Fast-moving markets, above asking bids and demands to close on properties quickly can mean real estate investors are having to scramble to secure additional financing.
IMPORTANT UPDATE: Olympia Trust has very recently announced some stunning news regarding registered funds mortgages which you MUST be aware of urgently. Join Chad Robinson, Mortgage Administrator, who will be sharing the details and suggested solutions to this breaking news.
Daniel: Two years ago in early March, you wanted to meet five of your friends at Tim Horton nearby, and you guys are gonna have coffee and you're gonna be talking about whatever business. You walk into the restaurant, your friends are sitting there. You go to the counter, you order. I would order a medium French vanilla and a Boston cream pie. I picked it up. I walk over to my friends. I sit at the table and then we can spend a whole bunch of time talking and discussing business.
What about today? First of all, I can't have six people at the table because there's only tables that will sit forward and half of the restaurant is blocked off. I walked to the counter and I ordered my coffee and my donut. The first thing they ask is, are you going to add it here or are you going to take it out, I'm going to have a tear. Now, you're going to pull out your phone. You've got to show all of your credentials, your vaccinations and all that kind of stuff.
You got to be wearing a mask. They're going to give you your stuff and then you can go and sit with two of your friends, maybe three. This is the difference between when it was a lot of fun and easy, and now it's not so much fun and easy now, hold on because the coffee is just as good as it was before. The donuts are just as good as he was before the conversation will be as good as it was before. It's just a little bit more work, a little bit more annoying, and it's just that's something we didn't need.
Why am I talking about that? Because until a week ago in our business, and we've been doing this for 12 years now, we had set up ourselves without anybody's help 95 RRSP mortgages, I call them RRSP mortgages, but you can use Lira. You can use any registered fund, TFSA, RRSP, ref, whatever. Absolutely no problems so far. It went absolutely slowly, like going to Morton and ordering a coffee and donut. Absolutely, no problem. Except last week we got a bombed, which I almost like a pandemic hitting us and now everything is different. And a beak to explain to us how everything is different. We're going to go back to Mr. Chad Robinson.
Chad: Thank you, Daniel. I really appreciate the introduction and the feedback. There's Olympia Trust came up with some very surprising rules a few weeks ago. What happened was Olympia decided. Olympia has been doing syndicated mortgages for awhile. To give a little bit of background on what syndicated mortgages were, people would come together and say, I have three friends, they all have a hundred grand in their RRSPs.
Let's put the three RRSPs together, a $300,000 mortgage, and I'm going to go buy a property. You're going to lend it. The kind of thing that Daniel has been doing for quite a while, and it's been working really great. There's been no problems. The majority of people do it very well. There's no issue at all. Lately, there's been a lot of pressure from the different regulators, from the different governments across the province. There's been a whole bunch of defaults that happened all related to syndicated mortgages with people that weren't being as thorough as somebody like yourself has been.
Very quickly, they decided to turn around and say, we are not going to allow anybody to do syndicated mortgages. In other words, other than themselves, because it's yours, if it's your own RRSP and your own RESP, that's fine. But any more than we know one human being is, they said, no, we're not allowing that anymore unless you're working with a third party, registered licensed and approved mortgage administrator and mortgage broker, because we have to do both to facilitate the deal.
We're jumping in the middle of this transaction and to use your analogy. It's like I'm standing between Daniel and the Tim Horton's counter relaying the order back and forth and a hundred pages of paperwork in between. It slows it down but also makes it a lot more formal and it always happens because there's a few bad apples in the bunch that spoils the whole thing. I think that's what happened in this situation. A little bit of, what does a mortgage administry work?
First of all our company, you'll see a few different names of my companies here. You'll see align mortgage, you'll see MA mortgage architects. You'll see Lauria capital funding and even another one called Atlas one. The reason why you see these different names here is the regulators have we're licensed under different corporations for different things. That's the reason why, so there it's all me. I have four different licenses depending on which hat.
What did the mortgage administrator do? It falls into three basic categories. One is the funding of the mortgage. Before the mortgage actually gets to the lawyers office, we're instructing the lawyers, we're making sure all of that legal paperwork is done the right way. We're ensuring compliance. It sounds like it's a simple thing. When we're working with clients like yourself and you're very sophisticated, but the majority of people out there do a mortgage once every five or six or eight years, they don't know what the heck.
Mortgage administrator makes sure that it's done correctly. We set up the banking transfers. One of the cool advantages of an administrator in these situations is we can bring RRSP funds plus cash into the same mortgage. We can have the night with our RESP, cash, and TFSA. We can slice and dice the mortgage. For the borrower, there's only one payment, one registered charge, and we can have 4 or 5, 6, 8, 10 people behind the scenes that we give the payments to behind.
We do closing package compliance. There's a whole suite of products that we do here. Post-funding we take care of all the payments. My company takes the payment out of the borrower's account and distributes it to the lender or lenders, whether that's an Olympia trust or cash into their bank accounts. We monitor things like fire insurance, tax bills. We follow up to make sure that they have valid fire insurance. It's quite often a lot of people forget when you're private lending that, hey, did that fire insurance expire? Did they renew it? Have they paid their tax bill? Simple things like renewal management, a lot of people forget to do mortgage renewals and make sure that we're on top of it.
