments within 30 days
What is the meaning of this rating code and account holder: M01 (or M1) rating with ABC Mortgage
M01 (or M1) rating with ABC Mortgage
What is the rating code and account holder for "The applicant has been making his or her mortgage payments within 30 days"
This revolving credit account has been paid on time
What is the meaning of this rating code and account holder: R01* (or R1) rating from ABC Department *The 0 in R01, etc. refe
R01* (or R1) rating from ABC Department
What is the rating code and account holder for "This revolving credit account has been paid on time"
*: Indicates the info was updated by an accounts receivable tape or electronically BUS/ID AND CODE: The credit grantor's nam
Explain each vertical column means below on the trade information section of a credit report (Each column is separated by "--
Banking information
The ___ section of a credit report provides information about an individual's history with banking institutions
ROYAL BANK (403) 943-1171: The name and phone # of the banking institution 09/16: The date the item was reported to the c
Analyze and explain each part of this banking information section: ROYAL BANK (403) 943-1171 09/16 CHKAC 601BB4559 09/1
Consumer narrative
The ___ section of a credit report includes any information added by the credit holder. Consumers can add a statement to the
Consumer narrative. It explains that late payments are due to unemployment. It also indicates that the individual added the co
What section is the following statement an example of and what does it mean: NARRATIVE RPTD 09/18 PURGE 03/24**CONSU
Consumer narratives
What can also be used in cases where an individual has fallen victim to identity theft. Credit holders can add instructions that
Fraud alert
If a credit holder has added a ___ on his or her credit report, lenders must do the following: - Contact the credit holder directly
What must lenders do if a credit holder has added a fraud alert on his or her credit report
Fraud alert
What does this consumer narrative indicate: NARRATIVE RPTD 09/18 PURGE 03/24 ****WARNING****CONFIRMED TRUE NA
Ampersand (&)
What has to be at the end on a credit report
Indicates the end of the report. Every report should have this concluding note. If there is no ampersand, you do not have the f
What does the ampersand (&) symbol indicate on a credit report
Closing costs
All of the expenses associated with obtaining a mortgage Could potentially include: - Appraisal fees - Legal fees and disbursem
Borrower
In Alberta, lenders and insurers require the ___ to show proof of funds available to cover any possible closing costs. Typically,
May be required as part of disclosing fees
(State the reason) In some cases, closing costs are accounted for early on in the transaction: Where the lender or the brokerag
May be required as part of proof of dp
(State the reason) In some cases, closing costs are accounted for early on in the transaction: Some lenders require proof of fun
May be a lender's condition for approval
(State the reason) In some cases, closing costs are accounted for early on in the transaction: Some lenders require proof of fun
Interest adjustment
(State the type of adjustment) Adjustment costs, mentioned in the closing costs above, are subject to change at the final signin
Property tax adjustments
(State the type of adjustment) Adjustment costs, mentioned in the closing costs above, are subject to change at the final signin
Utility bill adjustments
(State the type of adjustment) Adjustment costs, mentioned in the closing costs above, are subject to change at the final signin
Origination points
Sometimes called lender's feels. Represent the fees a borrower pays to a lender for evaluating, processing, and the approval o

One point (origination point) typically represents ___ of the mortgage loan
$3,000 (1.5% of $200,000)
If a mortgage loan is $200,000 and the lender is charging the borrower 1.5 origination points, how much will the borrower pay
Total cost of credit (TCC)
Sometimes called the cost of borrowing. It is the anticipated dollar cost of a loan over its term. It is calculated as the "differenc
Difference between the value received by a borrower as a result of a credit agreement, and the value of what the borrower m
Calculation for TCC
There is a difference between the amount received and repaid by the borrower due to:
All fees associated with arranging a mortgage billed to the buyer
The TCC includes ___
Requires that consumers who borrow or receive credit are fully informed of the cost and conditions of borrowing
In Alberta, the Cost of Credit Disclosure is a regulation that___
$6,000; $98,000; $8,000 ($6,000 (interest) + $2,000 (fees);
If an applicant takes out a loan for $100,000 at an annual interest rate of 6% simple interest, with no principal payment until t
Interest on the loan
If an applicant chooses to pay all the fees and closing costs themselves, their only cost of borrowing is the ___
Costs that the applicant has no control over or receives no continuing benefit from
Those costs that are included in the calculation of the TCC (and therefore APR) are ___
Costs that the applicant does have control over or does derive continuing benefit from
Those costs that are excluded from the TCC are ___
I; E; I; E; I E; I; I; E; I; E; E E; E; I; I; I; I; I
Indicate whether the following costs are included (I) or excluded (E) in the calculated of TCC: - Mortgage interest charges - App
Annual percentage rate (APR)
The ___ is the total cost of borrowing money beyond the interest rate. It is always equal to or higher than the interest rate.
Total cost of borrowing / amount of loaned money actually received
How do you arrive/ calculate the annual percentage rate (APR)
Annual percentage rate (APR)
The ___ is related to both the effective annual rate (EAR) and the total cost of credit (TCC). Like the EAR, it considers the effect
TCC
If the lender or broker charges any fees as part of the mortgage transaction, ___ must be determined to calculate the annual p
APR
___is higher than the nominal interest rate and EAR because the ___ factors in the non-interest costs of the loan, it is higher th
APR
___ is the "true" interest rate for the loan. It represents the interest costs plus the non-interest costs incurred to obtain a loan
Subtracted
Just as compounding interest over time increases the interest rate on a loan, so does adding fees and other costs to the initial
$106,000; $98,000; 8.2% (TCC/ loan amt = $8,000/$98,000)
Example: Assume a negotiated loan amount of $100,000, a quoted (nominal) interest rate of 6%, and no principal payments u
6.87 Steps (on mtg calculator): 1. (THIS STEP IS ON THE COVER OF CALC) Clear calculator > enter loan amt (287,000 -> loan am
You have secured a conventional mortgage for your client, Ali. The non-interest costs to arrange the mortgage amount to $1,2
3.36% Steps (on mtg calculator): 1. (THIS STEP IS ON THE COVER OF CALC) Clear calculator (shift > x) -> Enter loan amt (27,000
You have arranged a high-ratio mortgage for your clients, Lilia and Matko. The loan amount is $270,000, and you have calculat
Preparing an application and loan file for submission to a lender (also referred to as packaging the loan or underwriting the file
Forms of electronic signatures include
1. Mortgage loan application form 2. Broker's summary/ lender notes 3. Copy of void cheque 4. Lawyer information 5. Waiver
Every loan file package should contain the following sections of information
Validating and correcting details
Once you have assembled your mortgage application package, you must go through the process of ___ in the file before subm
Accuracy Completeness Authenticity Lender and insurer qualifications
In preparation for submitting the mortgage loan application, review the information and documents to ensure:
Inaccurate verification
Some brokers indicate "not verified" as a standard indicator to avoid the potential risk of ___
Mortgage commitment
At this stage in the mortgage application process you have completed the application, defined closing costs, fulfilled the condi
Mortgage commitment
Usually provides details on: - Total mortgage amount - Interest rate - Insurer fees (if applicable) - Amortization - Mortgage pay
Conditions
What the lender deems necessary to fund the mortgage commitment. They can and are varied. Here is a list of what some ___
Private lenders
Who typically includes the lender fee and attaches the disclosure form to the commitment
Institutional lenders
Who typically, but not always, submits the disclosure form with the mortgage instructions to the lawyer
Conveyance
What is a lawyer's role in mortgage transactions. It is the legal process of transferring property from party to another
A lawyer typically requires the following documents
1. Understanding the lender's outstanding outstanding conditions 2. Clearly communicating those conditions to the borrower
To fulfill the condition of approval is the process of:
Outstanding conditions
Before meeting with the borrower, verify that you understand what the lender is requesting. If unsure, contact the lender and
Income
Defined as money earned on a regular basis from year to year. Capital gains is not considered to be this as it is a one-time inco
Verification of income
___ is any document from a third party that details income such as: - Paystub - T4 tax forms - Personal income tax returns - No
Verification of dp
___ is the capital a borrower is putting towards the purchase of a property. This can be verified using: - Three months of bank
Property type
Can be verified using the MLS feature sheet, or the legal description of the property sourced from the property title
Property value
Can be determined by an appraisal completed by an independent appraiser, who provides an estimate of the property's curre
Credit history
Can be documented using a credit report sourced from Equifax and or TransUnion
3 years
12(1)(m) requiring licensees and former licensees to keep records and books of account and respecting the contents of the rec
- Complete and accurate - Property stored to protect against improper access to clients' personal information - Retained for a
In compliance with requirements from the Real Estate Council of Alberta (RECA), the Canada Revenue Agency, and federal and
Application file or loan application
A mortgage ___ refers to the paper or electronic mortgage application form which includes consent forms, disclosures, notes,
Separate loan file
Brokerages are required to maintain a ___ for each mortgage loan application, per s.105 of the Real Estate Act Rules. This rule
Everything
So, what does a broker need to keep in terms of paperwork? ___. You must keep all records created and received during a mo
All files
A brokerage must retain ___ and provide them immediately upon request to the Real Estate Council of Alberta (RECA) for aud
3 years after the end of the mortgage term
RECA requires mortgage brokerages to retain mortgage deal records for ___. However, if RECA has opened an investigation re
Hard (paper) copies or virtual (electronic) copies; Alberta
The Real Estate Act Rules set out comprehensive record-retention requirements but allow brokers the flexibility to establish th
policies and procedures
Brokers have a duty to communicate the brokerage's ___ about records retention to associates, associate brokers, and unlicen
physical and electronic documents
There are requirements for maintaining both ___ documents. Brokerages must maintain a separate physical loan file for each
Brokerage
Document maintenance and privacy are the responsibility of ___. However, the requirements around maintaining mortgage tr
At the end of each transaction (whether the transaction was approved or not), you are responsible for the following:
Commercial; Private
Brokerages that deal in ___ mortgages and many brokerages in ___ (different than term above) lending do not use mortgage o
compliant and efficient
At the brokerage level, mortgage origination software allows brokers to monitor their mortgage associates' deals and use exte
1. Create a new loan application file 2. Enter the application type and purpose 3. Enter the applicant's personal info 4. Enter em
Steps to create a mortgage application file (there are lots, try to remember all but briefly)
Information Protection and Electronic Documents Act (PIPEDA); Personal Information Protection Act of Alberta (PIPA); Real Es
As a mortgage broker, you will regularly collect, use, and disclose personal client information. There are a number of privacy le
Personal Information Protection and Electronic Documents Act (PIPEDA)
At a federal level, the collection, use, and disclosure of personal information to organizations engaged in commercial activities
Personal Information Protection Act of Alberta (PIPA)
Outlines requirements and obligations related to the collection, use, and disclosure of personal information by private-sector o
Real Estate Act Rules
Dictate specific obligations around the collection, use, and disclosure of personal information related to real estate transaction
Mortgage broker
In recent years, brokerages have moved from storing records in paper files to storing records electronically. While the ease of
Electronic document storage
Some advantages to this: - Access anywhere, anytime. - Provides transparency on when a document was sent, by whom, and t
Electronic document storage
Some negatives to this: - Unencrypted information can be stolen or misdirected. - Information may be retained on unused ser
Breaches of privacy
Incidents that qualify as ___ include such things as the following: - Loss or theft of a USB stick, computer, or other electronic d
Canadian Anti-Spam Legislation (CASL) and the Personal Information Protection and Electronic Documents Act (PIPEDA)
What are the two pieces of legislation that defined what would be considered acceptable behavior, what rights individuals had
CASL
Under ___ regulations, brokerages and associates had to modify email campaigns to ensure they had explicit permission from
PIPEDA
___ provided strong protection for consumers to understand who had access to their personal information, what it was, who h
Small fines (several thousand dollars) to very large (hundreds of thousands to millions of dollars), professional disbarment, or
Failure to comply with PIPEDA and CASL can involve consequences ranging from ___
RECA
Who is responsible for handling complaints, investigations, hearings, and discipline regarding the compliance of its members w
lender; the brokerage
As the mortgage transaction comes to a close, you are entitled to receive your compensation for the deal. Once the mortgage
split
Typically, you will split your commission with your brokerage. The portion of the commission that you receive is negotiated as
Of total commission, brokerage pays associate 90% and keeps 10% for the brokerage
what does a 90/10 split mean
Basis point (abbreviated as bp and pronounced as "beep")
The general "unit" of compensation for mortgage brokers and associates is the ___. It is pre-set by the lender
There are ___ basis points in 1%
$500 ($100,000 x 0.005)
If the finder's fee on a $100,000 deal is 50bp, the brokerage will receive ___ for that deal
commission-based
Within the industry, there are several different ___ compensation models, including the following: - Referral fees - Brokerage
Referral fee
A one-time fee paid by one brokerage to another for referring a client whose mortgage is ultimately approved and fully funde
Brokerage fees
As you know, some brokerages charge additional fees to the applicant, depending on the brokerage's corporate policy or the c
Finder's fees (also called upfront fees)
One-time, lump-sum payments from lenders to brokerages based on the loan amount and term length. The larger the loan am
Trailer fees
Based on a model by which an individual receives a smaller lump-sum finder's fee when a deal closes but receives a small recu
Trailer fees
Advantages and disadvantages to this: - New brokers may not like to be paid by these because their income will likely be spora
Volume bonuses (sometimes called the aggregate volume model)
Mainly offered at the brokerage level. An individual at a brokerage is compensated based on the company's efforts as a whole
Value bonuses
Related to your efficiency rating or funding ratio. With this model of compensation, an individual is paid based on the number
not qualify
Regardless of the expected efficiency rating or funding ratio, a low level of efficiency in your submitted applications would ___
Lender incentives (also called loyalty programs or loyalty incentives)
Come in many forms and are intended to encourage mortgage associate performance and lender loyalty. For example, lender
While an individual brokerage may have variations on their specific process, it's typically based on factors such as: (in terms of
Compliance
What begins when an application closes. The associate completes an application and closes a transaction with a lender. The as
compliance package
During the application's life cycle, the associate will collect and supply documentation for the consumer to support the transac
Compliance officer
What is the name of the role with this responsibility/ job: Once the associate updates information on the application and uplo
Payroll officer
This person confirms the compliance officer has validated the compliance package and determines the associate and payment
Funds have been advanced
The transaction is not closed until the mortgage ___, the compliance process is complete, and you have received your compen
Soft
___ marketing techniques that you can use soon after closing to follow up with your client and acknowledge their patronage:
What are some soft marketing techniques that you can use soon after closing to follow up with your client and acknowledge t
Private mortgage lenders
Provides uninsured mortgage loans directly through their own financial resources or mortgage syndication
Private lenders
Non-institutional lenders who do not have access to mortgage default insurance through the Canada and Mortgage Housing A
Private mortgage lenders
Provides funds where traditional financial institution lenders cannot or will not
Private lenders specialize in financing areas such as:
efficiency and flexibility
When used correctly, private lending can provide ___. In some instances, it may be cheaper than other lending alternatives av
Private lenders can afford flexibility with terms such as:
- If a transaction closes too quickly for a typical financial institution - May have less strenuous document requirements - If a bo
Advantages of private mortgages vs. traditional lenders (/ traditional lender barriers):

