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Liberal government writes off $1.1B US loan to Chrysler, plus interest, docs show

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The Liberal government has quietly written off a $2.6-billion auto-sector loan that was cobbled together to save Chrysler during the 2009 global economic meltdown.

The write-off, among the largest ever for a taxpayer-funded bailout, is buried in a volume of the 2018 Public Accounts of Canada, tabled in Parliament on Friday.

The reference contains no explanation for the write-off, identifying neither the business that received the loan nor the sector of the economy.

But CBC News has confirmed the money was lent on March 30, 2009, to Chrysler LLC by the federal government – a non-performing loan that grew with interest over the following nine years. The loan was made by the Harper government, in co-operation with the Ontario government.

“After exhausting all potential avenues for recovery, a $1.125 billion US principal plus accrued interest write-off in respect of ‘Old Chrysler’ occurred in March,” said John Babcock of Global Affairs Canada, the department responsible.

“This amount is reflected in the Public Accounts.”

At the time of the 2009 auto-sector bailouts in Canada and the United States, Chrysler was split in two: an “Old Chrysler” that went into bankruptcy and a “New Chrysler” that became viable and remains in operation today. Now called Fiat Chrysler, the international firm reported net profits of $4.3 billion US for 2017.

Auditor General Michael Ferguson has previously slammed Ottawa’s auto bailouts for lack of transparency. (The Canadian Press/Sean Kilpatrick)

Another 2009 loan, to the restructured Chrysler Corp., was repaid in 2011, when the company paid $1.7 billion in principal and interest to the governments of Canada and Ontario.

CBC News reported earlier this year, drawing on heavily censored documents obtained through the Access to Information Act, that the Liberal government had forgiven a large auto-sector loan.

Similarly opaque

Officials at the time refused to provide details, including the amount or the business that benefited, saying they were protecting “commercial confidentiality.”

Friday’s Public Accounts documents were similarly opaque about the write-off, referring only to the precise value, $2,595,974,536 in Canadian funds.

Canada’s auditor general has previously cited a lack of transparency over the bailouts.

“We found it impossible to gain a complete picture of the assistance provided, the difference the assistance made to the viability of the companies, and the amounts recovered and lost,” Michael Ferguson said in his fall 2014 report.

“There was no comprehensive reporting of the information to Parliament.”

The bare minimum condition for taxpayer support should be transparency– Aaron Wudrick, federal director, Canadian Taxpayers Federation

The now-defunct Chrysler loan was administered by Export Development Canada (EDC), which manages the Canada Account, a financial vehicle for making large loans and loan guarantees backed directly by the Government of Canada.

The Canada Account, for example, was used to finance Ottawa’s multibillion-dollar purchase of Trans Mountain Pipeline on Aug. 31, 2018, from Kinder Morgan Energy Partners, in an effort to assure the construction of a pipeline expansion from Alberta to British Columbia.

EDC’s Canada Account transactions currently show an outstanding loan to GM Corp. for more than $1 billion, originally made on April 29, 2009. The loan also appears to be attributed to a bankrupt version of the firm that was split off from a viable version of GM that year.

As part of GM’s restructuring, the federal and Ontario governments also took multibillion-dollar equity stakes in the company. They sold the last of their GM shares in 2015.

Aaron Wudrick of the Canadian Taxpayers Federation says it “defies common sense” that a taxpayer should be on the hook for a government mistake. (Brian Morris/CBC)

A political scientist who has studied the auto-sector bailouts, Mark Milke, said in 2015 that the $13.7 billion that Ottawa delivered in 2009 eventually cost Canadian taxpayers about $3.7 billion in money that was never repaid.

In the dark

Industry Canada itself warned in 2014 that “neither Canada nor the U.S. expected any of the loans to be recovered from ‘Old Chrysler’.” It was not clear why the non-performing loan remained on the Canada Account books for four more years.

Aaron Wudrick, federal director of the Canadian Taxpayers Federation, said the Chrysler write-off is yet another example of governments keeping citizens in the dark about how their tax dollars bail out corporations.

“While our organization opposes taxpayer bailouts of private businesses as a rule, I think even for those who take a less stringent view, this case highlights the importance of transparency in government expenditures,” he said.