This is the big one, and this is a real fundamental reason why Olympia did this was NSF and default management. In the case of a default, if there's three people altogether and they decide that to go power a sale, and one person decides I don't want to go power sale, but the other two do, how do you deal with that? Unless there's really proper agreements done, It's you know, what kind of show it is. It's not good.
We have paperwork that's been approved by Olympia trust and it's actually like a 20 page co-lender agreement that covers all these various situations. If the parties can't agree, we step in as administrator and make the decision of what's going to go forward. We handle all the power of sale features. We handle any default insurance, default, anything like that. That's part of our job. When things discharge, then we prepare the discharge statements. That Olympia is notorious for having errors on discharge statements that we take care of all that communicate with lawyers. Of course post-closing making sure things are discharged.
I don't know how many of you have ever had three years later, you look at a property and a mortgage hasn't been discharged off your property. Those kinds of things where we help ensure get done. We go to the next slide, please. It touched on a lot of that effective, immediate Olympia is no longer allowing third party third party people, and they need an administrator. We are an approved administrator with Olympia trust and it took me almost a year to get that approval. It's definitely not something that is easy to do.
How does it change the process? It changes it because we need a broker and an administrator on every one of these files. The reason we need two people is that a mortgage broker represents the borrower and the lenders up to the point. Once the money has transacted, then the administrator takes over. It's just the way the licensing works. In Ontario in most provinces, it's two different licenses and that's why I say there's a broker and a lender is needed. We handle post payments and we covered that mostly on the last slide.
One of the most important things is that there's one charge, not two or three or four. We base our costs and the number of admin investors that we have on a file. This is the number of investors, not number of accounts. If one investor has five different accounts in our RESP in our RDSP, in a company account of cash, we count that as one. There's two costs. One is the setup fee, and that's the 0.75% or the 1% or the 2%, as you can see there, and that's charged at the time of funding of the loan. The other one is an annual fee deducted from whether it's monthly payments or quarterly payments or that type of thing.
Typically, we come off the spread to the investor because the administration is more of a benefit to the investor than the borrower. These are just some very high-level features of what we provide SMS notification to borrowers and lenders. We send text messages, say, hey, your payment is coming out tomorrow. That's helped keep our default and our NSF really down very low. I think we've had NSF in the last six months. That's been a huge savings for portals and lender portals.
The boarders can log in and see their statements. You don't get those calls with my interests this time of year. What are you saying? How much have I paid? Because I got to do my taxes. That's all immediately given a lot of automation that's there and for the investors, if it's not a registered account we have, we provide T5. We do all that kind of accounting. That's it. Yeah. If I wanted to keep it short. If you have more questions, please contact me, fire me an email here. That's my phone number as well.
Daniel: Chad one thing that's important is we did want to keep it short, but at the same time, we know that there will be all kinds of questions that people want to ask. I believe you're preparing a webinar sometime in the very near future.
Chad: Absolutely, probably within the next 10 days and the next week or the week after I'm going to do about a 30 minute webinar. We're going to go into detail about this and have a lot of Q and A, because I know there's a lot of questions around this. It's shifting people's business models very quickly. We're here to provide support and help you guys through that change.
Daniel: Yes, because just so people know why they absolutely have to be on that webinar. A couple of things you did not go into details. For example, you have a lot of power. I am setting up mortgages up to a hundred percent. You can decide based on criteria or other things that you will not allow a mortgage up to a hundred percent as the administrator, you will only allow 90%. Is that correct?
Chad: Technically we could make that decision, but we know when we're working depends on what happens. If we're coming in and saying, if a borrower says, Chad, I'm looking for a hundred percent loan to value mortgage, and here's my five investors. They're already looking forward to that. They're already okay with the deal. If we just put the paperwork together and we can facilitate it some investors will come to me and say, I want to place my money, Chad and we want, this is our maximum loan to value that we're looking for or here's our interest rates. We help find borrowers to match them. We can do both and we typically don't meet those decisions because we're an intermediary. We're just helping other people either place or money or borrow money.
Daniel: Also, you told me that day in a conversation that, for example, a friend of mine is a multimillionaire and he wants to do a hundred thousand dollar RRSP mortgage. He has a half-a-million in RRSPs. You're not going to be asking him a whole lot of questions. However, my aunt is 67 years old. She has a hundred thousand dollars PFSA and that's all she has, and she really can't afford to lose it. You're gonna have a different conversation with her. And there's always a possibility that you will not allow me to use our a hundred thousand, but only 50 or whatever. But I'm trying to say here, there's a lot of things that were not in the picture before.
When you're going out to Tim Horton and you have the mask and yet to show you, it was not there before, but it's there now. This is the new reality. You need to deal with this. For people who are doing or we're planning to do a lot of RRSP mortgages like us. This is quite the change. I can not. From now on, I can not talk to Olympia. I can only communicate with Olympia through Chad. Anyway, everything has changed. Please be on the webinar next week or as soon as Chad puts it together. And as a link, we will send it to everybody who has registered this evening. What is this, why you were on this webinar or not, what is of interest to you or not. But we will make sure to facilitate access to that webinar because this is a game changer.
Chad: Absolutely. And if anybody, please throw in as many questions as you want. I'll make sure they're covered in detail in the webinar. If people aren't interested in these kinds of mortgages, I don't want to bore them to death with me going super technical right now. But I will definitely go very deep dive into those on the webinar.
Daniel: Thank you very much, Chad.
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