Search This Blog

Monday, December 5, 2016

The Ugly Side of the Lending Industry Part 2

It is now 5:10 pm on Monday, December 5, and still no word. Our closing date came and went, we blew through one extension on Friday, and got a second extension to close of business on Wednesday. If we can't close, we will likely be sued by the sellers. What a wonderful start to life in New Brunswick!

I had written  the post below a few days ago, and didn't want to post it until I knew for sure whether or not we are approved. But now I honestly don't give a flying fig. So here it is...

It is now 5:18 pm on Friday, December 2, two days after our scheduled closing date. We are now spending our third night in  hotel, and are having to extend our truck rental. With us heading into the weekend, we are probably looking at a close now of December 7, and will be out over $1,500 that we had set aside as our buffer for our first couple of months here.

What has happened over the past three days has broken my spirit, and I never thought that possible. Those people who know me well have watched me deal with heartbreaking loss:
  • Bankruptcy at age 28.
  • 2 divorces.
  • Death of my first wife.
To name just a few. Through it all, I have usually managed to remain optimistic, and roll with the punches. But this time, I just feel as though something has fractured deep within me. I think its that I just didn't expect lenders to treat me so badly given my background and experience as a Chartered Accountant. 

Just after writing this, Steph and I decided to go out to the Christmas festival downtown, instead of wallowing in anger, bitterness and self-pity. We actually saw some nice sights and managed to meet the local stamp dealers, which made me feel better. So it's actually now Saturday morning at 8:37, and I'm not feeling quite so broken as I was last night. 

The bottom line is that we now have until the end of Wednesday to close this deal or lose the house, our $6,600 deposit, and possibly get sued for the difference between what the owners finally sell the house for, and what we agreed to pay for it. My worry of course, is that they will put it back on the market and take, say a $30,000 haircut on it to get rid of it and will come after us for the other $30,000. They are already talking about charging us for extra living expenses while they are staying here in town, so we'll see. But the thrust of today's post is to expose more of the ugliness of the lending industry in this country. The four aspects I want to focus on are:

1. Not taking responsibility unless threatened with legal action.
2. Not acting diligently to protect your client's interests, either because of laziness or ignorance. 
3. Predatory lending practices.
4. It is not about your ability to pay, and never was. 

Not Taking Responsibility Unless Threatened

My last communication with Laking had been late Friday, November 25, 2016, when he told me he almost had an answer from Equitable Bank. For the next five days, complete radio silence. I later learned that he was notified on Monday by the appraisal company that the appraisal had been requested by another lender, so that he would have known then that I had started working with someone else. I guess he figured that since I had done this, that he was off the hook and could just walk away from the mess. I don't know for sure. But I would imagine that you would all agree that 5 days under these circumstances is an inexcusable length of time to go without calling your client, after you have screwed things up so badly for them. 

We left Drummondville on Wednesday morning very early, it turns out - just after I published the last post, and drove the entire way to Saint John, arriving at 4:45pm. along the way, I had many discussions with our new broker, Debbie, who did a great job of keeping me informed. However, the news was not good: one credit union was only willing to use our net business income, rather than our gross income, even though many of our write-offs are for things that require no future cash outlay. This is the inherent double standard in lending:

An employee, who can lose their job tomorrow, and lives from paycheque to paycheque on $75,000 per year can qualify for a mortgage, no problem, even though he or she brings no real security to the table. But a self-employed person like myself, who has the same or greater income generating potential, and lives frugally, investing any monthly surplus in the business, or saving it for the slower months, and who has strong business connections can't. 

But I digress. We went to see our lawyer as soon as we arrived, and extended the contract until Friday, December 2. We then found the closest motel and checked in. It was one of those places from the 1950's, and looked it. But we settled in and made the best of it. In the morning I woke up early, yelled "fire in the hole" inside my head, and sent the following e-mails to the bank, and Laking:

Good morning Liane

I am writing to inform you that I will be taking legal action against Optimum Mortgage and the Canadian Western Bank due to your decision not to honour the commitment that you issued on September 29, 2016.  I will also be filing a formal complaint with the Office of the Superintendent of Financial Institutions. 

I have attached the financing letter that Mr. Laking sent my realtor. It clearly states that we were approved, subject only to the appraisal and nothing else. Your four page commitment letter also states that we would only be required to supply a 25% downpayment on closing. Therefore Optimum is in breach of its contract with me, and there is a contract, because all four legal ingredients are present, with the key one being an exchange of consideration. That occurred when I paid for the appraisal that Optimum claimed ownership of. 