The Criminal Code also protects consumers from any interest rates (APR) that exceed ___
Risks of private lending to the borrower
Individuals, syndicated mortgages, mortgage investment corporations (MIC's), mutual fund trusts
What are the main groups of private lending
Individual investors
RRSP; TFSA, or self-directed pension plan
A registered loan's funds come from ___
Syndicated mortgage
An arrangement whereby more than one investor agrees to lend money using real estate security to secure the loan.
Mortgage investment corporations (MICs)
- Pools shareholder capital and lends across multiple mortgages. They are corporations formed under the rules set out in s.130
Mutual fund trusts
- A structure using a corporation, partnership, or trust where investors are issued units instead of shares. - The trust structure
Provincially
In Canada, the real estate and securities industries are ___ regulated
Canadian Securities Administrators (CSA)
The is an association of all provincial securities regulators.
Securities
In 2010, the CSA redefined mortgages as ___. In the case of default, a lender can take legal action to recoup their loan amoun
Mortgage investment entities
The Canadian Securities Administrators define private lenders like mortgage syndicators, MICs, mutual fund trusts, or limited p
Registration
___ is required to be licensed as an exempt market dealer and raise capital as eligible, accredited or permitted investors.
Consumer Protection Act
Private mortgage lenders must comply with the ___ by disclosing the terms of the mortgage transaction.
Liensed
As a mortgage broker, you must be ___ to sell mortgages
brokerage
If a consumer wants to hire a broker to represent them, the mortgage professional they hire cannot be with the same ___ as t
- Any conflicts of interest - Whether they are lending their own funds - Whether they are lending a family member's funds *Do
The appropriate disclosure and service agreement forms must be signed, and mortgage brokers must declare:
What are the key points to gathering information
- Application form - Income - Credit bureau - Property info - Lender's notes
What is included in private loan documentation
Commitment
Private lender mortgage commitments typically include the lender fee and attach the disclosure form to the ___
Determine property value
The overall goal of property appraisal is to ___ in terms of how it compares to other properties in the area, location, amenities
area, location, amenities, and other factors.
The overall goal of property appraisal is to determine property value in terms of how it compares to other properties in the
Neighborhood, the property located within the neighborhood, the exterior site influences, landscape, curb appeal, etc. Proper
The appraiser collects data regarding the ___ They also collect interior data regarding ___
1. Cost approach 2. Income approach 3. Sales comparison approach
With the property data, the appraiser may use one or more of the following three approaches to conducting a valuation:
Cost approach to value
In this approach, a property is valued based on a comparison with the cost to build a new or substitute property. The cost esti
Income approach to value
- In this approach, an appraiser analyzes a property's capacity to generate future benefits, and uses the potential income as a
Sales comparison approach to value
This approach is the process in which an appraiser applies quantitative and qualitative techniques to comparable sales to deriv
- Check the report was ordered per lender preferences and guidelines. - Ensure the appraiser's opinion of value is substantiate
Things to check when verifying appraisal reports
Appraisal reports contain a number of key details, all of which should be complete in a valid report. These include:
Neighborhood description
This section of the appraisal examines the subject property's community, describing the type of district, average age and cond
Description of improvements
This section of the appraisal looks at improvements to the land, specifically the house on the property. These sections provide
In an appraisal, using a cost approach to value, this section is somewhat technical so you may only want to check the following
In an appraisal, using a sales comparison approach to value, this section is somewhat technical so you may only want to check
Based on lender instruction, you may order an appraisal through:
Blind model and preferred partner
What are the two types of an appraisal management company (AMC)
Blind model
The lender indicates their approved appraisal management companies. The broker places an appraisal order through the AMC
Preferred partner
The lender indicates their approved appraisal management companies. The mortgage broker places an appraisal order and se
Upfront
The appraisal fee is paid ___
does not
Your client ___ receive a copy of the appraisal
As soon as possible
Place an appraisal order ___ to meet condition dates
Online
Most appraisals can be ordered ___
mortgage administration
In general terms, ___ involves the administrative processes associated with collecting and remitting mortgage payments, prop
- Record-keeping. - Coordinating with lawyers. - Funding the mortgage. - Collecting monthly payments. - Collecting and paying
Duties in mortgage administration involve:
lender; mortgage brokerage
The ___ often performs mortgage administration. However, there are circumstances where a ___ performs these duties
1. Receive an executed commitment letter or agreement between lender and borrower 2. Instruct the legal and insurance con
As a broker, practicing proper mortgage administration procedures requires collecting necessary information and documents u
For mortgage administration, the mortgage software you use must be able to:
Canadian mortgages; GST collection
It is very important to select a mortgage software system that supports ___ and ___
Key agreements
Prior to servicing a mortgage in conjunction with a lender, a set of ___ between the lender and the broker must be in place. Th
Servicing agreement, a trust declaration, a disclosure statement, and an inter-lender agreement between the multiple lenders
Prior to servicing a mortgage in conjunction with a lender, a set of key agreements between the lender and the broker must b
Service agreements include the following information:
monthly
The general trust account, which is enacted by the trust declaration document, should be reconciled ___
under-funded
The general trust account may not at any time be ___. No banking fees may be charged to the trust account, and funds must b
Borrowers
Once a mortgage has been approved and finalized, ___ are responsible for regular payments (monthly, semi-monthly, or biwe
4 days
Monthly payment collection should start no later than ___ before month-end
1. Interest bills are system-generated and reviewed by the broker. 2. Interest bills are sent via online delivery methods to the b
The payment collection and remittance process follows these steps:
2 days prior
Interest bills are sent via online delivery methods to the borrower at least ___ to collections detailing the amount o the month
municipality
When securing a new loan, determine the property's ___, as location determines the schedule of property tax payments. The
30 days
If the borrower requests to pay their taxes, they must provide proof of payment to the broker and lender within ___
amount collected
If the broker collects taxes with the monthly payments, they determine the ___ each month. The broker holds the payments i
15 days prior to the tax due date
The broker sends payment to the municipality for taxes on behalf of the borrower no later than ___. The broker provides a sta
Certificate of Insurance (COI)
To do with property insurance: A ___ is collected and approved by an insurance consultant at the time of funding a loan
Annually, at the time of COI maturity)
___, the borrower provides the broker with a renewed policy for the loan
Broker's
The ___ responsibility to do with property insurance is to review the policy and verify there are no changes, including the insu
- Taking all action to ensure the borrower and all others under contractual agreement remedy the default. - Diligently pursuing
When a loan is in default, a mortgage broker has a specific set of duties to carry out. These include:
As early as possible
The broker must contact the borrower ___ when outstanding debt develops since delays in following up on the default can be
In the mortgage recovery process, a broker is responsible for:
Apply for a final foreclosure order and possession
Where foreclosure proceedings are in motion, the broker is required to ___ of the mortgaged property at the earliest date per
discontinue
After foreclosure proceedings are in motion, the broker may ___ the action if costs and all payments in arrears are paid before
valid and enforceable judgment
In addition to realizing the mortgage security, the broker must obtain a ___ for the outstanding debt under their corporate gu
The broker should seek judgment against:
Total debt or deficiency outstanding
If the borrower has a strong covenant, the broker should obtain a judgment for the ___. However, the broker must be alert to

