Mortgage Broker is the magazine of the Canadian Mortgage Brokers Association and showcases the multi-billion dollar mortgage-broking industry to all levels of government, associated organizations and other interested individuals.
Issue link: http://digital.canadawide.com/i/906457
CMB MAGAZINE cmba-achc.ca fall 2017 | 13 Notice that in all scenarios the sum of the lender fee and the interest rate is 15 per cent. Notice too that changing the amount of the lender fee changes both the interest rate charged on the face amount and the CCM rate. But even more important to notice is that even just changing the timing of the interest payments as in scenarios A and B can have a significant impact on the CCM rate. is is because the timing of payments (both interest payments and lender fees) is taken into account by CCM. is is in contrast to the usual cost of borrowing calculations that do not really consider the timing of at least some of the components in the calculation. ere is an example of this point below. Now let us imagine that in each scenario there is a broker fee of two per cent and legal fees of $1,000 on both the borrower side and the lender side. e borrower would need to pay both of these legal fees as well as the broker fee. ese extra fees total four per cent of the loan amount. Should some or all of these fees be treated as interest? ey would certainly all be included in a cost-of-borrowing calculation, but not all items in the cost-of- borrowing calculation are necessarily interest. Let us assume, however, that they would all be treated as interest for CCM. e cost of borrowing calculated for this loan, using the Ontario cost-of-borrowing method, would be 19 per cent. is is well below the proposed new criminal rate of 20.75 per cent. But wait... what would the rates be using CCM? One might be tempted to add four per cent to 15 per cent in all cases and get 19 per cent and conclude that all scenarios were OK. Or one might be tempted simply to add four per cent to each of the above rates and if so one would conclude that only D was a criminal rate, since even C would be 20.37 per cent and less than the 20.75 per cent limit. However, neither of these approaches is, in fact, correct! e actual rates calculated by CCM would be: (A) 19.79% (B) 21.26% (C) 21.67% (d) 23.46% In other words, only scenario A escapes being a criminal rate. Given the current level of private mortgage rates, the proposed change in the criminal rate level is almost certainly too extreme. Especially if strictly non-interest items such as broker fees and legal fee were deemed to be interest for the purposes of calculating CCM. To what extent, if any, should these extra fees be considered interest for the purposes of CCM? is is certainly an interesting topic of discussion, but this too is a topic for another time. I would be pleased to provide complete details of my calculations to anyone wishing to see them. Barry Savage Mortgage Alliance LIC # 10530 mortgage@barrysavage.com 416-931-2718 Stay safe, save everything We have a question regarding the retention of documents. As a MIC mortgage lender, we have mortgage brokers/agents send potential clients our way. We look at a deal and start a file. If the potential mortgage becomes a dead or cancelled deal, are we as the lender required to hold the documentation on the file or is it the originating mortgage broker's responsibility to hold the details of the file for seven years? In the past, we have been holding everything, but it seems redundant to do so if it is not necessary. We have been saving the documents in paper form. If scanning is acceptable, then we will scan all the documents and save them in so files, which will be backed up regularly for the seven years. ank you, A BC Mortgage Investment Corporation (MIC) rePly: A MIC is a registrant under the Mortgage Brokers Act, and as a registrant it has all of the record-keeping responsibilities of a registrant (which includes persons who act as mortgage administrators, lenders and brokers). If you rely on mortgage brokers to maintain records that your MIC is responsible to keep, at some point, you may find a need for a record which has not been kept by the broker, or which the broker will not provide to you. is need may arise out of litigation, or regulatory demands by BCSC or the Registrar of Mortgage Brokers. e safe thing to do is keep your records for seven years, even if the deals do not fund. Indeed, scanning is the way most brokers store documents these days, and it is permissible so long as you are able to print the documents. Please send letters to the editor to info@cmba-achc.ca