AMERICANS GET MORTGAGE RELIEF, CANADIANS GET MORE GOUGING

We demand new probe into high cost of credit 

BY LINDA LEATHERDALE

Before visiting Canada yesterday, the new messiah for America, U.S. President Barack Obama was busy doling out more bailout money. And finally, after billions went to Wall Street, with bank brass treating themselves to fat-cat bonuses paid for by the taxpayer - some of the money is filtering down to Main Street.

In total, some nine million families will see mortgage payment relief worth US$275 billion.

Still, no-one's answered this question. With the U.S. facing record deficits and owing US$60 trillion in total debt and unfunded liabilities - where the hell is all the money coming from? Tax revenues are drying up at a record pace, with California teetering on bankruptcy while many States face their worst financial crisis in U.S. history. Housing starts have crashed to their lowest levels since government began tracking them 50 years ago. People are losing jobs, homes and bankrutpcies are on rise.

Be warned: When the United States sneezes, Canada catches pneumonia.  We're already hurting, and it's going to get worse.

So, it's riling a lot of Canadians that while U.S. families get help with mortgage debt - north of the border big banks are getting away with fleecing consumers' pockets by hiking the cost of borrowing, even as the Bank of Canada rate falls to a low of 1% and even after Ottawa removed $75 billion of insured mortgage debt off their books to free up credit.  At least some bank brass are taking pay cuts.  And so they should.

First, it was sweet discounts on variable rate mortgages that dried up. Then, banks started hiking the rates of interest charged on outstanding credit card debt. TD Visa's rate, for example, jumped from 18.9% to 24.75% for clients who missed two consecutive minimum payments.

And now this:  More banks are joining TD's and Bank and Montreal's lead and hiking rates of interest charged on secured lines of credit. TD even has the gall to charge a $35 inactivity fee if a line of credit is not accessed within a year.

 "Linda, I just received my monthly statement from CIBC for my secured line of credit.  They are raising the rate 1% and claim increased costs of lending products," wrote reader Bill McLeod. "Considering my rate is prime, plus 3%, this is a 25% increase."

South of the border, lenders have been hauled onto the red carpet by a U.S. Senate Banking Committee, demanding answers as to why they're raising interest rates, adding fees and cutting credit lines, even for low-risk consumers with high credit scores, when the key U.S. lending has fallen to 0%.

But here in Canada, it's open season on struggling families, with banks charging what they want and no-one holding them accountable for this new fleecing.  That's despite a groundswell of taxpayers demanding a new probe into the high cost of credit.  Before I left the Toronto Sun, thousands had joined in my crusade for a new investigation.

"Please keep up your fight," urged reader Devendra in an email to me.

Devendra wants Ottawa to legislate that any lending rate 5% above the Bank of Canada rate is "extortion" and therefore banned by law.

Others just want fair lending practices, especially when families are struggling with record household debt at $1.3 trillion at the same time the economy is crashing into the biggest contraction since the Great Depression.

It's time to let Prime Minister Stephen Harper know what you think. Email him at This e-mail address is being protected from spambots. You need JavaScript enabled to view it , or call him at 1-613-992-4211.  His fax number is 1-613-941-6900.  Or you can write him at the Office of the Prime Minister, 80 Wellington Street, Ottawa, Ont. K1A 0A2.

And while you're at, let him know what you think of these gouging gasoline prices.  Oil prices are down to US$35 a barrel, and we're being hosed paying 85 cents a litre.

Stop bleeding us dry - before a total economic catastrophe hits!

 

 

 


 
 
MORE HYDRO SHOCKERS

Electrocuted by higher bills, while Hydro One rakes in the dough:

By LINDA LEATHERDALE

Let me be clear:  Profit is not a dirty word.

But what is - is "profiteering" from an essential service paid for by the taxpayers, while struggling families lose jobs and can't afford to pay the bills.  Worse, for almost a decade these families have been paying a gouging debt retirement tax on their bills, to retire Ontario Hydro's old stranded $20 billion debt. Then the taxman hits them again with a 5% GST on top of it.

Can you imagine a small business who mismanaged and lost money turning around and telling its customers - "you didn't pay enough" for their products or services bought years ago, so cough up now? Insanity.

Welcome to Ontario's hydro follies - where Queen's Park has totally mismanaged an electricity sector once the envy of the world and now an explosive political minefield, with some getting rich as a strong lobby took us from public power to a free market under deregulation, to half-baked privatization - with the taxpayer footing the bill for all the mistakes along the way.

"Linda, if Hydro One is making such a sweet profit, why am I not getting a break in the debt retirement tax?" asked an angry reader.

What this reader's referring to is an explosive 25% jump in Hydro One's revenues in 2008 to $4.6 billion, up $99 million from 2007, to rake in a decent profit of $498 million a year ago. The utility gives credit to a break in corporate taxes.

But despite the profit, Hydro One applied to the Ontario Energy Board and was approved for distribution rate hikes, effective Feb. 1. Its website estimates its customers will be paying anywhere from 1.3% to 8.3% more for hydro this year, with small businesses paying 2.5%.

Hydro One, formed on May 1, 2000, after the old Ontario Hydro monopoly was busted up, is seeking to bring its rate structure into 12 from 280, after it gobbled up many smaller, local utilities across the province.  And that is pushing up prices, particularly in rural Ontario.

Meanwhile, new layers of hydro brass enjoyed fat-cat paycheques and bonuses since the bust-up that ushered in a new electricity empire of new players, including Hydro One and Ontario Power Generation.  A revolving door of CEOs, paid millions of dollars in salaries and caught in one scandal after another, ended up costing taxpayers millions in very expensive golden parachutes.