The ___ is responsible for adhering to all applicable laws affecting the property, including provincial statute limitations, to ens
maturity dates
The broker must keep a record of the ___ of all loans they manage
3 months prior to maturity
At least ___, the broker should communicate with a borrower to determine if they will repay the loan at maturity or request a
1. Communicate with the lender and determine any additional underwriting required to approve a renewal. - If the lenders ag
If a borrower requests a renewal, the broker's responsibilities are to:
Renewed
The loan is considered ___ till the new maturity date
Commercial mortgage
A mortgage loan using a business or income-generating property as the loan security
Commercial mortgage
This is secured by properties such as a retail complex, apartment block, office, industrial commercial buildings, manufacturing
Purchase transactions, refinance transactions, construction loans for development of property
What are the types of commercial mortgages
new or existing properties
Commercial purchase transactions buy ___. Commercial refinancing transactions may involve the following: - Paying out an ex
Industrial, office, multi-family, retail
Commercial property is defined by subcategories based on use. What are the subcategories
Industrial
Properties for manufacturing, production, distribution, and logistics. These properties can vary from small mom-and-pop equi
Office
Properties intended to provide space and amenities to businesses. The differentiating factors for ___ properties are generally
Multi-family
Residential properties with five or more separate dwellings. Examples include single high-rise towers, expansive townhome de
Retail
Properties intended to market and sell consumer goods and services. Examples include grocery-anchored centres, power cent
Commercial property
Other types of property classified as ___: - Vacant land zoned for commercial development (serviced or unserviced). - Leisure
Portfolio diversification
Commercial mortgages provide investors with ___. If an investor had $1 million in cash, they could either: - Own a single prop
Capital stack
Senior debt lenders
What is the name of the primary debt lenders in capital stack
Mezzanine and subordinate debt lenders
What is the name of the debt lenders that are second to receive payment and earn a slightly higher rate of return in capital sta
Equity investors
What is the name of the debt lenders that typically receive all excess proceeds, if any. They earn an unrestricted rate of return
Leverage
Uses debt financing to potentially increase the rate of return and access bigger deals and opportunities that would be out of re
Positive and negative
What are the types of leverage
Cost of capital and rate of return
The ___ on the investment are the two main factors that determine if a leverage is positive or negative
Positive leverage
The rate of return on the investment (capitalizatino rate) is higher than the interest on the mortgage. The investor earns a high
Negative leverage
The interest rate is higher than the rate of return, and the investor earns a lower return on their equity
negative
Investors typically don't buy properties where they expect a ___ leverage unless they see considerable upside in rent or value
Owner-occupied property
- If a commercial real estate owner intends to occupy a unit of their commercial property for the use of their business, it is con
qualifying standards
Both the applicant and the property must meet ___ in residential mortgages. Residential lenders prioritize the applicant's abili
qualify
Commercial mortgages similarly require the applicant and property to ___. Commercial lenders, however, prioritize the value
Commercial lenders
___ have their own qualification guidelines that specify the types of situations they prefer to lend on. As before, it is vital that
Income, equity, and credit brhavior
For residential mortgages, lenders largely structure their underwriting guidelines around factors related to the applicant's ___
- Property valuation - Cash flow - Ability of the property to generate income - Applicant's ability to service the loan payments f
For commercial mortgages, lenders largely structure their underwriting guidelines on:
service ratio (GDS), total debt service ratio (TDS), and loan-to-value ratio (LTV)
As discussed in Mortgage Fundamentals, residential qualifying ratios are the ___
Loan-to-value ratio (LTV), and the debt service coverage ratio (DSCR)
Commercial qualifying ratios are the ___
Loan-to-value (LTV)
The ratio of the total loan amount of the commercial mortgage to the purchase price or appraised value of the property expre
Debt service coverage ratio (DSCR)
The ratio of revenue remaining after paying property operating expenses (Net Operating Income (NOI)), divided by the total re
higher
The ___ the DSCR, the easier it is to obtain a loan
larger
Commercial mortgage loans are typically much ___ than residential loans, ranging in value from hundreds of thousands to hun
Residential applicants
Usually individuals who want to buy property as a place to live
Commercial applicants
Typically experienced investors, often businesses, with an interest in the investment or income-generating value of the proper
Sole prop., Partnership, corp., Limited liability company, limited partnerships
Types of business for of commercial applicants
Sole proprietorship
One owner is responsible for all assets and liabilities of the company. If necessary, the owner's personal assets are accessed to
Partnership
The owners are responsible for the assets and liabilities of the business. There is no severance between the owners' personal
Corporation
Legal entities recognized under law as an individual. The people running this are typically not liable for debts incurred by it. Th
Limited liability company
Owners, directors, and stakeholders' personal assets are protected from the company's debt obligations. Income flows throug
Limited partnerships
Common when groups assemble an investment in a real estate development. Requires a written agreement between the gene
corporations
Commercial lenders prefer to lend to ___ and may require an applicant to be, or become, incorporated. In Alberta, the primar
Personal guarantee
A promise made by a business owner obligating them to honor the debts incurred by the business. The lender determines the
personal assets
When a lender has a personal guarantee, they can pursue the owner's ___ if they default on the loan and the business assets
Residential mortgages
With ___, the relationship between you and your applicants may be somewhat personal. They are not just buying property; th
Commercial mortgages
With ___, you generally deal with experienced applicants working with a business portfolio. They are concerned with the value
commercial mortgage deals
While residential mortgage deals tend to be similar from one to the next, any two ___ generally have little in common. There a
complicated
Additionally, commercial mortgage deals are ___ transactions compared to residential mortgages. The amount and type of pa
longer
Commercial mortgages generally have a ___ turnaround relative to residential mortgage closure periods. It's not uncommon f
Additional conditions
One of the reasons it takes longer to underwrite a commercial mortgage is the ___ lenders specify. Here are some examples: -
Posted rates
Lenders base interest rates for residential mortgages on their ___. Although some lenders allow discounting the ___ (same), th
commercial mortgages
Typically, ___ do not post interest rates because the transactions vary so widely from deal to deal. Lenders review commercia
175 to 250 basis points; 250 to 400 basis points
On average, expect ___ over the Government of Canada Bond yield with similar duration, depending on term length and risk p
BBB-rated
Note that commercial mortgage spreads generally correlate with ___ corporate bonds and are often analyzed in relation to ea
Do not
For straightforward residential deals, most mortgage brokerages ___ charge extra fees. When the deal is complex, difficult to a
brokerage fee
Brokerages almost always charge a ___ for commercial deals. Given the significantly larger loan amounts associated with com
higher
Closing costs for commercial transactions are significantly ___ for commercial properties because they often involve real prop
Commercial
Property which include smulti-family rental with more than 5 units
Residential
Single-family property
Commercial
Purchase, refinance, and construction
Residential
Purchase, refinance, borrow equity, switch, renew
Commercial
Residential
Commercial
Residential
- Underwriting guidelines structured around applicant's employment income and credit behavior - Ratios - GDS, TDS, LTV - Loa
Commercial
Usually experienced investors or an incorporated business buying, refinancing, or constructing a property for investment or in
Residential
Usually an individual buying or refinancing a property as a place to live
Commercial
Very personal relationship where trust is paramount to succeed
Residential
More personal, often involves a sense of emotional connection
Commercial
Residential
Commercial
Time to closing is two months or longer for larger and or more complex deals
Residential
One to two weeks to close, on average
Commercial
Residential
- Posted interest rates, sometimes discounted - Brokerage fees for unusual, complex, or private lender deals, typically no fees
zones
Land is divided into these that define the property type and its permissible uses. Lane use ___ and bylaws regulate the develo
municipal websutes
Land use bylaws and maps are typically found on ___ and municipal resource centres. Physical copies are usually available, bu
Geographic Information Systems (GIS)
Commercial real estate professionals should be aware of the respective ___ in their area of interest. For example, the City of E
Industrial
What does the land use code "I" stand for
Residential
What does the land use code "R" stand for
Commercial
What does the land use code "C" stand for
C-N1
For example, in Calgary, ___ is the land use code for a commercial property zoned to offer small-scale retail services in an urba
C-N1 (Commercial neighborhood)
What is the zoning code for this: Details of permissible usage: Small storefront retail businesses. Caters to local pedestrian traffi
C-N2 (Commercial nerighborhood)
What is the zoning code for this: Details of permissible usage: Smaller retail businesses and services. Caters to automobile traffi
C-C1 (Commercial community)
What is the zoning code for this: Details of permissible usage: Small to medium-sized businesses. Set apart from residential pro
C-C2 (Commercial community)
What is the zoning code for this: Details of permissible usage: Medium-sized businesses. Multi-property retail complexes. Situa
C-COR1 (Commercial corridor)
What is the zoning code for this: Details of permissible usage: Small storefront businesses on both sides of the street. Caters to
C-COR2 (Commercial corridor)
What is the zoning code for this: Details of permissible usage: Small to medium-sized businesses situated on commuter routes
C-COR3 (commercial corridor)
What is the zoning code for this: Details of permissible usage: Small to medium-sized businesses situated on high-traffic roads
C-O (Commercial office)
What is the zoning code for this: Details of permissible usage: Site purposed for office space. Some retail businesses and servic
C-R1 (commercial regional)
What is the zoning code for this: Details of permissible usage: Large-acale retail operations. Typically single-use sites. Caters to
C-R2 (Commercial regional)
What is the zoning code for this: Details of permissible usage: Large-scale retail operations. Multi-tenant buildings. Situated on
C-R3
What is the zoning code for this: Details of permissible usage: Large-scale retail, dining, and entertainment developments. Allo
one aspect
Land use bylaws are only ___ of the legal permits that affect the development of a commercial site. Most projects require a se
Development permit
A document issued under a land use bylaw to authorize a development. The permit may be approved or refused. If refused, th
Building permits
Ensure that construction abides by municipal bylaws and is in accordance with approved plans
Physical condition, location, commercial tenants, commercial LTV ratios, mortgage default insurance
What are other factors lenders consider in commercial property when deciding whether or not to fund a mortgage request
Physical condition
Directly impacts both its revenue-generating potential and its resale value. A building inspection is not only recommended but
Location is another prime consideration, as it:
Location
For a retail property, the ___ is of the utmost importance to attract both quality tenants, and customers and equally importan
Size an dstrength
When analyzing a property that has been leased to one or more commercial tenants, the lender considers the ___ of the tena
favorable terms
A mortgage secured by a property leased to tenants with nationwide operations (e.g., Subway, Tim Horton's, Sobeys) will likel
loan-to-value (LTV)
Commercial lenders vary greatly on the ___ they are willing to accept for a commercial mortgage. The type of business and co

An LTV ratio of ___ is considered to be standard for most stabilized income-producing properties
lower
As a general rule, LTV ratios are ___ for commercial mortgages than residential mortgages. Commercial lenders don't typically
default insurance programs
Lenders may be willing to consider financing up to a higher LTV if mortgage ___ are available. If mortgage ___ (same) is availab
Mixed-use property
- Has two or more functions - Typical example is above building with retail stores on the main level and residential apartments
multi-unit residential
- Has more than 4 residential rental units - Rental apartment buildings are the most common example of a multi-unit residenti
Office property
- Single-unit or multi-unit buildings designated for business use. Office properties are categorized into types such as class A, AA
A
What class for office property is this: Likely newly-built, with high-end finishes, state-of-the-art construction and servicing, and
B
What class for office property is this: Generally former Class A properties that are well fitted but are dated compared to brand
C or lower
What class for office property is this: Includes fewer amenities and conveniences with small or no windows, very dated finishe
Strip malls, stand-alone storefronts, and large regional shopping malls
Retail property includes
Anchored or unanchored
Retail properties may be either ___
Anchored
Where a large, well-known tenant such as a department store or large supermarket draws consumers into the shopping centr
unanchored
A smaller strip mall or shopping plaza
best mortgage terms
As mentioned, properties that have a large, nationally-branded anchor tenant give lenders a sense of stability in terms of the i
decreases; increase
As brand recognition and information about the tenant ___, interest rates may ___ (different). For example, a shopping centre
stable and reliable
Lenders can be quite receptive or quite reluctant, depending on the type of business. For example, restaurants, bars, and recr
Warehouses, distribution centres, storage facilities, manufacturing plants, research facilities, service shops
Industrial properties include: (May be single-tenant or multi-tenant buildings)
limited use in the event of a foreclosure; environmental issues
Two potential lender concerns about industrial property include ___ and ___ such as ground contamination. Either case may m
property owners
Environmental liability falls on all ___, and lenders will not lend on properties with environmental contamination.