“In short, the bare minimum condition for taxpayer support should be transparency — for the amount given and the terms attached to it. If a business is not even willing to meet that basic requirement in order to receive what are in many cases billions of free taxpayer dollars, they shouldn’t get it at all.”

Word of the Chrysler write-off comes as the Liberal government has been bracing for possible U.S. tariffs against Canada’s auto exports, threatened by the Trump administration.

Follow @DeanBeeby on Twitter

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11-Step Guide to Buying A House

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Purchasing a home is likely going to be one of the largest purchases you will make in your lifetime, which is why it is so important to follow the right steps when starting on your home-buying journey to ensure that the entire process goes smoothly from start to finish!

We’ve put together a step-by-step guide to buying a home, to help you get off on the right foot when it comes to buying a home. Click the download button below to download these steps in PDF form.

1. Decide to buy a home

Make sure you are ready both financially and emotionally!

2. Get Pre-Approved

Work with a mortgage broker or your bank. They will work with you on what you require to submit an application. Once approved, this will determine how much you can afford to spend on a home.

3. REALTOR® Consultation

Work with a RE/MAX agent to help guide you through the process. The right agent will discuss your price range, ideal locations, current market conditions and much more!

4. Start Your Search

Your REALTOR® will get you information on new homes that meet your criteria as soon as they’re listed. They’ll work with you and for you to ensure you find your dream home.

5. Current Market Conditions

Your experienced RE/MAX agent is a valuable resource as you consider different properties. They will be there when you have questions regarding the homes you’re interested in – they can tell you what is a good deal, and when to walk away.

6. Make an Offer

Your REALTOR® will help create your offer tailored to your needs including the right subject clauses down to the closing date that works best for you.

7. Negotiate

You may receive a counter offer but don’t be worried! RE/MAX agents will negotiate for you to ensure you get the best possible price for the house you love!

8. Accepted Offer

It’s crunch time! The next few weeks are busy as you need to schedule and remove every one of your subject clauses by the specified date. You’ll likely need to schedule an inspection, appraisal, financing approval, and several others. You will also need to provide a deposit to put down on the home. The deposit will be a pre-determined amount given in-trust to your REALTOR® to show the sellers you are committed to this home. Don’t worry, that money goes towards the purchase of said home if all goes well! This is a busy time but be sure to reach out to your RE/MAX agent if you have any questions or are unsure about next steps.

9. Subject Removal

Once you have completed all your subject clauses, and everything went smooth, it is time for you to sign on the dotted line and consider your new home to be yours (almost!).

10. Official Documents

You will need to provide your RE/MAX agent with your preferred lawyer or notary to have the official title transferred into your name. You will meet with the lawyer or notary in person to sign all the legal documents before you move in. This typically happens a few days before you take possession of your new home.

11. Move In!

Congratulations, you are officially a homeowner! The date pre-determined by you is your move-in day! You can now move into your new home. Your RE/MAX agent will be there ready and waiting to hand you the keys. Enjoy!

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Know When to Rent ‘Em, Know When to Buy ‘Em

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We’re told it’s always better to buy than rent. Everyone—from our parents to the banks to the government—encourages us to buy, buy, buy our homes.

But times have changed, and I dare say that these authority figures might be slightly out of touch. The jaw-droppingly high cost of real estate in big cities is encouraging millennials to rent instead of own, causing homeownership rates to drop. At 30 years old, 50.2% of millennials own homes versus 55% of baby boomers at the same age. As a millennial homeowner, I can’t help but wonder if I’m generationally displaced.

There’s an old misconception out there about renting that needs to be addressed. You’re not “throwing away your money” if you’re renting. While that familiar axiom might be true sometimes, there are plenty of circumstances in which it does actually make more sense to rent than buy.

You Might Choose to Rent If…

…You Invest What You Save

Renting tends to come with lower carrying costs than owning. Typically, all you’ll have to worry about paying as a renter is, well, the rent (clearly) and perhaps a share of utilities. This leaves you with extra monthly cash to invest, which can ultimately put you on even financial footing or better with a homeowner.