I will of course, be willing to drop these actions if you send funding to my lawyer Seamus Cox, no later than Friday, December 2, 2016, as originally agreed. His e-mail is 

Otherwise I will proceed and hold Optimum accountable for all financial losses that I stand to suffer as a result of Optimum's failure to honour its contract with me. I had hoped that it wouldn't come to this and had attempted to resolve this through reasoned discussion, but unfortunately it was for nought.


Chris McFetridge, CPA, CA

Hi Mike

Here is an e-mail I forwarded to Liane at Optimum. You will be hearing further in due course from the oversight body here in NB that regulates mortgage brokers. 



We decided to hit the Walmart, as we stank from wearing the same clothes for three days in a row, and while in the mall, we found a nice little restaurant. Over breakfast, we received the following from Laking:

Hi Chris,

I am very sorry to see what this has come to.
I did figure you would proceed with the options we went over on Friday where you could top up your down payment.  I realize that wasn't ideal but it would work to complete the transaction.  I am not sure what your interest rate is on the credit facility we discussed you using for that but if it's higher than the interest rate on the mortgage I would be willing to help with those costs in order to help you close this transaction.  If that's something you are interested in please let me know.  I know you have advised that you should have the extra funds in the next 2 months hopefully.

Monday morning I was advised you had asked for a copy of your appraisal which Optimum agreed to release to you.  I thought perhaps you may have been seeking and found alternate financing.

Equitable Bank has come through with an approval.  However the best they can do is 30% down, but they are willing to offer a better interest rate of 3.69% and a small line of credit secured to the property. 

I apologize, that last email sent without me being finished typing.

The line of credit would be revolving and work as a traditional line of credit would.
To proceed with this approval they would want additional documents on top of what I have.  They want 12 months history of bank statements and I have 5-6 on your accounts.

If this is something you are interested in proceeding with please let me know.  I will assist you anyway possible to complete the transaction. Obviously we would need some time to complete the closing but we could work together to make it happen as soon as possible.

Please let me know if either of the options mentioned can be proceeded with.

Mike Laking

That was way, way more motivational than I could have imagined. But why did it have to come to this? Steph and I were understandably skeptical about this "approval". What does it really mean when he says "that we are approved, but they need to see another 6 months of bank statements"? It sounds like the same old BS all over again. We had already lost a ton of credibility with the sellers the first time things fell through, and I couldn't have this happen again, so I sent him the following reply:

Hi Mike

I appreciate your attempt to reach out. It is indeed a very unfortunate situation with the sellers in the exact same situation as us with a truck packed ready to move to Ontario. Both they and us are now past the closing date and are incurring additional expenses. 

The thing is the sellers have now lost all confidence in our ability to close this thing. I cannot go back to them with a deal unless it is iron clad. I appreciate that Equitable has come back to you with a deal, but it sounds just like more of the same in the sense that they want another 6 months of bank statements. I can provide those, but what I can't have is a situation where you tell me it is approved, I go back to the sellers and tell them this and then Equitable changes the terms and the whole thing is unworkable. 

So I will hear back today or tomorrow about two other applications I have made in the meantime. If you want to proceed with Equitable  because you are absolutely certain that we will be approved no matter what, then I will be happy to let you do so, provided that I hear back on the other two applications, and Equitable is the best option. I am going to have to really scramble to come up with 30% (35% was impossible), but I may be able to just find a way. 

So, let me know what they need the additional 6 months for (i.e. whether this affects the approval, or just specific terms, and if so, which ones), and I will let you know. 



I sent this e-mail at 3:30 on same day, Thursday, December 1. No further word was forthcoming from either lender that my new broker was working with, so we checked into a new motel, did some laundry and settled in.  

Not Acting Diligently to Protect the Client's Interests

Diligence, is a word that implies behaving in a pro-active manner, and not merely reacting to things or waiting for things to happen. So in this instance, a diligent broker would:

1. Understand the lender's information requirements to know exactly what they were looking for, or if he or she didn't understand it, would ask the appropriate questions of the lender. 

2. Communicate those requirements to me clearly, not so much in terms of what documents to provide, but more in terms of what information is needed for the lender to satisfy themselves and be comfortable issuing an approval. It is not good enough to tell a client "provide 6 months of bank statements" if you know that what the lender is really looking for is consistent income that does not fluctuate by more than 25% during that period, for example. 

3. Review the information your client provides you before sending it to the lender. Merely forwarding the information, sight unseen to the lender is both lazy and unprofessional. 

