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Andy's Corner
A message from Andy Charles, President and CEO
The current credit crunch experienced by our U.S. neighbours has been felt throughout the world. Recent speculation about an economic recession has raised concerns over the effect it will have on the Canadian housing market. Despite many differences between our markets, only time will reveal the true extent of its impact. A key theme has emerged within the mortgage and lending community – our collective responsibility to maintain prudent credit policies and lending practices that will sustain a strong real estate market. In doing so, we can ensure that more Canadians are able to protect their most valuable assets – their homes.
The long-established financial strength of AIG assures our continued growth in Canada and our commitment around the globe, but our industry should take this opportunity to learn from the experiences of other markets and work together to ensure Canada remains a strong and sustainable housing market. AIG United Guaranty continues to focus on strengthening relationships that create greater opportunities across the country, while promoting ongoing communication that will help us develop better solutions for the individual homebuyer. In a recent survey conducted by AIG United Guaranty, 95% of our customers stated they would refer us to a colleague. This is an honour we take very seriously as we continue to work each day to exceed your expectations. Our commitment to providing excellence in customer service is complemented by our passion for understanding the unique needs of today’s mortgage and lending professionals. Through the continued support of our partners, we have broadened the spectrum of opportunity for the Canadian homebuyer while striving to improve the home buying experience, one mortgage at a time. Wishing everyone a successful second quarter, we thank you for your business. Andy President and CEO AIG United Guaranty
Product Updates & Enhancements
As AIG United Guaranty adapts to meet the changing needs of the Canadian market, mortgage professionals and homebuyers continue to benefit from the products and services we have pioneered and improved.
This quarter, the following product enhancements were made: Effective January 28, 2008 Rental Advantagesm & Maple Leaf Advantagesm Guideline Enhancements To better serve the needs of lenders and mortgage professionals, AIG United Guaranty is pleased to announce the following guideline enhancements affecting the Rental Advantagesm and Maple Leaf Advantagesm products.
These changes became effective on Monday, January 28, 2008. To review the complete and updated Rental Advantagesm and Maple Leaf Advantagesm product sheets, please visit the Insurance Products page on our website. For questions regarding these and other AIG United Guaranty products, please contact your local account executive or speak directly with an underwriter at our National Underwriting Centre. National Underwriting Centre
1.877.AIGUG CA (244.8422)
Product of the Month Feature In February 2008, AIG United Guaranty kicked off a new initiative to encourage greater familiarity with our innovative line of products. Each month, subscribers to the AIG United Guaranty opt-in service will receive an e-mail announcing the featured Product of the Month. Subscribing lenders and mortgage professionals will receive links to product sheets, as well as helpful tools and product resource guides designed to provide greater insight into how the product is best suited to specific borrowers and their needs. Increased knowledge of AIG United Guaranty’s suite of products will assist lenders and mortgage professionals in providing their borrowers with more homeownership opportunities.
Keeping the “Home” in Homeowner Loss mitigation - The key to preventing mortgage default
For many homebuyers, the thought of losing their home is unimaginable, but the consequences of unexpected financial hardship often leave them with few options. Through loss mitigation programs and tools designed to create more options for borrowers, AIG United Guaranty is committed to working with our mortgage partners to keep more homeowners in their homes. THE ROLE OF LOSS MITIGATION Loss mitigation is not a new trend in the mortgage lending industry; lenders and mortgage insurers have long had a commitment to helping borrowers avoid foreclosure. By using proactive strategies and workout resolution techniques, costly foreclosure procedures can often be prevented. COMMON CAUSES OF MORTGAGE DEFAULT Wilfred Pande, director of loss mitigation at AIG United Guaranty and resident expert on default management, explains that the risk of defaulting on one’s mortgage is often greater for borrowers who purchase beyond their financial means. “With a strong housing market and rising house prices, homebuyers are commonly faced with the dilemma of sacrificing their dream home for a more affordable option. The impact of unforeseen financial hardship, such as job loss or serious illness, will severely hinder a borrower’s ability to maintain payments if they’ve stretched their financial boundaries beyond a reasonable limit. Despite the availability of products designed to provide responsible homeowners with the option to purchase homes sooner, either through lower down payments or extended amortizations, some borrowers may be tempted to spend beyond their means.” The Most Common Reasons for Mortgage Default:
In the unfortunate event that default does occur, AIG United Guaranty has developed programs to help borrowers keep their homes. The following represent some of the solutions available to avoid foreclosure. Repayment Plans – Sometimes borrowers recover from temporary financial hardship within a few months, but are not immediately able to pay off all delinquencies. With a repayment plan, the borrower arranges to make regular mortgage payments with additional predetermined payments made towards arrears. Forbearance – This is a written agreement between the borrower and the lender to reduce or suspend mortgage payments for a specific period of time, until the borrower is able to start a repayment plan. Forbearance arrangements are often encouraged where there is reasonable probability that the borrower can and will recover from delinquency. Loan or Agreement Modification – This option is typically considered when borrowers have difficulty making regular mortgage payments after experiencing permanent or long-term financial hardship. Examples of agreement modifications include the reduction of the contract rate to reflect current market interest rates (assuming they have decreased since the initial approval) or extending the mortgage terms through a longer amortization. Capitalization – In some cases, borrowers may have the ability to continue making their regular monthly mortgage payments, but are unable to satisfy the delinquent payments from months prior. This is when lenders are encouraged to consider the capitalization of arrears. THE RESPONSIBILITY OF THE MORTGAGE AND LENDING COMMUNITY Mortgage insurance was established to protect the lender against losses in the event of borrower default. Consequently, this financial protection has provided lenders with the flexibility required to offer products designed to meet the needs of individual borrowers. In addition to providing greater opportunity, with increased flexibility comes the responsibility of mortgage professionals to promote the best solutions for affordable, long-term homeownership. Lenders and mortgage professionals play a critical role in helping borrowers succeed as long-term homeowners. By working closely with borrowers, the mortgage professional has a unique opportunity to help homebuyers make sensible financial decisions that can often prevent mortgage default altogether. HOW AIG UNITED GUARANTY CAN HELP Creating opportunities for homeownership involves more than just providing the means to purchasing a home. It also means providing homeowners with the necessary assistance to keep their most valuable asset during unexpected life events or economic downturns. We recognize that unique circumstances may arise and that complications during the process are common. That is why AIG United Guaranty is committed to providing the necessary support and ongoing assistance to find the best solution for your borrowers, every step of the way. Keeping borrowers in their homes is the best way to mitigate credit losses, preserve customer relationships, maintain stable neighborhoods and reduce the detrimental effects vacant properties can have on neighborhood safety and property values. For more information, or for questions regarding our Default Resolution Program, please contact the AIG United Guaranty loss management department at 1.877 AIGUG CA (1.877.244.8422).
In Response … Perspectives from industry professionals
We asked respected members of the broker community to comment on the trend of homebuyers purchasing homes beyond their means and inquired whether methods were being employed to help avoid situations that could lead to mortgage default. Elie Melki of Multi-Prêts Courtier Hypothécaire (Québec), Peter Fairhead of The Mortgage Group (Alberta), and Audrey Wamboldt of MacInnis Mortgage Consultants (Nova Scotia) share their perspectives on the importance of recognizing homebuyers’ limitations and the difficult task of convincing clients to make sensible, and sometimes restrictive, financial decisions. AIG United Guaranty: Have you seen a rise in borrowers over-extending their finances after purchasing a home? Elie Melki: Unfortunately, yes. I have seen examples where people purchase beyond their financial means and it often happens in cases where clients have had bad, or no, advice before buying a home. Peter Fairhead: Yes. It is common to see clients making major purchases, such as vehicles, in addition to their new homes. As a result, they are raising their overall consumer debt. Eventually, they return to my office to discuss further options, such as refinancing or the addition of a line of credit. Audrey Wamboldt: Definitely. This is occurring more and more, particularly within the first-time borrowers group. Seasoned homeowners are also extending their amortizations in order to gain payment relief. All too often, however, this relief only temporarily aids the homeowner and soon after, old habits return along with mismanaged funds. The idea of a “fresh start” rapidly becomes, “Do we have enough equity to refinance again?” AIG United Guaranty: What tools or advice do you provide to help homebuyers make more sensible and affordable choices? Elie Melki: The first things I talk to my clients about are financial liberty, the ultimate goal towards their retirement, and being mortgage-free. I often encourage my clients to take a standard amortization of 25 years or less. By explaining to my customers how much they will save in interest with a lower amortization