Chartered banks (prime or institutional lenders) typically accept LTVs up to ___ for industrial property.
Car dealerships, churches, gas stations, nursing homes, hospitals, sports facilities, hotels, motels, and other properties designe
Special-use properties include things like (don't need to name all, just get the idea):
Reluctant
Many lenders are ___ to finance special-use properties such as churches or religious buildings. The appearance and functional
Gas stations
___ are another special-use property that can be difficult to finance because of the potential for environmental contamination
Lenders that fund residential properties and MICs
Who can also deal in commercial mortgages
Commercial mortgages
Unlike residential mortgages, where lenders offer specific mortgage products (e.g., cashback mortgages, new-to-Canada progr
Commercial lenders
Do not typically post fixed interest rates; the interst rates are risk-based, established as a spread over the cost of funds or agai
Underwriting guidelines
The ___ for commercial lenders are typically structured around the property. They consider the applicant's experience and fin
min and max loan amt and the types and locations of commercial property
Commercial underwriting guidelines only outline variables such as ___ they are willing to invest in. The rest is likely to be deal-
Institutional lenders, Mortgage Investment Corporations (MICs), Private lenders
What are the general types of commercial lenders
Within the context of commercial mortgage lending, institutional lenders include the following groups: These categories reflec
Commercial transaction
Generally, a ___ is suited to an institutional lender if: - The applicant has a significant amount of equity (down payment). - The
Banks, credit unions, life insurance, and trust companies
Lend their "own" money from their client's savings deposits, premiums, and loan interest
Conduit lenders
1. A commercial client is seeking mortgage financing 2. A conduit lender lends on behalf of investors to clients 3. Investors put
How conduit lending works (in steps)
higher
Conduit lenders are a major source of large, fixed interest rate term commercial loans, and they offer slightly ___ fixed rates o
Conduit lenders
The loan must be refinanced with another lender when the mortgage matures, as the ___ does not own the mortgage, and th
Pension fund
___ dues are collected from employers and their employees. Collectively, these monies add up to large amounts of capital, wh
Pension funds
Because they are so large, ___ do not get involved in financing single-family residential mortgages. They tend to be active in th
Pension funds
Typically prefer to finance mortgages on large office buildings, shopping centres, and other commercial mortgages in the $25-
Business Development Bank of Canada (BDC)
Is a Crown corporation with a mandate to provide funds for commercial, industrial development, and sometimes farming. The
Mortgage investment corporations (MICs)
- Lend money for residential and commercial mortgage transactions. They mainly invest solely in residential mortgages, comm
Short
Private lenders operate similarly in commercial transactions as they do in residential transactions. They offer ___ terms (typica
bridge financing
Private lenders are often used for ___ to take advantage of time-critical opportunities or manage until the borrowing situation
Private lenders
Private commercial lender
Generally, a deal is suited to a ___ if the following apply: - The applicant has a lower percentage of equity in the property (e.g.
Private companies, individuals, and mortgage investment corporations (MICs)
Commercial private lenders include:
Private lenders
Range from individuals to privately capitalized corporations. As you recall, they are knowledgeable and experienced investors
Lower interest rates, improved LTV, and title protection
Many commercial borrowers seek mortgage insurance for various benefits, including:
Canada Mortgage and Housing Corporation (CMHC)
Mortgage default insurance is available for certain commercial mortgages through the ___
CMHC
___ insurance influences the lender's minimum LTV ratio
insurance products
CMHC offers ___ for commercial properties
CMHC coverage
___ qualifies the applicant for a lower interest rate, often at least 1% less than conventional mortgages
1%; 6.25%
Insurance premiums vary from as low as ___ to ___ of the insurable mortgage amount. Fees are also variable, but an average
full amortization period of the loan
Also, note that CMHC insurance coverage is for the ___, so the insurance does not cease at the end of the initial term of the lo
CMHC offers multi-unit mortgage default insurance applicable to new or existing rental multi-family residences, student reside
title insurance
Like residential mortgage transactions, lenders and borrowers can purchase commercial title insurance. Commercial ___ polic
1. Validating any referral sources 2. Developing rapport with the business owner 3. Discovering the needs, goals, and intention
The process in commercial mortgage brokerage is the same as a residential mortgage. You will need to create, assemble, and a
due diligence
As you learned, appropriate ___ to validate the source is always required if you receive a referral from an unknown source. Sim
rapport
No matter who the commercial borrower is (individual, partnership or corporation), you must develop a comfortable but profe
goal
A commercial broker's __ is to achieve a professional, business-like dynamic and reassure the borrower's trust and confidence
two parties
1. Discussing the borrower's needs, goals, and intentions for borrowing and developing broker-client rapport 2. Discussing fee
For a commercial mortgage, the initial analysis to collecting and analyzing information occurs in these basic stages:
financing
Commercial borrowers prioritize obtaining the best ___ available to meet their needs
borrower and their property
You should stay informed about what lenders prefer in a ___. The property type, degree of borrower experience, assets, and e
open
Commercial lenders are usually more ___ to lending to borrowers who have experience owning and managing the type of pro
net worth
Borrowers who demonstrate ___ over and above the equity and strong cash flow from their business holdings have a better ch
conservative
If the borrower's cash flows and net worth do not exceed the equity, the lending offer will be ___. The lender may even reject
Lower
Higher risk = ___ LTV
1. Additional equity is required to reduce the lender's risk 2. Additional mtg security is required via a collateral mtg on the othe
All commercial loans carry a significant amount of lender scrutiny. However, there are generally three outcomes for mortgage
Consent, relationship and compensation disclosure, cost of credit disclosure, brokerage fees, good faith deposits, exclusivity a
The AMBA private mortgage lenders forum have developed a disclosure form (this can be found on the members' side of the A
Consent
The borrower must sign a written ___ before you can retrieve or share any personal or sensitive information such as credit bu
Relationship and compensation disclosure
You must discuss and complete both the ___ document with commercial and residential borrowers
Cost of credit disclosure
Unlike residential brokers, commercial mortgage brokers are not required by the Fair Trading Act (FTA) to complete this or ann
Brokerage fees
Generally, these are standard in commercial mortgage transactions. A discussion of the expected amount and other related co
Good faith deposits
Occasionally, brokerages require the borrower to submit a ___ in a trust account to be held by the brokerage
Exclusivity agreements
Commercial mtg brokerages may require borrowers to sign this. This intends to prevent borrower loan "shopping" - taking a lo
Service agreements
Personal guarantees
any type
Consent is a requirement for ___ of mortgage.
Exclusivity agreements
Not required on a residential mortgage and are often present on commercial mortgages
legal and formal
Residential disclosure has ___ components because many residential clients are unfamiliar with the process or inherent risks
Experienced investors
Typically, commercial borrowers are ___ - often businesses rather than individuals. The type of borrower influences the docum
beginning
Brokerages specializing in commercial mortgages may use detailed paper application forms to gather information at the ___ o
commercial loan
Some typical documents required for ___ requests include: - Application documents such as the application form and service a
The type and amount of documentation required for commercial mortgages are complex. When you collect preliminary docum
Because the borrower in a commercial transaction is often a business, a significant part of your preliminary discussions, data c
The history of the business and each of its executive officers and shareholders
What is included in the category "company history and management team"
The company's (and management team's) experience in operating income properties. Information about any other properties
What is included in the category "experience"
Information about the company's general operations
What is included in the category "operations"
A list of the company's professional advisors (accountant, auditor, lawyer, banking references, etc.)
What is included in the category "advisors"
Information about any corporate joint ventures or other agreements or activities that may affect corporate decision-making
What is included in the category "joint ventures"
Business plans, cash flow statements, operating statements, projected project budgets, and financial statements
What is included in the category "financial"
Information about if and what other security may be required by the lender
What is included in the category "additional security"
Detailed information about the project, such as survey certificates, environmental reports, appraisal reports, building conditio
What is included in the category "proposed purchase or project"
credit reports, T4s, and personal income statements
- Initial analysis in commercial mortgage includes reviewing the borrower's ___ - They still evaluate the borrower's ability, alon
presently
Net worth and personal guarantees: This involves providing ___ dated and signed personal net worth statements for the busin
credit history
It is also possible to get ___ information about a corporation or business. You must go through a registry company to do this. T
- 3 yrs of financial statements - Property income and operating statements for each property owned by the borrower - Cash flo
The usual kinds of documents a lender may require to substantiate a corporate borrower's income include:
influencing factors
Down payment is an important element in the initial analysis, just as it is in residential mortgage brokerage. Commercial lende
high-dollar
Commercial mortgages are usually ___ figures, so the amt of DP required is also significant
Repayment terms
If the borrower borrowers money for the down payment (equity), the lender will want details of the ___. You must always ver
priority
As you recall, the subject property in a commercial transaction is the ___ focus for the lender. The same documents required f
historical title search
Tip: If the title was recently transferred, it's due diligence to complete a ___ and review the history of ownership and transacti
property
In addition to resale value, both the borrower and lender are interested in verifying the income-generating potential of the __
income stream
Documents related to determining the actual or potential from the subject property include: - The building's operating statem
Property appraisal
estimate
If no property appraisal is available, you may need to ___ the amount of revenue the property generates to estimate cash flow
connecting the borrower w/ a suitable lender
If the preliminary discussions and documentation support a general decision to proceed, the next step is ___. Typically, a brok
Executive summary
- A ___ outlines why the borrower's mortgage application is suitable and desirable for the lender. If the lender is interested, th
present, explain, and have it signed by the borrower
If and when you receive a letter of interest from a lender, you must ___ before the lender will proceed any further in processin
- The reason for the loan (pur, refi, construction, etc.) - A brief description of the borrower and prop - A macro and micro analy
An executive summary usually includes:
30 days
Note: It can take some time (___ or more) to find a commercial lender who will provide a letter of interest, so be sure that you
communicate between the lender and the borrower and provide and verify additional documentation as required
After the borrower accepts a letter of interest, you will be required to ___
appraisal and sale prices
Commercial property, like residential property, is subject to shifts in the real estate market. The market value of a property is c
Expansion, excessive supply, recession, and recovery
The phases to a real estate cycle IN ORDER are:
Expansion
When the economy in a particular area is on an upswing, showing strong job growth, the real estate market is in ___. At this p
Excessive supply
Overbuild. During this phase, capital is easily accessible and as a result, supply exceeds the demand for space in a relatively sh
Recession
As a correction to the previous phase, markets will experience this, during which rents and property values compress based on
Recovery
After the previous phase, which is usually much longer than the step before it, there is this phase, During this period in the cyc
costly; time-consuming
Lenders almost always require a property appraisal to qualify for a commercial mortgage. Compared to residential property, c
few hundred; applicant
- A residential appraisal typically costs a ___ and is usually paid by the ___ - A commercial appraisal, on average, costs $3,500
increase
The lender may have certain requirements to be addressed from the appraisal. If the lender requirements change or add to th
approved list
Commercial appraisals should be obtained through a firm or individual on the lender's ___. It is particularly important that the
income
Most often, commercial property appraisals use the ___ approach
Income approach
Direct capitalization, discounted cash flow
The two primary methods of valuation using the income approach include:
Direct capitalization
Divide the stabilized net annual operating income (NOI) by a singular rate, taking into account the investment characteristics o
Discounted cash flow
Calculate the PV of future cash flows over a specified period, including the potential proceeds of the reversionary value, to det
highest and best use
- Commercial appraisal reports should contain a detailed analysis of the ___ of the subject property - This refers to the use of a
An appraisal report should be complete in full, including:
The factors impacting property value are numerous and should initially include:
limiting assumptions
Ultimately, the development of the pro forma and capitalization process should be supported by sound reasoning that is read
Return on Investment (ROI)
- A performance measure or measure of benefit related to the question "how much money will I earn on the money I invest?"
favorable
Income-generating and invstment properties must have a ___ ROI to interest buyers and invsetors. Aditionally, lenders require
For example, the pp of an apartment building or an office prop is essentially a lump-sum investment. The ROI occurs through:
rent
Rental property tenants pay ___ to a property owner, whether the subject property is an apartment building with individuals o
potential rental revenue
If the commercial real estate rental market were such that the owner could rent space elsewhere for less, then the ROI would
Net operating income (NOI)
The gross income generated by a property after deducting vacancy allowance and operating expenses
Net operating income (NOI)
Gross income
The total income generated by a property
The overall rent paid by the tenants for occupation of the suite
In the context of rental properties, gross income can be defined as
net
For commercial property, the gross revenue collected is dependent on the particular lease. Often, commercial leases are nego
gross
Conversely, a commercial tenant can simply pay rent on a ___ basis, which is more typical of lower-grade assets.
1. Calculate the stabilized NOI 2. Calculate the capitalization rate
To determine commercial property value using the income approach:
1. Determining the potential gross annual income from all sources 2. Deducting an allowance for vacancy and bad debt 3. Ded
Determining the annual, stabilized NOI for the property involves:
Potential gross annual income
A revenue estimate accounting for all sources of revenue from the property. It assumes 100% occupancy for the property
Parking rentals, laundry facilities, or other income-generating areas associated with the subject property
Other income factored into the estimate of potential gross annual income includes:
Operating expenses
To determine NOI, determine which expenses are ___. Only ___ (same) payable by the landlord are included in the calculation
Operating expenses
The following list is examples of what?: - Property taxes - Fuel - Utilities (electrical, heat, and water) - Maintenance and repair
Operating expenses
The following list is examples of what?: - Property taxes - Fuel - Utilities (electrical, heat, and water) - Maintenance and repair
Property taxes
Fuel
Utilities (electrical, heat, and water)
- Sometimes the landlord pays all of this.; in other buildings, tenants are responsible for their share. Many buildings are not eq
Maintenance and repair
Reserve and replacement contributions
Management fees or salaries of on-site personnel
Property insurance
Misc expenses
Operating expenses typically do NOT include:
Deduction allowances
Potential gross income + other income - Vacancies and bad debts = Vacancies and bad debts - Operating expenses (landlord) =
How to calculate NOI on calc
$138,750 Calculated on calculator: Potential gross income ($300,000) + Other income ($50,000 parking + $25,000 laundry = $1
- You have an applicant, Jorge, who is seeking to purchase the Lantern Building, a commercial building with ten residential ren
Vacant building
A ___ has no NOI - no tenants means no income stream. However, a v___ still has income-generating potential. Calculating a p
market rent
Properties in similar locations with similar features and assets are the best estimators of ___
$138,750 On the calculator: Potential gross income (4 units x ($5,000 x 12) = $240,000) - Vacancy and bad debts (5% vacancy r
Big Z is a strip mall with four retail storefront units. It recently underwent renovations to update the design and décor and is c
capitalization rate
(I / R) = V I being NOI R being capitalization rate V being property value
IRV formula
Income / rate
Formula for property value
Value x rate
Formula for Income (NOI)
Income / Value
Formula for capitalization rate
Analyzing the sale data of similar properties
___ is the best method of determining an appropriate capitalization rate for your subject property
V=$1,500,000; LTV=75% Calculation NOI ($150,000) / Capitalization rate (R)(0.07) = Property value ($1,500,000) Loan amount
- You are arranging a commercial mortgage request for $1,125,000 for another client, Shapez Gym. The lender's LTV threshold
Discounted cash flow (DCF)
Reversionary value
Projected sale price of a property at the end of its holding period, i.e., the time from purchase to sale or time of lease expiratio
Determine the capitalization of the estimated NOI at the end of the holding period
To calculate the reversionary value, ___
Time value of money
- The concept that "a sum of money is worth more now than the same sum will be at a future date due to its earning potentia
The present value of all the payments they will need to make over the term of their mortgage
When someone takes out a mortgage to buy an investment property, the time value of money equation is ___
FV = PV x (1 + (i / n))^(nxt) FV = the future value of the money PV = the present value of money i = the interest rate n = numbe
Formula for FV (time value of money)
Today
The discounted, or present value, is the value of the loan ___
Sinking fund
income and cash flow analysis
If the property valuation sufficiently meets the lender's criteria, the next step in approval is an ___. The lender requires eviden
Owner-occupied
Rental or investment
If the property is a ___ property, calculate the debt service coverage ratio (DSCR). You do not have to calculate DSCR as part o
Debt service coverage ratio (DSCR)
Compares a property's annual net operating income to the annual mortgage payments, and the resulting value indicates whet
Net operating income / total debt service
Formula for DSCR
1.26 Calculation NOI ($950,000) / Total debt service (TDR)($750,000) = DSCR (1.26)
If NOI is $950,000 and the total debt service (annual principal and interest payments is $750,000, what is the debt service cove
income or cash flor
The DSCR value reflects the ___ of the property
The property does not generate sufficient income or cash flow to support the loan payments
What does a DSCR <1.0 mean
