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PMPC 3: Specialized Mortgage Topics

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Introduction

It’s important for mortgage professionals to understand a wide range of specialized mortgages in order to provide the best service possible to their clients and industry partners. Specialized Mortgages provides mortgage industry participants with a complete menu of products that will help them expand their suite of suitable mortgage options for clients. This course is divided into six sections: MIC Structures and Private Mortgages, Funding Models and Pricing, Commercial Financing, Development and Construction Financing, Appraisal Process and Techniques, and Property Inspections. These sections provide an overview of MIC structures and private lending, including the regulations surrounding MICs, private lenders, and syndicated mortgages. In addition, organizational operations and best practices for these lenders are addressed. Funding models encompasses an overview of capital markets, securitization, NHA MBS and CMB programs, registered covered bonds, and traditional deposit-taking structures. The sections on commercial and development and construction financing emphasize the importance of knowing the client and knowing the parameters for which they require the loan. We also look at risk assessment and the steps involved in funding these types of loans. The last two sections give an overview on the appraisal process and techniques used by appraisers, as well as the process involved in property inspections.

Course Outline

Section 1: Mortgage Investment Corporation Structures (MICs) and Private Mortgages

  • Who Might Benefit from Using a MIC or a Private Lender?
  • MICs: Regulatory Framework
  • Characteristics of an MIC
  • MIC Operations
  • Provincial Mortgage Brokerage Regulation
  • Investor Eligibility Requirements for Private Distributions of MIC Shares
  • Public Distribution of MIC Shares
  • The Characteristics of Private Lending
    • Borrower Risks Associated with Private Lending
    • Determining the Options
    • Explaining the Rationale for the Selected Mortgage
    • Proactive Suggestions for Documenting Conversations
  • Syndicated Mortgages
  • The Importance of Knowing Your Lender or Investor
  • Tips for Submitting a Successful Application
  • Best Practices for Dealing with MICs and Private Lenders

Section 2: Funding Models and Pricing

  • Capital Market
  • Mortgage Market
    • Supply of Mortgage Funds
    • Demand for Mortgage Funds
  • Securitization
    • Characteristics of Mortgage Loans as Investments
    • Uniqueness o Liquidity
    • Reinvestment Problem
    • Administration
    • Capital Cost
  • National Housing Act Mortgage-Backed Security (NHA MBS) Program
    • How Does the Lender Make Money?
    • Features of NHA MBS Program
    • Challenges with NHA MBS Program
  • Canada Mortgage Bonds Program
    • Features of the CMB Program
    • Challenges with the CMB Program
  • Registered Covered Bonds
  • Government of Canada Guarantees for Mortgage Products
  • Traditional Deposit-Taking Structures
    • Background
    • How Do Banks Make Money?

Section 3: Commercial Financing

  • Types of Commercial Properties
    • Condominium
    • Retail
    • Commercial Condominium
    • Office Building
    • Retail and Office Condominium
    • Multi-Residential
    • Mixed-Use
    • Industrial
    • Co-operative
  • Knowing the Borrower and Knowing the Details of the Mortgage Transaction
    • Case Study
  • Contacting Commercial Lenders
  • Commercial Financing Application and Letter of Intent
  • Additional Securities
    • Guarantor
    • General Security Agreement
    • Assignment of Rents
    • Loss of Payee
  • Assessing Risk
    • Income Constraint
  • Closing the Transaction
    • Fee Agreement and Letter of Direction
    • Returning the Commitment to the Lender
    • Lawyers and Commercial Lending
    • Communication Post Commitment
    • Steps Taken by the Lender Prior to Closing
    • The Lender’s Lawyer’s Duties

Section 4: Development and Construction Financing

  • Real Estate Debt Market
  • Construction or Interim Loans
  • Permanent Loans
  • Stages of Finance
  • Land Acquisition Loan
  • Land Development Loan
  • Construction Loans
  • Permanent Financing
  • Prepayment of a Permanent Loan
  • Acquisition of a Property
  • Underwriting Financing
    • Underwriting Criteria
    • Loan-to-Value Ratio
    • Debt Coverage Ratio
    • Case Study
  • The Loan Underwriting Process
  • Mortgage Insurance

Section 5: Appraisal Process and Techniques

  • Defining Appraisal and What Appraisers Do
  • The Appraisal Process
    • Step 1: Defining the Appraisal Problem
    • Step 2: Determining the Scope of Work
    • Step 3: Data Collection
    • Step 4: Data Analysis
    • Step 5: Selecting the Appropriate Appraisal Approach
    • Step 6: Reconciling Value Indications and Final Opinion of Value
    • Step 7: Communicating Findings
  • Looking Ahead: Innovations in Property Valuation

Section 6: Property Inspections

  • Home inspections
    • Rules and Regulations About Home Inspections
    • The Inspection Report
    • Licensing Requirements for Home Inspectors Across Canada
    • Advantages of Using a Home Inspector who Holds a Designation