Then new Sunshine laws revealed that gluttony was growing at Queen's Park, where more and more civil servants were joining the lofty $100,000 a year club, with the bulk of them hydro workers.

Most in the private sector were lucky to get a raise at all, if they were even able to hold on a job as Ontario's unemployment rate is on rise. Many struggle to keep up with household bills, especially skyrocketing hydro bills.

And rubbing salt in their wounds was news that Toronto Hydro sought a 6.3% rate hike to cover the cost of lost revenue, due to so many households frantically cutting back and conserving energy - which is what green advocates chatised us to do.

Bottom line is cheap, affordable and dependable electricity is what our strong manufacturing heartland was built on back in the heyday when we were proud to belt out, "Got a place to stand, got a place to grow, we call this land Ontario."

Today, Ontario has been reduced to a struggling have-not province, that keeps bleeding manufacturing jobs - while skyrocketing energy bills have helped nail the coffin shut.  And still leaders don't get it.  We can't afford to pay more.

Meanwhile, Queen's Park estimates we may not be free of the debt retirement tax until 2020. If there's a profit, taxpayers should get some kind of break.  Yes, we need to spend on infrastructure - but based on the idiotic mismanagement of hydro thus far, many don't trust the money will go to where it should.

We need a masterplan to get Ontario out of this mess.  Strong leadership would help.  So too would someone who understands we've got to get back to power for the people and by the people.

 
 
Foreclosures on rise

Banks, please play fair with people who face losing their homes:

By LINDA LEATHERDALE

Here's my message to our Big Banks, as families struggle in this brutal economic meltdown:  Please, have a little heart.

This is a time to work with the cash-strapped. Not nail the coffin shut on them.

And face it: Making it easier to cut consumers some slack in this difficult times is bailout after bailout, cash infusions of our tax dollars into the banking system to boost liquidity, and Ottawa wiping $75-billion in insured mortgage liabilities from banks' books.

Fact is, it's the taxpayer who's footing the bill when a homeowner, who made the plunge into the market with less than the conventional 20% down payment, fails and foreclosure notices start to hit.

"Linda, my husband just lost his job, we're behind on our mortgage and I'm scared we're going to lose our home," wrote a worried regular reader of lindaleatherdale.com, who asked that I not use her name.

This young couple made the plunge into Toronto's market a few years ago, worried if they didn't get in then they'd never be able to afford it. What they didn't know was a raging global credit crunch and economic meltdown would hit here, too - with Toronto real estate prices now in freefall.  If they waited, they could have paid a cheaper price.

This couple didn't have a down payment of 25% (the rate for a conventional mortgage has since been cut to 20%).  So they took advantage of those 0% down schemes and 40 amortizations, so they could afford to get in.  Ottawa, worried about the subprime madness spreading to Canada, has since clamped down on amortizing mortgages over 40 years (35 is now the maximum), and you now must have at least a 5% down payment to get into the market.

That doesn't help this couple, now. They're in over their heads, and a job loss means they can no longer cope.  Also, with real estate values in free fall (Toronto average homes prices are down from $404,202 a year ago to $364,416) - if they were to hold on to renewal time (they locked in for five years), they fear there would no longer quality for a mortgage.

"Linda, what can we do?" she asked in desperation.

Selling the home and renting is an option, but this couple may find it tough to unload with sales down by almost 50% from a year ago, worried buyers putting homeownership on hold, and Toronto Mayor David Miller's new municipal land transfer tax pushing buyers into the 905.

So, will the banks cut families some slack, when it comes to delinquent mortgages?

A phone call to the Canadian Bankers Association (www.cba.ca) revealed each bank will likely their own guidelines on how they handle clients with mortgage payments in arrears, but bottom line is if there's a way to save them from foreclosure, most will try to work with clients.

Still, the spokesperson was clear: Banks take seriously contractual agreements that promise to repay the debt.

If late payment notices threatening foreclosure are starting to hit the mailbox, now is not the time to stuff them into a drawer with all the unopened RRSP statements. Now is the time to take control.

CBA's Andrew Addison suggests contacting your bank immediately, set up a meeting and come armed with financial information.

"Before you meet with your bank, gather together all the paperwork you will need so that both you and your bank have a good understanding of your financial situation," said Addison.  "If you aren't sure what you'll need, ask in advance."

Key, he says, is a short term plan on how you may be able to overcome the difficult financial times.  "Communicate to your bank some specific and immediate steps you are willing to take," he said.  This could include reducing living expenses, selling a second car, taking on a part-time job, etc.  Even renting out a room, if it meets with zoning bylaws, could help.

Now is the time to try to convince your bank to look at all options, like lengthening the mortgage's amortization to lessen payments or opting for a cheaper variable mortage, whose rate is tied to the Bank of Canada rate, now at a low of 1%.

If you have a locked-in mortgage, banks normally make you pay a penalty to get out of the contract.  In fact, what's charged is whichever penalty is greater, between a three-month interest rate penalty or the interest-rate differential.

It's no brainer that paying a penalty will only add to the burden of a homeowner in arrears.  Now is the time to negotiate, negotiate, negotiate and see if the penalty can be waived.

Be careful about going in deeper with a private lender, or a second mortgage.  And beware of "save you from foreclosure" scams out there. In the end, you could still lose your home.

Bottom line is our homes are our castles.  And they're also the biggest asset for most families.  So, please Big Banks, play fair.

Listen to Linda Leatherdale with popular Toronto morning man Bill Carroll on Newstalk 1010 CFRB at 7:30 a.m. on Mondays, Wednesdays and Fridays.

 
 
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