The property only generates enough income or cash flow to meet the mortgage payments: most lenders would consider this t
What does a DSCR = 1.0 mean
The cash flow or income from the property covers the mtg pmts by 1.x. Commercial lenders vary in terms of what "x" must be
What does a DSCR >1.0 mean
10 days to 3 weeks
The 48-hour "cooling-off" period applicable to residential mortgage agreements (noted in s.64(2) of the Consumer Protection
lawyer
After all conditions of the mortgage commitment are fulfilled, the lender will send mortgage instructions to the applicant's and
The applicant
Who pays for the lender's lawyer and their lawyer for commercial deals
closing
Closing costs, property tax adjustments, insurance, etc., are paid at ___ as expected in a residential transaction. However, the
closed
It is important to maintain contact with the applicant until the file is ___. Remember, the transaction is not ___ (same) until th
longer; 2 months
Commercial transactions take far ___ to close with a solicitor than residential transactions. Ensure you allow sufficient time fo
the brokerage
Once all mtg instructions have been carried out, and the funds are advanced, the lawyer will send a cheque to ___ for your co
RECA, the CRA, and federal and provincial privacy legislation
Your record keeping must be in compliance with the requirements from ___
unsolicited
Before sending any ___ email messages to former, current, or prospective clients, ensure you are compliant with current priva
Mortgage fraud
The deliberate falsification or misrepresentation of information in part or in whole during the process of applying for mortgage
Mortgage fraud
The deliberate misrepresentation of information to obtain mortgage financing that would not have been granted if the truth h
accurate and truthful
Borrowers have a responsibility to provide ___ information on a mortgage application. Providing false or inaccurate document
- Several transactions involving the same party or those undertaken by groups who may have links to one another - Transactio
Mortgage fraud involves one or more common elements:
What are the categories of mortgage fraud
Fraud for shelter
- To apply for a loan application using false information. - The most common occurrence of fraud in the industry - If an applica
Employment and other income
(In fraud for shelter): If an applicant is outside the normal range of Gross Debt Service Ratio (GDSR) and Total Debt Service Rati
Fraud for profit
Fraud for profit
Professionals possibly involved in this type of fraud include: - Real estate appraiser - Mtg broker - Lawyer - Credit agency empl
Straw buyer
- A person who makes a purchase on behalf of another person. This in itself is not illegal. They may, for a piece of the profit, le
Fraud for money laundering
- A type of fraud for profit in which illegally obtained money is fraudulently transferred into "clean," legitimate funds. - Those l
Fraud for title
- Occurs when someone uses stolen identity, fake documents, and identification to change the title on a property - The crimin
Foreclosure fraud
- Generally targets vulnerable, low-income individuals whose homes are in foreclosure or at risk of defaulting on their loans Th
Other financial costs attributed to fraudulent activities include:
Indirect cost
An ___ of mortgage fraud is the potential decrease in a neighbourhood's marketability and property values—especially to adja
real estate
Mortgage fraud has become increasingly sophisticated through the use of technology. Fraudsters can electronically manipulat
monetary
Criminal activity adversely affects various individuals, industries, and society as a whole. Mortgage fraud is no exception. The h
Mortgage fraud
___ impacts our public services, communities, individuals, businesses, and professions. It places stress on government services
legal system; safety services
pver-pay
Buyers may significantly ___ for a property, facing a financial loss when they sell. They may default due to a vendor take-back
legal costs
Identity theft results in significant financial implications. There may be ___ of restoring their identity, credit, or property title. P
physical
Even ___ consequences may result from mortgage fraud. Buyers can come to harm if they unknowingly purchase properties th
Emotional and psychological harm
99lenders and mortgage insurers
high-ratio mortgages
___ have high loan ratios - usually, the loan value exceeds 80% of the property's value. The closer the loan ratio gets to 100% o
fraud-for-profit
Criminal groups across Canada are involved in mortgage ___ schemes. They acquire properties for money laundering or becom
specialized skills
Some criminal groups commit a limited number of mortgage frauds using relatively simple schemes. Some sophisticated crimi
mortgage fraud; industry members
Consequences of ___ for ___. These consequences will be proportionate to the offence and may range from: - Internal sanctio
RECA judgment
Example of ___: Calgary, Alberta—As of the date noted, the Administrator of the Real Estate Council of Alberta (RECA), having
criminal offence
Apart from possible sanctions, the industry member could be charged with a ___. The Criminal Code of Canada sets the legisla
fraudulent activity
In this instance, any fraudulent activity carried out when trading in real estate, dealing on mortgages, or performing real estat
Criminal Code
Mortgage fraudsters may be charged under several sections of the ___, including sections not mentioned, depending on the n
False documentation
It is fraudulent to alter mortgage applications and supporting documentation to enhance the borrower's ability to qualify for t
Some of the more frequently altered or falsified documents include
False statements
Any ___ causing a lender to make a decision that would have not otherwise occurred is mortgage fraud. This includes making
Non-occupancy fraud
- The availability of insured, high-ratio, financing for the purchase of residential property is typically restricted to applicants res
Name manipulation
People with poor credit information may alter their name when applying for a mortgage to create a new credit bureau record
Identity theft
Sophisticated fraudsters can create fake identification and documents, or doctor existing ones. These may include: - Employm
Assumable mortgage
- A type of financing arrangement whereby an outstanding mortgage and its terms are transferred from the current owner to
Buyers; existing; mortgagor
When fraudsters are ___ in mortgage assumption fraud: - The criminals target properties with ___ (different) mortgages. No q
Sellers; inflated; unsuspecting; resell
When fraudsters are ___ in mortgage assumption fraud: - They attempt to trick others into assuming ___ (different) mortgage
mortgage fraud
To reduce the potential for ___: - Sellers can require the potential buyer to qualify for the specific terms of the mortgage with
Private mortgage financing fraud
Bankruptcy fraud
US
Although debt consolidation or foreclosure schemes are more common in the ___, they still occur in Canada
Debt consolidation
Debt consolidation and foreclosure fraud
Title fraud
- Involves the fraudulent transfer of a property title from a legitimate owner to another party. Higher value properties with no
Equity access fraud
- Fraudulently facilitating a property owner to mortgage the equity in their property. The owner seeks to access funds using th
Re-development scheme
- Involves converting an apartment building into condominium units or upgrading an older condo complex through renovation
Silent second mortgage fraud
- An undisclosed additional loan or mortgage fraudulently used as a down payment for a primary mortgage. The "silent" refers
Air loan fraud
- A fraudulent loan advanced on a property that does not exist. It is a sophisticated scheme with considerable profits and requ
Inflated appraisal fraud
- Involves the fraudulent inflation of the property's value, size, or degree of upgrading for the borrower to obtain a larger mor
Automated appraisal systems
- Electronically generated property appraisals that rely on an extensive database of property information and sales data to pro
Vendor cash-back fraud
- Occurs when fraudsters write an inflated purchase contract on a property and later amend it to a lower price. The amended
Kiting
The fraudulent use of a financial instrument to obtain additional credit that is not authorized
Contract kiting
- The use of fraudulent contracts to obtain a higher loan-to-value ratio. It requires writing two or more purchase contracts for
Straw buyer
The scheme: 1. The ___ is approved for a mtg and assumes the title 2. The fraudster quickly assumes the title 3. The fraudster
Straw buyers
___ may face many consequences for participating in mtg fraud. They may be responsible for: - A mortgage even after a new b
landlord
A straw buyer who takes title to a rental property will become the ___ under Alberta's Residential Tenancies Act. The straw bu
Property flip fraud
- Refers to two or more transactions on a property in a short period, with the subsequent sale(s) occurring before the first tran
Property flips
___ related to mortgage fraud may involve the following: - Fraudulent appraisals - Straw buyers - False loan documentation - F
- Use a thank you (thank and ask referral source how they heard of you, what kind of business they do, why they referred the
If the referral is unknown to you, there are a number of ways to gather more information before a meeting:
Referral sources
Red flags for ___: - Someone who seeks you out with high-value clients needing a quick transaction. Is it reasonable for that re
Liability
When you refer business to another party (such as a lawyer), you are endorsing that the person will provide reliable service to
non-verbal
Some ___ red flags can include behaviors such as: - Evasiveness in providing answers - Nervous laughter - Looking away when
Original documents
What item should you check for these details?: No photocopies. Check for alterations or irregularities
Photo ID
What item should you check for these details?: Does the picture match the appearance of the applicant?
Full legal name
What item should you check for these details?: First, middle (if applicable), and last names. If the borrower has a common nam
Birth date
What item should you check for these details?: Is it the same on all documents? Does the person look to be the stated age
Signatures
What item should you check for these details?: Do the signatures match on the ID, purchase contract, and mtg application? It
Name and address
What item should you check for these details?: Name and address should be the same as the gov't ID for every document. If y
Expiry dates
What item should you check for these details?: If a document is expired, find out why. All documents must be current, or fund
Blank or void cheque
What item should you check for these details?: Verify that the bank and bank branch exist
Cross-check phone numbers
What item should you check for these details?: Find the applicant's name, address, and phone number in a credible directory.
Red flags warrant further investigation by:
- Original doc on company letterhead - Position title, length, type of employment - Hourly rate and guaranteed hrs per week, o
A letter of employment must meet the following criteria:
Bank statements
Bank statements
Red flags for this document: - An applicant reports a high income, but it is not reflected in their account - Be wary if a stateme
T4 slips, NOA
What are the tax documents
T4 slips
Notice of Assessment (NOA)
- The form that the CRA sends to all taxpayers after processing their income tax returns - It is a good proof-of-income docume
NOA
This document indicates the following: - Total income - Deductions form total income - Net income - Taxable income - Balance
T-451 and T-452
What are the two different NOA forms
T-451
TERM
A type of NOA form. Issued with direct deposit, nil valance, or taxes owing
DEFINITION
T-452
TERM
A type of NOA form. Issued only when the taxpayer receives a refund from the CRA
DEFINITION
full
TERM
If the NOA indicates the applicant owes tax payments to the CRA, it's important to let the applicant know that lenders are like
DEFINITION
Tax documents (T4s and NOAs)
TERM
Red flags with these:
DEFINITION
lenders
TERM
As discussed earlier in this course, ___ want verification that:
- The down payment is from the applicant's own resources, not just temporarily in the account or being shuffled between diffe
DEFINITION
Down payments
TERM
Red flags ___:
- Compare savings account balances with the applicant's income. Make sure that the balance is realistic and reflective of incom
DEFINITION
Down payments
TERM
Possible alterations or irregularities in this:
DEFINITION
Gifts
TERM
Red flags for ___ as down payment. Since ___ (same) from family are not arm's-length transactions, you must be careful to ve
- Verify the details of the donor's contact information and ID through phone listings or other sources.
- Make a copy of the proof of deposit to the applicant's account or of proof that the money was given directly to the applicant
- If necessary, track the transfer of the gifted money from the donor into the applicant's bank account.
DEFINITION
multiple sources
TERM
Red flags for ___ of down payment. A down payment with more than one source must:
DEFINITION
sale of assets
TERM
Red flags for ___ as down payment. You should review the following in this situation:
- Ensure that the applicant's name and address are identical on all documentation.
- If the down payment is from the sale of chattels, investigate the entire application thoroughly. Chattel sales are sometimes u
- On statements for RRSPs, stocks, or bonds, check for formatting alterations such as the following:
DEFINITION
borrowing against assets
TERM
Red flags for down payment from ___. You should take note of the following in this situation:
- Check large deposits to see if they coincide with credit inquiries on the credit report. If they do, it could mean that monies ap
DEFINITION
Rent equity
TERM
Red flags for ___ as down payment. Things to look for in this situation:
- Does the address on the purchase contract match the address on the applicant's driver's licence or other primary ID? If the a
- Do the applicant's bank statements over a period of time show regular withdrawal of an amount of rent that matches what i
DEFINITION
Property
TERM
The lender's security against the risk of default on a mortgage loan. They consider if the ___ (same) is worth what the borrowe
DEFINITION
TERM
For every mtg transaction, lenders want to see documents that prove or verify the following:
DEFINITION
Purchase contracts
TERM
Red flags for ___. For every one, perform the following checks:
1. Does the purchase contract indicate who is holding the deposit
2. Are all amendments, schedules, and addenda accounted for and attached to the purchase contract?
3. Review and cross-reference dates on the purchase contract and the mortgage application
4. Are there conditions on the purchase contract regarding existing tenants?
5. Are the agent and witness the same on the offer to purchase?
DEFINITION
listing real estate office or lawyer
TERM
Who should be holding the deposit in regards to a purchase contract
DEFINITION
MLS listing sheets
TERM
Red flags for ___. Be sure to look for these details on this for the property:
- Are the real estate professional's name, brokerage, contact information, contract date, and expiry date displayed on the listin
- If an ___ (same) has been provided, is the property listed on the MLS website? If this has been provided, it should appear on
DEFINITION
title documents
TERM
Red flags for ___. When checking these, look for the following details:
- Is the seller's name(s) on it? If not, they do not have the right to be selling the property. Further, ensure every name on the ti
DEFINITION
Refinance
TERM
- In these cases, lenders want documentation about existing mortgage details such as the outstanding balance. This informatio
DEFINITION
Property verification documents
TERM
Red flags for ___. In mortgage fraud schemes, property details are often altered and ownership misrepresented. A common ta
- Does the information match across documents (for example, property address and names)? Do signatures match across docu
DEFINITION
1. Retain all documentation
2. Write down everything about the transaction that has not already been documented
3. Refer the case to the broker, and follow the brokerage's internal reporting procedures
4. Report the case to the Real Estate Council of Alberta (RECA)
5. Report the case to the police
TERM
If you suspect mortgage fraud, it is your duty to make a report. You must (in order):
DEFINITION
any time
TERM
Remember, you can terminate the relationship at ___
DEFINITION
RECA
TERM
- Only has jurisdiction over industry members. Other individuals involved in mortgage fraud are not under their jurisdiction. Fo
DEFINITION
Industry members
TERM
Who does RECA have jurisdiction over?
DEFINITION
s.41 and s.42
TERM
The Real Estate Act Rules address the RECA standards of practice for industry members. The specific conduct standards identifi
DEFINITION
TERM
Industry members are expected to:
DEFINITION
- Participate in the creation of a document or other form of communication that is false or misleading.
TERM
An industry member must not:
DEFINITION
Guidelines for Mortgage Broker and Associate Originated Applications
TERM
In the absence of instruction from the lender, the ___ serves as the minimum standards of care and due diligence required for
DEFINITION
writing
TERM
- RECA and the Alberta Mortgage Brokers Association (AMBA) developed these guidelines based on an earlier document devel
DEFINITION
contractual agreements between the parties and the laws of the applicable jurisdictions
TERM
The guidelines are not meant to define the legal responsibilities of the parties in a mortgage transaction. Legal responsibilities
DEFINITION
cooperate
TERM
Industry members are required to ___ with RECA investigations. The courts have held that those who become members of a r
DEFINITION
Cooperation
TERM
DEFINITION
TERM
Under s.83.2 of the Real Estate Act, investigators appointed by the executive director of the Council may:
DEFINITION
unaltered
TERM
Sometimes an investigator may request copies of cell phone records or bank statements held jointly with a spouse or business
DEFINITION
suspension; $25,000
TERM
- As outlined in s.38(4) of the Real Estate Act, failing to cooperate with an investigator is a breach of the law and may lead to d
- RECA has historically seen investigations where no evidence of conduct deserving of sanction was present, but the industry m
DEFINITION
mortgage fraud
TERM
As a regulatory body, RECA has an important role to play in interacting with other organizations, agencies, and public bodies to
DEFINITION
Compliance audits (auditors in the blank spot)
TERM
As a standard procedure during the audit process, RECA's ___ meet with the broker and managers of the brokerage to review
DEFINITION
law enforcement
TERM
RECA notifies ___ agencies of cases of mortgage fraud involving industry members. They make copies of the investigation file
DEFINITION
Bank security
TERM
RECA investigators meet regularly with ___ representatives and law enforcement officials to discuss mortgage fraud and relate
DEFINITION
Association of Real Estate License Law Officials (ARELLO)
TERM
RECA participates in the ___ database to share information about licensees with other regulatory jurisdictions
DEFINITION
tip sheet
TERM
In collaboration with Service Alberta, RECA created a consumer ___ on mortgage fraud to educate the public on ways they mi
DEFINITION
media releases
TERM
RECA issues ___ when the license of an industry member is suspended or cancelled or when a licensee withdraws from the ind
DEFINITION
Federal and provincial
TERM
As part of cross-Canada initiatives, RECA is entering into cooperative arrangements with ___ agencies to report mortgage frau
DEFINITION
Title insurance
TERM
Protects a lender against title fraud - the misrepresentation of who has ownership of the title of the property
DEFINITION
Who ordered the appraisal?
TERM
Things to check with this possible red flag:
- If a party ordered the appraisal to the transaction, it indicates that the transaction process is not occurring "at arm's length".
DEFINITION
Purchase price
TERM
Things to check with this possible red flag:
Is the pp substancially higher or lower than the predominant market price in the area? If so, why?
DEFINITION
Steep appreciation
TERM
Things to check with this possible red flag:
Has there been a significant appreciation in value in a short period? If so, why? Is it related to mkt conditions or some other re
DEFINITION
Excessive depreciated costs
TERM
Things to check with this possible red flag:
Are there excessive depreciated costs for things like basement development, landscaping, garages, and extras? If so, what is th
DEFINITION
Comparable properties
TERM
Things to check with this possible red flag:
Are the comparables used current and do they "bracket" the value of the subject property? Comparables that sold more than
DEFINITION
credit holder
TERM
If a credit holder has added a fraud alert on their credit report, lenders must contact the ___ directly before granting credit. To

