National PostMark
McInnis, vice-president insurance underwriting, servicing and policy
with CMHC, said the CMHC policies on disclosure have been in place for
decades. Canada Mortgage and Housing Corp.
is making no apologies over its tactic of not disclosing a house has
been repossessed when it puts the home back on the market.
The Crown corporation says it is acting like any other seller — just trying to get the best offer it can. Critics charge CMHC should disclose more information, given its role as Canada’s national housing agency.
“We don’t want to attract low-ball offers,” said Mark McInnis, vice-president insurance underwriting, servicing and policy with CMHC.
Mr. McInnis agreed to discuss CMHC’s policy on repossession in the wake of a Financial Post story on Wednesday that said Quebec realtors were balking at a demand to not disclose the fact properties the Crown corporation was selling were previously repossessed.
The agency said listing a property as foreclosed just muddies the waters and brings in offers that are less than genuine.
"We don’t want to attract low-ball offers"“We establish our target prices and we stick to our guns,” said Mr. McInnis. “It’s more efficient to deal with people who are paying fair market value.”
At this point the question of whether to disclose the fact properties are part of a repossession is mostly philosophical given that only 0.32% of Canadian mortgages are in arrears, according to the Canadian Bankers Association.
On top that, CMHC says it ends up as the seller only in about 20% of cases in which the property is distressed; the rest of the time the bank sells the home and sends the bill to Crown corporation for any shortfall between the price it gets plus costs and what the mortgage was insured for.
In Canada, anyone buying a home with less than 20% down and borrowing money from a financial institution covered by the Bank Act must have mortgage default insurance. CMHC, which controls about 75% of the insurance market, is ultimately backed 100% by the federal government.
Mr. McInnis said the CMHC policies on disclosure have been in place for decades. He said the agency can end up with properties in a slow market in which the lender can’t sale the home.
“I’ve been in this business for over 30 years and this has always been our policy,” he said. “It’s always better to have people come in and look at a property and make a decision on whether it something they are interested in buying and then you can have the conversation about who owns the property and what the specific conditions of that are and the fact it is a foreclosure.”
CMHC has no legal obligation to say in the listing that the property was part of foreclosure and say its only obligation would be if there was an issue like a foundation crack.
If the buyer finds out, absolutely the buyer puts in a low-ball bid John Andrew, a professor at Queen’s University who specializes in real estate, wonders whether the CMHC has some sort of special responsibility. “As a Crown corporation, they have a responsibility to encourage good business practices too,” said Mr. Andrew. “The real estate industry is all about transparency and disclosure. That disclosure [about repossession] is a key piece of information. A house that has been foreclosed on is a house that is more likely to have sat vacant for a considerable period of time and probably more likely to have not been maintained well.”Rob McLister, editor of Canadian Mortgage Trends, said he doesn’t blame CMHC for not disclosing foreclosure information because it means a better price. “If the buyer finds out, absolutely the buyer puts in a low-ball bid,” said Mr. McLister. The chief executive of the Québec Federation of Real Estate Boards, Hélène Morand, said last April it was auditing brokerage contracts and noticed there was request that homes that were repossessed not be mentioned on a detail sheet.
“We don’t have any idea if CMHC issued a new rule,” said Ms. Morand. “We were doing quality control and we noticed a new clause on brokerage contracts.”
The Quebec group has agreed that brokers now have the choice to leave blank information about whether a home was repossessed.
Taken from Financial Post
Garry Marr: 13/02/28