4. Keep their client informed about the progress of the approval process, since the client cannot contact the lender directly. I would expect that in a situation like this, a good broker would update me two or three times a day. This would entail following up with the lenders if they had not gotten back to the broker in a timely way. "They're still looking it at." is not a helpful update. "They are reviewing your monthly gross sales, and are having trouble extracting it from the Paypal reports you sent. Is there any way you can generate a more concise report?" is a useful update. 

I'm fairly convinced that the main reason why this has happened is that Laking did not:

1. Understand what the true information requirements were for the lenders, even though he may have thought he did. But he didn't check and make sure that he knew, before telling me what he needed from me. 

2. Review what I sent him and advise me accordingly, before forwarding the information to the lender. I'm sure I could have included naked pictures of myself with the information, and he would just sent it along.

3. Consequently, this meant that his assurances about us being approved were highly questionable, since he had no real basis for thinking we would be approved. 

4. Tell me what specific information the lenders wanted, which was incredibly frustrating, because I could have given him anything they wanted to see, and I could have done it quickly, because it is what I spent 21 years doing every day. 

5. Keep me updated. I had to call him if I wanted to know how things were progressing. 

As it was, I did not receive a response from him to that e-mail by 10:00 am the next day, on Friday, December 2, which was very surprising. Steph and I finally called him to follow up and discuss with him what he meant when he said that Equitable had approved us. After much pressing, he finally said: "They only have a six month snapshot, and they want to see if the other 6 months is consistent". Now I had forgotten that I actually had some very large individual sales in that first 6 months. My perception was that my sales were lower in that period, which might have been true from a volume perspective, but actually wasn't in dollar terms. So I said to him "Well they won't be exactly consistent, because they have been increasing each month". Then he said: "As long as your statements don't show any significant periods without any sales, you should be good to go, and I will work with you and them throughout the day to get an approval by 5.". So I said "Ok good. I will go to the bank now and get my statements printed and send them to you right away.". 

So with that, I went and consolidated all our funds into one account, so that we could get a certified cheque for the downpayment, and obtained 12 months of statements for all accounts. I sent Laking these statements right away from the lawyer's office. Then I went back to the motel and generated 12 months of Paypal statements from my account and sent them off. Then we waited. We called a few times for updates, and at 3:00 were told that the lender was reviewing the statements still, that the feedback was positive so far, and we were on track to get an approval still by 5pm. With that, we met with our agent to sign an amendment to extend the closing to December 7. We told him that we had been told that we were still on track for 5pm. He told us about the Christmas Festival downtown and then we left his office. 

Then at 4:30, after having not heard from Laking, we decided to call him. The converation that ensured was thus:

Laking: "Hi Stephanie."

Steph: "Hi Mike. So we've got half an hour to go here. What is the latest?"

Laking: "Yeah I just got off the phone with the lender actually. To honest with you they are struggling with the information. Chris, one question: In your value account, there is a period where you have very little activity."

Me: "Yes, there was a period where I built up my Paypal balance to over $8,000, and I drew it out all at once."

Laking: "Yeah I see that."

Me: "OK, there was also a period between November 2015 and March 2016, where I did a lot of buying for stock, and a lot of that was paid for with the funds in my Paypal account."

Laking: "Yeah I see that."

Me: "Ok, I so what is their issue? I don't understand."

Laking: "Well they just don't see the same consistency of income in the first six months. One manager there said that there is a summary report in Paypal that will show your monthly totals."

Me: "I don't think there is, but I will check and get it over to you as soon as I can."

There was more to this conversation after this, but it was mostly in the form of @$%!*&! and was only about another 30 seconds or so.

After I got off the phone I checked Paypal to see if such a report existed. Of course, there was no such report. So I called Paypal support and spoke to someone who said that they could help me generate such a report. They told me that they would have to create a support ticket to generate such a report, but suggested that I produce a comma delimited Excel file and then manipulate it to yield the information the lender was looking for. So I e-mailed Laking back to let him know that this "quick" report would take up to 24 hours to generate, and that I would get it to him as soon as I can. We requested the file from Paypal, got a message that it was in process, and then headed out to the Christmas festival.

We got back to our room at close to 10:00pm. By then Paypal, had notified us that the spreadsheet was ready for download. So I got to work, creating a very clear monthly sales report. By 1:30 am, I was finished. So I sent it off to Laking and went to sleep. 