This also means that the ___ (same) must notify the credit reporting agency if his or her contact information changes
DEFINITION
reported
TERM
Remember that credit reporting agencies like Equifax and TransUnion do not actively seek the credit data to present in credit
DEFINITION
do not include
TERM
Credit report red flags ___ issues related to the delayed reporting of credit information. They consist of discrepancies that req

If you find inconsistencies for which no satisfactory explanation is provided, do not submit the application to the lender unless
fficulty remembering common details

payments? 6. What is the borrower's general credit status and debt load 7. What is the borrower's personal status? 8. What is your gener

may also provide information about the borrower's underlying intentions

size of the loan request

d payout penalty

of life may also be significant

g relationship with the borrower

ible, set up a time for personal meeting 5. Inform the applicant they will need to bring the above-mentioned two pieces of ID to the first m
bad and the borrower loses the property

ut but needs to be aware of in order to make responsible and informed decisions. "These aspects" being: - Timing, records, and privacy - O

our brokerage) and mad available to RECA during audits and/ or investigations

nts in the course of carrying on a business, and the credit grantor deducts the mortgage brokerage fee from the loan. In many jurisdiction

at you turn over to the brokerage at the end of the transaction

has provided a written confirmation to fund the mortgage, accepted by the borrower and the commitment has been provided to the borro

d restrictions in your ability to continue to practice

oof, and for record-keeping, verifying that the process was followed and consent obtained prior to any credit check
closures - Done an initial credit check

ncial and property documents; and doing a final, detailed evaluation of the borrower's credit worthiness and the property value
 may also want to follow up with the person from time to time to see how they are progressing towards being ready to purchase a propert

with the lender requirements and know what additional documentation will be needed, you may be able to succeed in securing a rate fro

An important feature is that the penalty is typically limited to three month's interest

of appraised value - Payment options are monthly, non-accelerated weekly, non-accelerated bi-weekly, semi-monthly, accelerated weekly
heck your files for accuracy 7. Make minor adjustments to any information that may have changed since you began the transaction proces
ata field that was not filled out, but which this lender considers a critical piece of information. - Was the decline because of a credit policy

d income taxes 9. Property does not meet lender's requirements

ties + 50% of condo fees + other debt payments) / (monthly gross income)

ement consists of assets and liabilities. 4. Credit check from Equifax and or TransUnion. 5. Detailed information on property being pledged

rch to confirm ownership of the company. The corporation must be an active company. These individuals that do not file income tax return

m a direct family member - A large deposit is typically considered to be over $1,000, but it varies depending on the total down payment
employment

es 6. Subject property that is a single-family dwelling or freehold in a major city (not a condo) 7. Debt servicing ratios in the mid range 8. C

ults on their mortgage.

e loan application file and in the credit report 4. Evaluate the applicant's overall creditworthiness and determine the type of credit risk the

The required credit score varies depending on the mortgage (or insurance) product.
y to go 90 or more days past due within the next 24 months on one or more credit card or loan accounts

ut credit cards or loans - Never applied for any credit

or applicants with no credit score. They generally need a minimum 15% down payment, and in most cases, the down payment must be fro
s or her age. Based on age, you also need to consider whether certain products will be appropriate or even available to the applicant. Len

are significant.

ate whether there are alimony or child support payments that could affect the applicant's debt ratios.

opportunity to discuss how behavior can affect the chance of mortgage financing.

ng models and do not affect the individual's credit score.

ved credit card offer, or employment purposes, or reasons other than applying for credit or financing. ___inquiries do not affect the credit

t the person's credit score.

y reject the loan request altogether. Lenders or insurers may also pull a report from an alternate bureau. With this in mind, make it clear t
user, you may want to investigate. Is the person experiencing financial difficulties and looking for credit to remedy the situation? Are they

income stream.

g: - Length of employment - Existence of a spouse or partner and whether they are co-applicant - Period(s) of unemployment and whether

urchases on credit, up to the maximum amount available to him or her. This may affect his or her ability to qualify

es or credit accounts on file HC$3K-5K - The highest amount the individual has ever owed on one credit card or other credit account ($3,00

on They have 3 trade lines or credit accounts on file The highest amount they have ever owed on one credit card or other credit account is

ny or child support.

he process is over Have a significant negative impact on credit rating and a lender's impression of the person's ability to manage and repa
AL, FP CASE NO-CASE NO-TRANS CANADA CREDIT 450 1 ST SW CAL 3600, MAT 04/22 03/18 ST JD CAL SM CL CT. $255 DEF-MICHAEL DENTO

t backed by the savings account. Pay the loan back promptly. - Obtain a low-limit credit card, use it regularly for small purchases, and pay
e name of the individual(s) who filed for the bankruptcy (SUBJECT) - The type of bankruptcy (IND), meaning that it was an individual (perso

tt was the person who filed for bankruptcy It was a personal (individual) bankruptcy Discharged in December 2017

has not been paid. Once this is discharged, the person receives a Certificate of Full Performance to prove that it has been completed.

ate of last activity (DLA) was in December 2017 - The person owes $1,260 as of September 2018

f September 2018 was $1,260

or damaging information

the terms are the same)

posed to a mainstream lender (FP) - Case number, name, and address of creditor: TransCanada Credit at 450 1 Street SW in Calgary - Amo

me. Once this is done, this has been "satisfied" and is no longer active. A ___ status may also be reported as "unsatisfied" or "disposition un

CHAEL DENTON) - Judgment number: 1234/05 - Plaintiff was the City of Calgary (CITY OF CAL) - Satisfied in November 2008 when Michael

years. These trade lines should have credit limits of at least $1,500 to $2,500, with no exceeding the credit limits and consistent, on-time p
ely reflect the borrower, depending on the circumstances behind the delinquencies.

eflection of the applicant's repayment behaviour. If the applicant can provide a reasonable explanation for the I5 rating, the lender may n

dit the applicant has used or the credit limit on the account TERMS: The min monthly payment amount BAL: The balance owing as of the r
mple, the account balance is in the low four figures 4NSF: The number of "not sufficient funds" occurrences 2017: Date last reported

l information when reviewing the credit report. For example, Janice suffered a serious physical injury that prevented her from working for

it reporting agency if his or her contact information changes

OMER THA TIT IS LEGITIMATE BEFORE EXTENDING CREDIT / PHONE (123) 456-7890 SAFESCANNED &

plication fee and premiums - Homeowner insurance - Prepayment penalty for early renewal or refinance - Lender fees - Mortgage brokera

s stage of the transaction

4$ of the property's purchase price

first payment date. To cover the interest for this period, lenders calculate interest for the number of days and deduct the amount from th

s prepaid the property taxes for the whole year, the adjustment can be a significant cost
 he lender would take the $2,000 fee out of the loaned funds. Repayment, however, would still be interest and balance on the loan of $10

rsements - lender directs selection of lawyer - Title insurance - owner policy - Title insurance - lender policy - Registry fees - title search, pr

control or from which they receive no continuing benefit - Nominal annual interest rate - Compounding frequency - Total number of paym

But, interest is still charged on the entire amount.

in fees and closing costs for the same loan. These costs have to be paid upfront, so they are subtracted from the loan amount. Therefore,
m (5 -> shift -> Amort) > Set amt as future value/ remaining bal (= -> shift -> loan amt) 3. Enter mtg value (287,000 -> - -> 1,250 -> =) > set am
on, what is the APR (or true cost of borrowing)?
mort) -> Set amt as future value/ remaining balance (= > shift > Loan amt) -> Add fees and costs (2,700 > + > 1,500 > =) -> Add amount to m
ortgage are $2,700 in brokerage fees and $1,500 in legal, appraisal, and title insurance fees. What is the APR on Lilia and Matko's loan?

itions of that approval

osts - Proof of title - Final underwriting approval

ehicle/ boat/ travel trailer) - Separation agreement - Sale of real estate property

_ after the person becomes a former licensee;

separate mortgage loan files at the brokerage per s.105 of the Real Estate Act Rules.
and disclosures. - All supporting and verification documents. - All notes. - Correspondence (including email). - Photocopies of all original d

l and private lenders does not generally warrant the cost of integrating the necessary data fields for those applications. - Private lenders h

mation 11. Enter mortgage request details 12. Add qualifying details 13. Add the applicant(s) assigned to this mortgage 14. Recalculate an

technology.

unsecured formats and channels. - Mistakenly emailing, faxing, or mailing client data to someone not authorized to have it.

he consumer's decision to receive emails.

st ___ (same as 1st), it became the responsibility of that departed brokerage to demonstrate they had explicit permission from the consum

ell as lessons learned for members

ales volume, and other aspects of your contribution to the brokerage

 brokerage Paid to the brokerage and then split with the broker or mortgage associate

to 15 basis points for every year of the initial term. Then, if the borrower renews the mortgage with the same lender, there is another sm

iod of time, and any new business with ___ keeps building on that stream of income. Another benefit of having a residual income is that it

ending on the employment agreement and brokerage policy, a volume bonus may or may not be split between the mortgage associate an

ualify for this

us of the file to indicate it closed successfully. This will indicate to the brokerage's compliance or payroll officer the brokerage should expe

cuments you should retain. Individual brokerages may have specific requirements regarding what documents they expect and in what ord

___ (same) may be the broker of record, an individual designated by the broker or record, or a full-time ___ (same). Their job is to ensure t
holds are too high - Properties institutional counterparts won't entertain, such as property condition, vendor take-back, foreclosures, etc.

nterest income. - No related party owns >25% of the entity - 50% of assets are in residential mortgages - Cannot develop[ properties - All a

r registered accounts, including RRSPs, TFSAs, LIRAs, and self-directed pension plans.
he end of a property's lifespan as noted in the cost approach - Particularly useful when considering the commercial proprety

hborhood description - Site description - Description of improvements - Cost approach to value - Sales comparison approach to value - Opi

market information, you may have some general knowledge to compare with the data in this section.

may include: - Effective age - Remaining economic life - Amortization period - Physical characteristics - Gross living area (GLA) - Comment

nt to be funded and the funding date 6. The day funds are received, wire money to the broker and remit all fees and payments to the appr
e lender on the loan.

rower's pre-authorized account (established during the funding of the loan). 4. Prior to remitting the payments to the lender, the broker d

hey must provide proof of payment to the broker and lender within 30 days.

s the default, being prepared to reinstate the loan if it's still early enough in the proceedings. - Notifying the lender of any offer of partial re
nformation must accompany this request.

newal letter is received. There may be instances where amendments to the legal documents are required. - The broker then collects and re

ction loan for funding development

re specialty ___

gs, medical research properties, etc. - Other property categorized as commercial under local land-use bylaws.
ey default on the loan, the lender assumes ownership of the property along with the tenants.
inarily larger than the general partners up until a certain limit. After that point, the limited partners will receive a lesser share than the gen

nt, and company size. A lender would not likely ask large companies with significant net equity and cash flow and a lower loan-to-value to

nge and complete - Environmental reports may take a month or more to arrange and complete. A Phase I Environmental involves a map r

oans charge a higher spread in the ___ (different) range to account for lending on properties that traditional lenders would not consider.
ew buildings

cted in these districts to prevent monopolies by large-scale operations and preserve the integrity, look, and feel of a community.

mmunity and minimize negative impacts on residential areas. Primarily serves the local community Example: Neighborhood strip mall

ber of communities Example: Grocery stores

retail and service plazas and complexes (but not big-box retail)

g districts in historic neighborhoods

 complexes (but not big-box retail)

ge shopping malls

the cumulative effect of having to obtain several permits can greatly delay the progress of a commercial mortgage transaction. The genera

HC) commercial lenders do have access to mortgage default insurance.

han four units.

ontains mixed-use properties must be zoned for both respective uses - Risk factors and LTV: Lenders vary widely in the LTV they will accep

dential mortgage, as well as with residential mortgage default insurance (for which there is no application fee) - Risk factors: Most lenders

ng on the leasing structure, as office leases generally are longer-term. This offers more income security and less leasing risk. Local economi
nd recreation tenants is usually higher than retail tenants. To maintain income and value, you must find a replacement tenant in the same

stment may be required to clean up site contamination and contamination of neighbouring sites. Franchise ones may be more acceptable

a case-by-case basis.

rower to minimize the costs of borrowing (lower fees and interest rates). - The applicant does not require bridge financing, quick closing, z
 on the interests collected from the mortgages

m leases, quality tenants, and stable income streams.

