Banks continue to frustrate brokers

by |

A perennial thorn in the side of every broker, the games that banks play in order to block a broker’s deal are many. So here’s one you may be able to relate to.

“Dealing with banks that don’t want to do discharge statements for those customers who wish to take their business elsewhere,” Mark Goode of Dominion Lending Centres Mortgage Man told “They play games and sometimes wait until a deal is closed so that penalties need to be paid.”

Goode does recall a time when a statement was issued by a bank that would free the client for his relationship – on a Friday at 5pm that was only good for 24 hours.

Despite improved efforts by banks to disclose penalties, brokers are still frustrated by ploys to instill fear in clients.

 “The luxury the banks have is fuelling the fear customers have of paying penalties,” Mark Cashin of Dominion Lending Centres told “Psychologically they can’t get over that penalty barrier. It’s a great retention tool.

“I had another one with RBC: They had and astronomical penalty of $5,000 for a $90,000 mortgage with only a year left on it,” Cashin said. “I asked the customer if they asked how RBC calculated it and they said the bank just gave them the number.”

It’s an issue Cashin has had more than once and it isn’t only the big banks that are guilty.

“I just had one yesterday and I don’t think it’s necessarily just the banks; I think it’s a ploy that a lot of lenders use,” Cashin said. “I calculated the discharge penalty to be $3,850 and they came back with a $5,000 penalty. They didn’t calculate their 20 per cent pre-payment privilege.”

Proper consultation with clients can convince them to take a penalty -- once it’s explained how much they will save.

“I do a total dollar calculation of interest over the term and I show customers what the balance is,” Cashin said. “If it’s calculated properly sometimes it is worth to take the penalty because a customer may save 15 to 30 thousand dollars.”

  • Paul in Toronto on 2013-08-29 9:28:37 AM

    I recently had a bank issue a discharge statement about a week after the maturity when it was requested three weeks before maturity. In the end, it only makes the banks look bad to the consumer and gives them a reason to come to us instead of banks in the future. People definitely deserve better treatment than that.

  • @kiltedbroker on 2013-08-29 9:40:34 AM

    I believe this kind of action by the bank is equal parts scare tactics, equal parts ignorance.

    From my experience, you can contact a bank 3 times to secure the exact amount for the mortgage penalty discharge and get 4 different figures.

  • todd on 2013-08-29 9:44:29 AM

    this information is all well and good but why don't they name the banks so that we the people can avoid them?

  • Ron Butler on 2013-08-29 11:15:49 AM

    Mr. Middleton is correct, it is partly the fact that these are really big companies with a thousand clerks and for some of them the discharge calculations do in fact change every day and its partly tactics to obstruct the client from changing lenders.

    Mark is right in saying that the banks need to stop doing things that are against their regulator's policies. OSFI wants the banks to act properly and in the public's interest. The banks need to process discharges in a timely fashion that does not stop a client from getting the new rate that they want.

    That being said; we have to accept these banks are very capable adversaries who are dedicated to holding on to their customers and they will do tons of things to slow us down. What they must not do is act against their client's instructions to issue a discharge.

  • Len Lane on 2013-08-30 8:31:07 AM

    We recently had meetings with FNF and they provided a spread sheet on how long pay out statements were valid for each lender. RBC and ING only has them valid for 5 calendar days. The rest range from 10 to 30.

  • M. Robertson on 2013-08-30 9:14:45 AM

    The issue with discharge statements is not just with banks, it is with all lenders. Each has a different policy regarding discharge statements.

    A discharge statement gives the amount required to discharge a mortgage in full as of the day the statement was issued. ALL discharge statements are required to provide a per diem amount.

    A large part of the problem is that most brokers do not take the time to fully understand each lenders payout policies. That results in confusion for the consumer because they are most often given information based on "general" payout policies.

    If you really want to understand the policies fully, get a copy of the standard charge terms for each lender and have a read.

  • Connie on 2013-08-30 12:35:01 PM

    Its no secret what banks do yet they still get plenty of business and never are told to stop behaving this way to the consumer. I had a mortgage with Scotia years ago before switching to Firstline, took advantage of my prepayment privilege and put 10% on the principle each year, when it came to the payout statement they based it on the original amortization schedule not factoring in how much I paid it down... it took my lawyer going to head office to get it corrected. No one there cared! They told me its what I HAD to pay... don't accept it - fight it!

  • Carlo the broker on 2013-08-29 9:11:39 AM

    (One bank)is notorious for straight out lying to customers about to leave them for a broker lender. My clients have told me how (it) would make up all kinds of lies about how broker lenders and how they will charge you more penalties than a bank, close up shop and you will lose your house , etc. Anything to scare their clients in to not leaving. This is on top of holding a discharge for days or weeks and not sending it to a lawyer.

Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Name (required)
Comment (required)
By submitting, I agree to the Terms & Conditions