period, I can educate them as to how they can realize their dreams of owning their homes mortgage-free, while providing an equity safety net, should they face financial difficulties down the road. Peter Fairhead: I bluntly ask them how they are going to effectively pay down their debt load to a sustainable level. Some will indicate that they are starting a family, and I ask them how they will afford all of this while one is on maternity leave at a reduced income level. They need a sense of reality injected into the scenario! I show them how they can pay down debt by simply making bi-weekly payments. Extra payments have a benefit as well. Audrey Wamboldt: Having an open and frank conversation about the equity position they will be in, to help them understand what they need to do make sure they are able to pay down their debt as quickly as possible, is essential. In order to help them make sensible and affordable choices today, it is necessary to paint a very detailed picture of their financial responsibilities tomorrow. Utilizing mortgage calculators to show how much borrowers can save down the road can be very compelling. Demonstrating how small financial adjustments can have a significant impact on their future helps make it clear what may be needed to ensure a healthy equity position with their property. Finally, I often counsel many borrowers to use longer amortizations as a temporary strategy only. Having the amortization reduced to a more normal range (25 to 30 years) upon renewal will put the equity picture back in the black for our future borrowers.
Recent Website Enhancements Have you visited the AIG United Guaranty website today? As we continue to develop our site, the following changes and additions have been made to better serve you and your clients. Be sure to visit www.aigug.ca today to discover our improvements and enhancements. Here is what you’ll find on our website today: NEW – Mortgage Fraud Resource Centre As concern rises over the threat of mortgage fraud across Canada, it has become increasingly important to stay aware of the latest information and strategies that will help prevent it. AIG United Guaranty has taken an active approach by developing the Mortgage Fraud Resource Centre. This page will house relevant information and useful tools to help prepare lenders and mortgage professionals in the event of potential fraud. As we build this resource, visitors will continue to discover information on how to detect fraud, methods that can be applied to prevent it, and programs available should fraud take place. NEW– Product Resource Centre Visitors can find the newly created Product Resource Centre by scrolling over the Insurance Product tab. This page includes a growing list of product features and benefits guides. Many of these guides will be announced through our Product of the Month feature, distributed monthly to all applicable Opt-in subscribers. Mortgage professionals and lenders will continue to find useful applications of our products through helpful product guides and FAQ sheets. NEW – Regional Account Management page Lenders will be pleased to know that contact information for key regional AIG United Guaranty account executives is now conveniently located on our website via a new link, titled, “Regional Account Management”. Visitors to the site will find this page by scrolling over the About Our Company section, then over Our Team, and finally, Business Development Team. Lenders who are unsure of their region are encouraged to call the National Underwriting Centre to be put in touch with the account executive in their area. Visit the AIG United Guaranty website today to find out what you’ve been missing!
Profiles and Personalities
Account Executive, GTA Southeast & Southwest With more than 10 years in the retail banking industry, Sheldon was looking for a change that would enhance his career and provide the kind of challenge that would continue his professional growth. He found those opportunities with the quickly growing team at AIG United Guaranty, a company dedicated to offering innovative product solutions and a focus on excellence in customer service. It was clear from the start that the team’s professionalism and enthusiasm made them a perfect fit for Sheldon. “Over the past year, I’ve witnessed tremendous growth across the business and within the mortgage market. I’m proud to say that a lot of that positive change has come as a result of our entrance. More and more lenders are asking for AIG United Guaranty and through our partnerships, we continue to work together to provide innovative solutions to more Canadian homebuyers across the country.” When asked what the most rewarding aspect of his role as account executive for southeastern and southwestern Ontario has been, Sheldon is quick to respond that “it has been the ability to work closely with lenders to ensure we look at the challenging deals from all angles. It is a joy to build those relationships with local lending professionals and offer the personal and dedicated customer service they have come to expect.” At the end of the work day, Sheldon and his wife are very busy with their two young boys. When he is not visiting with clients or hosting training sessions on the latest AIG United Guaranty products and services, Sheldon can be found enjoying the great outdoors, either hiking with his wife or taking the boys to the park to burn off their abundant energy. |
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