sh held on deposit. Residential mortgage assets would include single-family mortgage assets and multi-family mortgage assets - They are g

obtain the financing. - The applicant requires bridge financing, a quick close to the transaction, quick sale closing, some latitude to obtain p

make arrangements to administer) the mortgage. In other words, they are solely responsible for all aspects of underwriting, arranging, an
cant residential development land - Vacant commercial land

may accept some liability for any dissatisfaction your client may have with the referred service

ts 3. Collecting and verifying preliminary documentation to make initial assessments of the borrower and property to determine if the app

er to find out sooner than later. Fees are usually due once the borrower accepts the loan commitment from a lender.
The source of equity funds used in the property to acquire and develop the property - A detailed outline of how they will use the funds - E

mation, and environmental assessments. - Operating statements, rent rolls, leases, property tax, and utility statements. - Borrower inform

mentation must prove that the borrower can provide that security

Title document - Real property report (if uninsured) - Municipal property assessment notice - Property appraisal report - Building conditio
(if the property is a commercial rental property). - Property appraisal report (taking care to review the limiting assumptions within the app

st to proceed with further underwriting.

nalysis of the borrower's experience and management capabilities

u have a plot of undeveloped land, is the best use for it agricultural or a subdivision - Determining this is integral to the appraisal process. A

valuation's basis should be clearly defined.

ental units, they pay themselves ___ (same) for the space. The owner's ROI is the savings generated from not rending space elsewhere to c
Estimated by averaging two to three years of previous statements - Based on actual statements, may represent an average or require an i

round parking stalls amounts to another $50,000/year, with another $25,000/year from laundry machines. Jorge has calculated operating

average 95%, translating to an average vacancy rate of 5%. Operating Expenses for operating the property which is to be paid by the Landl

the lender's LTV guidelines. Calculate property estimated value (V) and LTV
cal explanation - Parties are strongly interested in a quick transaction, in absence of a logical or valid reason

resent their status

ate or qualify for a larger loan.

ese insiders may, knowingly or unknowingly, accept the use of false personal or financial information, use inaccurate appraisals, or transfe

a straw buyer allows for anonymity, uses another person's good credit, job security, income and complicates any efforts to seize assets sh

t. Even if the fraudsters did not change the home's title, they could leave the victim with mortgage debt. - Fraudsters could also take the h

he property title (sometimes unwittingly) to the criminal. 3. The legitimate owner receives a cash payout from the fraudster to address im

r property hazards (e.g. structural issues, electrical issues).

me and degree of sophisticated fraudulent activity. Individuals in the real estate, mortgage brokerage, real estate appraisal industries and

ed individual. - Dismissal from the brokerage. - Lenders may refuse to accept applications from the associate. - Monetary fines. - Remedia
ating in fraudulent or unlawful activities - Engaging in conduct that undermined public confidence in the industry, harmed the integrity of t

ormation, such as the existence of a recent bankruptcy or other actions for debt against the borrower.

at they intend to reside when they truly intend to purpose it as a rental property. - Example: The borrower seeks an insured, high-ratio mo

y become John J. Louis.

y steal the person's identity

erty or make any payments once the mortgage has been assumed. However, the fraudster may purpose it for their intended operations b

st the properties for sale with mortgages to be assumed by an ___ (different) buyer. Typically, buyers with poor credit are drawn to prope

r may exercise the clause any time up to the completion date of the sale.

raudster assumes the owner's identity to place a large mortgage on the property or sell the property. - The fraudster receives the mortgag

rgets owners who have accumulated significant equity in their property, such as seniors. Elderly consumers may be a preferred target for

straw buyer is often involved. - The remaining units in the building's value are inflated while often remaining unrenovated. Their sale price

nt. They secure a second mortgage, a loan, or another form of debt and present it as their own funds. This act is fraudulent, as the buyers m

ntion of borowers - As it tends to be a more complex scheme, it may also include members of the real estate, mortgage brokerage, apprai
perty details and sales data provided reflect legitimate information - May appear easier to manipulate because there is no physical inspecti

price. This achieves a higher loan-to-value ratio than the lender would have approved per the accurate sale price of the property. - Examp

lent and shows an inflated sale price for the property. - The fraudsters provide the illegitimate purchase contract to the lender as the true

ity bills and taxes. - Insurance on the property and any damage to the property. - Mortgage default and foreclosure of the property.

wnership. - Through a series of quick, successive property sales, the sale price is inflated each flip to increase the property value. The frauds

ther credible directory to verify the company's correct ph. #) - Chk licensing or trade organizations

lty in finding a web presence for that referral source

ertain that you have a first-hand, positive experience of that party's qualifications, personal ethics, and professionalism.

ty remembering typical details

tigation. This information is used only for purposes related to the investigation.

eir transactions.
l status? 8. What is your general impression of the borrower?

d two pieces of ID to the first meeting. Then you must verify that it is not expires and that it matches the borrower 6. Explain to them that
iming, records, and privacy - Obtaining consent - Disclosing conflicts of interest - Disclosing material risks - Reviewing the process and futu

the loan. In many jurisdictions, however, it is becoming more common to require a cost of credit disclosure on every transaction
has been provided to the borrower or the borrower's associate; and b) the lender or the lender's agent has provided the person with an in
the property value
ng ready to purchase a property. You may decide to continue consulting with the borrower while they take measures to strengthen areas o

succeed in securing a rate from a lender for the borrower

-monthly, accelerated weekly and accelerated bi-weekly - Simply, the mortgage is readvanceable and can be paid out at any time without
began the transaction process 8. Review your decisions around matching the applicant's needs with a particular lender and product 9. En
line because of a credit policy issue? - Was it declined by a mortgage default insurer? - Is the property outside of the lender's usual (geogr
tion on property being pledged as security in turn for mortgage. 6. With a completed mortgage application, supporting documents must be

at do not file income tax returns every year will not be ocnsidered for mortgage approval

on the total down payment

ng ratios in the mid range 8. Closing date within 120 days of approval 9. Sale price equal to lending value
mine the type of credit risk they represent to a lender 5. If discrepancies exist between what the client has told you and the credit report,
the down payment must be from the applicant's own savings—no gift funds are permitted.
available to the applicant. Lenders will not allow a primary applicant younger than 18 years of age, and some have age-related restrictions

quiries do not affect the credit score.

th this in mind, make it clear to pre-approved or pre-qualified applicants that they should not add any new credit or debit obligations that
emedy the situation? Are they taking on a level of debt that may prove to be unmanageable in the future? Perhaps they have been a victim

f unemployment and whether any credit problems resulted

or other credit account ($3,000) and the credit limit on that account is $5,000 1-ONE - indicates that for one account, payment was made

card or other credit account is $4,000, and the limit on that account is $5,000 For one account, payment was made within 30 days and no

n's ability to manage and repay debt obligations Documentation: You will also want to ask for a copy of the final discharge and a list of cre
 CT. $255 DEF-MICHAEL DENTON, 1234/05, CITY OF CAL, SATISFIED 11/18

for small purchases, and pay the balances off on time. Remind the applicant that many inquiries in a short period of time will affect his or
that it was an individual (personal) bankruptcy as opposed to a business (BUS) - The bankruptcy was discharged in December 2017 (DISCH

at it has been completed.

0 1 Street SW in Calgary - Amount of loan: $3,600 - Matures in April 2022

unsatisfied" or "disposition unknown" if the credit holder has not yet fulfilled the court order conditions.

November 2008 when Michael Denton paid the $255 owed to the City of Calgary

mits and consistent, on-time payments. This provides plenty of data to assess the person's credit activity and repayment behaviour.
he I5 rating, the lender may not weigh it as negatively.

The balance owing as of the reporting date RT: The rating code denoting type of account and manner of pmt 30/60/90: The number of tim
2017: Date last reported

evented her from working for over a year. Although she had some insurance, it was difficult to pay her debts on time. Her credit card acco

ender fees - Mortgage brokerage fees - Interim financing (if applicable) - GST (new builds only) - Estoppel certificate (condominium transac

nd deduct the amount from the advance of funds

 nd balance on the loan of $100,000 Therefore, the applicant's total cost of credit in this example is:

- Registry fees - title search, property tax search, land registration fees - Real property report or survey - copy given to applicant - Real pro

uency - Total number of payments (amortization) - Payment frequency

m the loan amount. Therefore, the applicant only receives ___ of the negotiated $100,000; however, interest is still charged on $100,000. W
7,000 -> - -> 1,250 -> =) > set amt as mort value (loan amt) > enter term as five years (5 -> term) > Calculate APR (Int) **Note: do not clear c

1,500 > =) -> Add amount to memory (M+) > Enter mort value (270,000 > - > Rcl > M+ > =) -> Set amt as mort value (Loan amt) -> Enter ter
on Lilia and Matko's loan?
 - Photocopies of all original documents viewed. - Paperwork pertaining to mortgage protection insurance (application/acceptance/waiver

pplications. - Private lenders have a different set of criteria for assigning loans and typically do not require the complexity or functionality

s mortgage 14. Recalculate and update the application as required based on your conversations with the borrower 15. Enter the lender su

rized to have it.

it permission from the consumer to let their information move to the new brokerage. In practice, this meant adding language to consent f
me lender, there is another small, lump-sum finder's fee for the renewal plus annual trailer fees. If the applicant purchases an insurance pr

ving a residual income is that it is very beneficial when markets are slow or take a downturn. - Some brokerage owners like these because

en the mortgage associate and the individual brokerage.

cer the brokerage should expect payment from a lender.

s they expect and in what order.

same). Their job is to ensure the agent has fulfilled their obligation to the brokerage and supplied a complete compliance package contain
take-back, foreclosures, etc.

nnot develop[ properties - All assets must be Canadian - Have a management company separate from the ___ responsible for raising capit
mercial proprety

arison approach to value - Opinion of value

s living area (GLA) - Comments or summary

ees and payments to the appropriate parties 7. Collect monthly mortgage payments and remit them to the lenders 8. Confirm taxes are co
nts to the lender, the broker deducts their servicing fee and GST from the payment collected, based on the loan servicing agreement. 5. T

lender of any offer of partial reinstatement.

The broker then collects and remits the renewal fee to the lender.
eive a lesser share than the general partners. Often there is a provision for an eventual buyout of the ___ by the general partners. The ___

w and a lower loan-to-value to provide personal guarantees.

nvironmental involves a map review and site review by a qualified engineer. An engineer may request further phases - Commercial buildin

lenders would not consider.

feel of a community.

: Neighborhood strip mall

rtgage transaction. The general contractor, project manager, lawyer, or project architect typically pulls permits on a project.

dely in the LTV they will accept on a ___ as they represent a higher risk in some cases. For example, the income stream from the retail com

ee) - Risk factors: Most lenders are open to this lending because the risk is relatively low - Mortgage default insurance: There is a mortgage

ess leasing risk. Local economic conditions are a major factor affecting office vacancy rates, influencing the degree lenders may be interest
placement tenant in the same business, i.e., another restaurant. To a lender, this means the business (and consequently, the mortgage rep

ones may be more acceptable to lenders because larger corporations have the financial resources to maintain environmental standards, an

idge financing, quick closing, zoning and permits, etc. I.e., the applicant does not require a great deal of flexibility. - The subject property is
y mortgage assets - They are generally licensed and operate under strict guidelines under the Alberta Securities Commission or the applica

sing, some latitude to obtain permits or land use changes, or some other consideration that requires flexibility. - The applicant is financing

of underwriting, arranging, and managing the mortgages they agree to fund, as illustrated here.
operty to determine if the application is viable in the market
how they will use the funds - Estimated market values and cash flows for any properties and businesses owned by the shareholders and bo

tatements. - Borrower information documents such as credit reports, past three years' financial statements, and current dated and signed

raisal report - Building condition assessment - Environmental assessment report - Payout statement or statement of the existing mortgage
ng assumptions within the appraisal and the property's remaining economic life).
gral to the appraisal process. All real estate mkt evaluation considers is the highest and best use

t rending space elsewhere to conduct business

sent an average or require an inflationary adjustment

orge has calculated operating expenses to be $225,000/year. - However, the Lantern Building has had a residential vacancy rate of 3% for

hich is to be paid by the Landlord is $89,250 per annum. What is the NOI
accurate appraisals, or transfer mortgage funds to an individual knowing they will be misused. - These people are held legally responsible

s any efforts to seize assets should the authorities get involved.

raudsters could also take the home's title without the owner's knowledge

m the fraudster to address immediate bills and remains in the home paying "rent" or "consolidated debt payments" to the criminal. 4. The

state appraisal industries and legal professions may be involved in facilitating their fraud. Whether they knowingly or unknowingly particip

e. - Monetary fines. - Remedial education. - Suspension of license. - Termination of license. - Criminal charges.
ustry, harmed the integrity of the industry, or brought the industry into disrepute

eeks an insured, high-ratio mortgage for a residential property. In order to facilitate the fraud, the borrower declares that they will occupy

or their intended operations before the property is lost in foreclosure proceedings. - If the mortgage being assumed has high-ratio default

oor credit are drawn to properties that offer assumable mortgages because they do not otherwise qualify with a lender. - The buyer only

raudster receives the mortgage funds, but the true owner is left with a large mortgage on their previously clear title property. The fraudste

may be a preferred target for this scheme, as they may not be familiar with alternate financing options or the prevalence of fraud in the m

unrenovated. Their sale price for unsuspecting buyers is beyond market value

t is fraudulent, as the buyers must have the down payment from their own resources such as savings, inheritance, sale of existing propert

e, mortgage brokerage, appraisal, and legal professions to collude in the scheme

 se there is no physical inspection of the property. However, physical inspections completed by an accredited appraiser are not exempt fro

price of the property. - Example: There is a property needing renovation located in an upscale neighbourhood. The purchase contract refl

tract to the lender as the true contract, enabling the borrower to obtain a larger loan. This results in a higher loan-to-value ratio for the pr

closure of the property.