As always, there’s a familiar caveat here: You need to be financially disciplined for this strategy to pay off. One mistake I see a lot is that those who rent tend to fall prey to something called ‘lifestyle inflation.’ Rather than investing what they save as renters, they just rent nicer apartments, eat at fancier restaurants, and put more money into their wardrobe than their RRSP. But this money vacuum can be easily avoided by:

1. Budgeting to find out how much you have left over to invest each month after factoring out all your expenses, then;

2. Funneling that leftover money directly into your investments. Some robo-advisors, like Wealthsimple, allow you to do this automatically via pre-authorized contributions, which set recurring transfers from your chequing account into your investment portfolio, at whatever amount and interval you choose.

…You Have Rent Control, aka the Urban Holy Grail

Depending on where you live, you might be lucky enough to benefit from the urban miracle known as rent control. That means your landlord can only increase your rent by the rate of inflation, which in turn keeps your cost of living way down and leaves you with more money to invest. In Canada, rent control is now implemented in most big cities like Toronto and Vancouver (although not in Montreal).

…You Have a Mobile Lifestyle

Renting makes it easier to move; if you’d like to relocate it’s usually as simple as giving your landlord 60 days written notice. But when you own a home you’re more tied down, and the obligation to be near your property may prevent you from chasing new adventures in faraway lands. I once turned down a fantastic job opportunity in Dallas, Texas for this very reason.

…You’re on a Tight Budget

Renting tends to be more affordable than buying in big cities like Toronto and Vancouver. I know, I know, renting is still unreasonably pricey in certain neighborhoods. But buying in those same areas can be arm-and-a-leg expensive.

When you rent, all you have to come up with is the first and last month’s rent; no need to scrimp and save to pull together a massive down payment on a house, which, incidentally, will take you two to four times longer to save than it did your parents.

And homeownership leads to a lot of other costs aside from mortgage payments. When you buy real estate, you’ll need to pay closing costs, which typically add up to between 1.5%–4% of the property’s purchase price and can include a home inspection fee, real estate lawyer fee, land transfer taxes, and homeowners insurance (sometimes you’ll have to fork over an entire year’s worth of home insurance as one lump sum).

There’s also the elephant in the room that nobody likes to speak about: repairs and maintenance. Homeowners are responsible for paying the big bucks for costly home repairs, such as a new roof and furnace, and are advised to set aside 3–5% of a home’s value toward home repairs and maintenance each year. Renters, on the other hand, can just call their landlord whenever they need repairs (provided the landlord actually picks up). Still, it’s important that tenants know their rights when renting to be aware of which fees do and don’t fall under their responsibility.

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A Montreal Real Estate Broker Answered 5 Qs About Buying A Property To Rent Out

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You’ve probably heard that Montreal’s real estate market is on fire. But how can you get in on the action? According to Alex Marshall, a local real estate broker, buying a property as an investment for the purpose of renting it out is a great way to go about it.

Marshall, who’s part of the Keller Williams Prestige team, sat down with us to explain why and how to purchase an investment property. These types of properties are also known as revenue properties.

Why do you recommend buying a revenue property?

Marshall used personal experience to highlight the advantages of owning a revenue property. He’s currently renting out the Saint-Henri loft he bought in 2010.

“Not only is my tenant paying off my mortgage, but I’m making a couple 100 bucks a month as well,” Marshall said.

Marshall was also able to take out a line of credit on the property, he said, and use the equity to buy an additional property.

“You actually don’t need to live in the property that you buy. I’m seeing clients who are in apartments with low rent [who] don’t want to move but have got the money right now … and are looking for smart ways to invest,” he said.

What are some tips to help people save up for a revenue property?

When Marshall was saving up to buy his first property, he said he worked a second job. 

“There’s a lot of value to having that side hustle … even if it’s at Subway or it’s at a landscaping company on Saturdays. It will add up significantly in the long run,” he said.

He gave the example of adding $5,000 to your annual income.

Marshall said you can qualify to borrow roughly four times your annual salary for a mortgage so $5,000 could actually provide you with an extra $20,000 of buying power.

“That might get you a second bedroom, that might get you a parking spot, that might get you a larger space,” he said.

The pandemic, Marshall said, has also helped some of his clients save extra funds.

“You can’t travel, you can’t go to the restaurant, you can’t go to the theatre, you can’t go to the bar. So a lot of people right now are finding themselves with almost a disposable income,” he said.

Marshall also recommends looking into Canada’s Home Buyers’ Plan program, which allows you to withdraw up to $35,000 — — tax-free — from your registered retirement savings plan (RRSP) to put toward buying or building a qualifying home. 

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