Predatory Lending Practices

In addition to the banks, and second-tier lenders, there are a number of private lenders who are all too willing to take advantage of people in our position. This was one of the deals that our new broker brought back to us. This lender, after reviewing the value of the property, and our financial situation, was only willing to lend us 63% of the property's value for 1 year at a whopping 12%! That is almost 4 times the going interest rate for a normal credit risk. To close this deal, I would have to borrow just over 15K on my Visa, which is allowed as the lender is fully aware that this is what I would be doing. But it would be a horribly crippling deal that would mean that our monthly cost of living for a year would be almost the same as Toronto. To me, this is the epitome of  predatory lender.

It Is Not About Your Ability To Pay And Never Was

We have all heard the never-ending propaganda in the media about how the Canadian banking system needs to take steps to curb Canada's out of control consumer debt problem. To read it, you would think that we are all a bunch of spoiled children with no impulse control who keep living beyond our means. What is always curiously missing from these news stories and opinion pieces, is how the government, through their continued manipulation of interest rates, have done much to create the problem. For at least the last 15 years, interest rates have been at their lowest levels in history. If that strikes you as odd, it should. It is not natural. It is the result of a deliberate attempt to lull people into a false sense of security, and to suck them into taking on more debt than they can comfortably afford. Why? Two reasons:

1. The banks make a TON of MONEY.
2. People who take on too much debt become slaves to the capitalist system.

When people are slaves, they don't complain about their working conditions, or how much tax they are paying. They fall nicely into line. And that, folks, is what the elites who run this beautiful oligarchy that we call Canada want ultimately. They want to make more money and the want you to not bother them while they do it - on your back.

The other thing you'll keep hearing when being turned down for a loan or mortgage is that the bank needs to satisfy themselves that you can pay your debts. This is complete nonsense because of how willing they are to ignore some of the most obvious pieces of evidence of such ability. For example, Optimum was only offering us a 2 year term on a mortgage for which the monthly payment was in the order of $600 per month. They knew that I had been self employed for 18 months, and that I had managed to pay rent of almost $2,500 a month in Toronto the entire time, and my personal debt had not increased. So obviously I could pay it - four times over actually. Yet they ultimately shafted us and their excuse was that we were too risky.

It just dawned on me last night, that the reason why we are being turned down, is because:

1. The lenders don't see us as being deserving of an approval because they won't make enough money from us.
2. They don't see us as deserving because, by being self-employed, we aren't supporting the system and falling nicely into line.

Think about it. If the banks were really concerned about your ability to pay them, they wouldn't be giving credit cards with $5,000 limits to university students, who are already up to their ears in debt, have no income, and no significant assets. To the contrary, a large part of the profit made by the banks depends on your inability to pay, and their ability to make you think you can pay, simply because you can pay the minimums, when you really can't pay off the debt over the longer term. How? Well take Scotiabank's "You're richer than you think." ad campaigns over the last several years. They are aimed at making you think that you really can afford that $25,000 kitchen reno, or that trip to Italy. In reality, most Canadians are poorer than they realize - having very few hard assets, like collectibles, or gold and instead having highly leveraged assets that are vulnerable to market swings like real estate, or stocks, and a TON of debt, that they have been sucked into taking on because it was so cheap. Kids today have only known low interest rates, their entire lives, so they think that how it is now, is how it will be later. They lack the historic perspective to see what is coming - a massive rise in rates.

Yes, but won't the banks lose big time if rates go up and real estate comes crashing down, with people defaulting left right and centre? Well, yes - if the government lets them fail and doesn't bail them out. But the government will bail them out. You can bet on it. And where will the bailout money come from? From you? Ding! ding! ding! WE HAVE A WINNER!!

So just remember, when you apply for a loan, what the bank really wants to know is:

1. Are you so wealthy that they can make money from you in other ways, by offering you financial products other than the mortgage?

2. If you are not that wealthy, are you the type of person who will will only make the minimum payments, so that they can make money from you forever, on credit cards, the mortgage, and other things?

If you are a frugal person who always pays off their loans, doesn't believe in making their money from stocks, and would rather create it by running a business, and all you have to offer them is a mortgage debt, chances are they won't want to deal with you because you just don't give them enough money to be worthwhile.

It is that simple. Now it all makes sense. 


  1. Did the bankruptcy, which i assume took place after you received your CA designation, pose any professional problems? I thought CA's had issues to deal with if they went bankrupt.

  2. No, it didn't. CA's who declare bankruptcy are required to form their provincial institute, who will investigate the circumstances. As long as the CA has not done anything wrong, there are no professional consequences. In my case, it happened because I divorced and I owned 2 properties in Vancouver in 1999 that were underwater - hard to imagine now, as they would be worth millions today, but back then, scarcely $500K betwween the two of them.