the property value. The fraudsters manipulate the higher prices from false appraisals or through successive sales between their associates

essionalism.
rower 6. Explain to them that other documentation will be required as the process moves forward
eviewing the process and future expectations

on every transaction
rovided the person with an initial disclosure statement and at least ___ (same as above) have passed since the initial disclosure statement
measures to strengthen areas of weakness, or you may refer them to someone in your professional network, such as a financial consultant

e paid out at any time without penalty

cular lender and product 9. Enter any final information and notes or comments to the lender to make the application file clear and comple
de of the lender's usual (geographical) area? - Has the lender or insurer flagged the property or applicant as needing "enhanced due diligen
upporting documents must be available and submitted to the lender at the time of submission for mortgage approval.
old you and the credit report, question the client further.
e have age-related restrictions on certain products. For example, certain insurance products are not available to people over 69, and other

credit or debit obligations that might affect their qualifying status, even if everything seems approved.
erhaps they have been a victim of identity theft and are re-establishing credit? From your point of view, the significance of several inquirie

e account, payment was made within 30 days and not more than one payment past due for this account 1-THREE - means that for another

s made within 30 days and not more than one payment was due for this account For another trade line, payment was made after more th

final discharge and a list of creditors as proof of discharge. Note that if the list of creditors includes lenders you frequent, the applicant wil
period of time will affect his or her credit score, so when seeking a low-limit credit card, do not apply for many cards at once.
ged in December 2017 (DISCHRGD 12/17)

d repayment behaviour.
mt 30/60/90: The number of times payment on the account was 30/60/90+ days late MR: Months reviewed DLA: The date of last activity
s on time. Her credit card accounts slipped to R3 and R4 ratings, and eventually, her car was repossessed, which appeared as an I8 on her

rtificate (condominium transactions only) - Home inspection fee - Utility deposits - Moving costs - Miscellaneous expenses such as applian
 y given to applicant - Real property report or survey - copy not given to applicant - Mortgage protection insurance application fee and pre

is still charged on $100,000. When you factor in the interest and non-interest costs associated with this mortgage ($6,000 in interest and
APR (Int) **Note: do not clear calculator after any of the steps

t value (Loan amt) -> Enter term as five yrs (5 > term) -> Calculate APR (Int)
application/acceptance/waiver/indemnification certificate).

he complexity or functionality of a mortgage origination program. - There is a cost associated with using origination software, which for sm

rrower 15. Enter the lender submission information 16. Add lender notes 17. Validate the file and correct any errors 18. Submit the file to

t adding language to consent forms at the beginning of the transaction or going to past clients to seek that permission. In some cases, the
ant purchases an insurance product with the mortgage, there may also be a ___ Paid to the brokerage and then split with the broker or m

ge owners like these because they can show a quantifiable dollar value for the brokerage. These represent an actual dollar value coming in

e compliance package containing all required or pertinent documents to support the application. If successful, the ___ (same) will pass thi
_ responsible for raising capital, attracting mortgage opportunities, and managing assets. The Alberta Securities Commission oversees the
enders 8. Confirm taxes are collected and paid before the deadlines each year 9. Confirm the property insurance annually
oan servicing agreement. 5. The broker remits all loan payments to the lender on the next day of the month. The broker sends an electron
the general partners. The ___ may not participate in management decisions of the partnership or they will lose their limited partnership s

r phases - Commercial building inspections (referred to as Building Condition Assessments or Reports) are generally required as a point of
its on a project.

me stream from the retail component of the property is less dependable than the income from the residential. - Mortgage default insuran

nsurance: There is a mortgage default insurance program available for ___ properties through Canada Mortgage and Housing Corporation

egree lenders may be interested in this type of investment

onsequently, the mortgage repayment) is less ___

n environmental standards, and leases usually include a covenant from the parent company in the event of an environmental issue. Franc

bility. - The subject property is considered a high-quality, low-risk investment. I.e., it produces a stable, reliable income stream and is read
ties Commission or the applicable Securities Commission in their province

ty. - The applicant is financing a property that exhibits less than ideal cash flow due to higher vacancies or temporary market conditions. -
ed by the shareholders and borrower - Details of any additional collateral that may support the mortgage request

and current dated and signed net worth statements.

ment of the existing mortgage - Proof of general liability and property insurance - Title insurance policy (if required by the lender) - Proof o
dential vacancy rate of 3% for the past five years. This is in keeping with residential rental suites in the area. The storefronts are all occupi
le are held legally responsible for the debt they take on for others. This person takes the risk if the real buyer cannot or does not

yments" to the criminal. 4. The criminal pockets all payments from the owner and ignores bills and taxes, leading to debt-collection proced

wingly or unknowingly participate in fraud, their collusion makes them culpable.

 r declares that they will occupy the property. However, the borrower's true intention is to assume it as a rental property. If the lender was

ssumed has high-ratio default insurance, the ___ will be personally responsible for any deficiencies in the event of foreclosure. It is in the

with a lender. - The buyer only realizes the fraud when they attempt to ___ (different the property, realizing it is worth less than the mortga

ear title property. The fraudster may then sell the property to another individual. - In this case, the unassuming property buyer may also b

e prevalence of fraud in the mortgage market. - The fraudster encourages the owner to mortgage the equity in their property and often fa

tance, sale of existing property, a gift from a family member, etc. - The person(s) lending the down payment may register the second mort
d appraiser are not exempt from fraud

od. The purchase contract reflects the average price level for that neighbourhood. The price on the purchase contract is later amended be

r loan-to-value ratio for the property than the lender would have approved if they had the true purchase contract.

sales between their associates. - This complex scheme requires the cooperation of many individuals, including lenders, lawyers, real estate
he initial disclosure statement was received by the person or the person has waived the time period for delivery in accordance with the C
such as a financial consultant or debt counsellor, for additional assistance
plication file clear and complete 10. Submit the electronic loan application file to a lender
needing "enhanced due diligence"? This may mean that there is a history on the property or the applicant of which you may not be aware
e to people over 69, and other products may be prohibitively expensive.
significance of several inquiries in a short period could indicate that the applicant is shopping around for the best mortgage rate, or it cou

HREE - means that for another trade line, payment was made after more than 60 days but within 90 days and there have not been more th

ment was made after more than 60 days but within 90 days and there have not been more than three payments past due with this particu

ou frequent, the applicant will not likely get a second chance if there was a written-off account.
ny cards at once.
DLA: The date of last activity
hich appeared as an I8 on her credit report. Janice had always met her debt obligations in the agreed-upon manner, so these delinquencie

eous expenses such as appliances, window coverings, and garden tools And adjustment costs such as: - Property tax adjustments - Utility b
urance application fee and premiums - Homeowner insurance - Prepayment penalty (incurred as part of early renewal or refinancing) - Pro

rtgage ($6,000 in interest and $2,000 in fees and closing costs), you can see that the applicant is actually paying $8,000 to borrow $100,00
 nation software, which for small-volume operations is cost-prohibitive.

y errors 18. Submit the file to the lender

permission. In some cases, the brokerage or associate would be trying to seek permission from a client they dealt with several years ago.
hen split with the broker or mortgage associate Not all lenders like or offer this model of compensation, however. Because borrowers ten

n actual dollar value coming in rather than having just a book of clients (who may or may not be "worth" money to the brokerage).

ul, the ___ (same) will pass this to the payroll officer noting the associate should be paid their commission. If the compliance package doe
ities Commission oversees these groups.
. The broker sends an electronic remittance statement detailing the loans and the payments sent.
ose their limited partnership status

enerally required as a point of due diligence of the buyer and typically required as a finance condition from the lender - Due diligence invo
tial. - Mortgage default insurance: CMHC will insure ___ (same) multi-family residential and retail properties that meet a few requirements

gage and Housing Corporation (CMHC) which greatly decreases the risk for lenders. Application fees are charged per unit on ___ (same) pr
an environmental issue. Franchisees obtain commercial financing based on the strength of the brand. The brand (usually a larger oil comp

ble income stream and is readily marketable.

emporary market conditions. - The applicant requires time to stabilize the property's income and value with evidence of improving market
quired by the lender) - Proof of down payment and the source
The storefronts are all occupied. There are no unpaid rents to date. - What is the NOI?
r cannot or does not

ding to debt-collection procedures against the owner. 5. The criminal may remortgage or sell the property to an accomplice, leaving the o
tal property. If the lender was aware of the true purpose, they would not have qualified the borrower for the same high-ratio mortgage. T

ent of foreclosure. It is in the seller's and vendor's best interest to have their personal covenant released by way of the purchaser qualifyi

t is worth less than the mortgage they assumed. The buyer is responsible for the outstanding balance on the mortgage, which is worth mo

ing property buyer may also become a victim along with the original owner.

y in their property and often facilitates the transaction with minimal paperwork and no property appraisal. However, they misrepresent th

may register the second mortgage as collateral on the title. Typically, the silent second mortgages are registered long after the first mortg
e contract is later amended between the parties to reflect a more realistic value for the property due to its need for extensive renovations

ng lenders, lawyers, real estate, mortgage brokerage, and real estate appraisal industry members. - Industry members should recognize if
very in accordance with the Consumer Protection Act
which you may not be aware. - Is the applicant receiving down payment money from a country under embargo?
e best mortgage rate, or it could mean that other lenders have denied them a mortgage. If other lenders have denied the applicant a mort

d there have not been more than three payments past due within this particular account 1-OTHER - means payment expected within 30 d

ents past due with this particular account For another, payment expected within 30 days after which, if other arrangements are not specifi
manner, so these delinquencies were very out of character. To explain her recent credit issues, she added a narrative in the ___ section. Th

erty tax adjustments - Utility bill adjustments - Interest adjustments

y renewal or refinancing) - Property taxes managed and paid by the applicant - Lender fee to maintain property tax account on high-ratio l

ing $8,000 to borrow $100,000 but only receives $98,000. The total they have to pay back, however, is $106,000, which reflects the intere
dealt with several years ago.
wever. Because borrowers tend to stay with the same lender at renewal time (in effect, repeat business that the lender did not have to inv

oney to the brokerage).

f the compliance package does not meet requirements, the ___ (same) will notify the associate to correct any mistakes.
he lender - Due diligence involves assessing the income-generating potential of a property and this requires a detailed review of financial
that meet a few requirements, such as the gross floor space attributable to the non-residential component not exceeding 30% of the tota

rged per unit on ___ (same) properties and are non-refundable. Insurance premiums can be significant, especially on large properties with
rand (usually a larger oil company) typically has environmental insurance and covenants with the lender, decreasing the lender's risk.
evidence of improving market conditions.
o an accomplice, leaving the owner without the property title, homeless and in debt.
 e same high-ratio mortgage. This is mortgage fraud.

way of the purchaser qualifying to assume the mortgage.

e mortgage, which is worth more than the property's market value.

However, they misrepresent the mortgage terms, the interest rate is inordinately high, and they intend for payments to be unmanageable

tered long after the first mortgage has closed so as not to bring immediate attention to the lender. It's not standard practice to pull the tit
eed for extensive renovations. However, the parties do not inform the lender of the amendment to the purchase price, and they fund the

members should recognize if they are approached to list a property on the MLS, and the seller already has a buyer, that this transaction m
ve denied the applicant a mortgage, they may be simply amending the mortgage application from the rejected attempts and re-submitting

payment expected within 30 days after which, if other arrangements are not specifically m

er arrangements are not specifically made, will be classified delinquent

narrative in the ___ section. The explanation may put lenders in a more sympathetic frame of mind when reviewing Janice's credit report.
erty tax account on high-ratio loans - Mrotgage default insurance application fee and premiums - Lender fees - any monies paid by the lend

6,000, which reflects the interest and balance on the $100,000 contract. What is the APR
 the lender did not have to invest time or money to secure), many lenders would prefer not to continue paying a mortgage associate or br

ny mistakes.
a detailed review of financial statements, rent roll, budgets, leases, actual utility, property tax statements, etc.
not exceeding 30% of the total gross floor area of the property.

ecially on large properties with many individual units. If the building is insured, most CMHC-approved lenders will finance a multi-unit resid
creasing the lender's risk.
ayments to be unmanageable for the owner. The owner is likely to default on the mortgage and lose the property to foreclosure proceedin

tandard practice to pull the title on the property after the mortgage is funded, leaving the lender unaware that there is a second mortgage
chase price, and they fund the property over its true market value. This is fraud.

a buyer, that this transaction may be part of of mortgage fraud intending to increase the price of the property
ed attempts and re-submitting it. This is a red flag situation that warrants further investigation.
viewing Janice's credit report. Without the explanation, they would only see serious delinquencies.
s - any monies paid by the lender to arrange, document, secure, administer, or renerw a mortgage - Mortgage brokerage fees (if applicable
ng a mortgage associate or broker a trailer fee over the lifetime of the loan
s will finance a multi-unit residential property to an 85% LTV.
perty to foreclosure proceedings commenced by the fraudster.

hat there is a second mortgage on the title. - While there are systems to notify lenders regarding any other mortgages on title, in some cas
ge brokerage fees (if applicable) - Share purchased to join a credit union - if a loan requirement
mortgages on title, in some cases, the secret second mortgage is not registered on the title and is only a verbal contract. In these cases, the
al contract. In these cases, the lenders have no recourse for identifying the source of this fraud.