Canada’s eight largest banks have promised to provide more information about collateral mortgages; including online educational resources and better training for bank employees to help them better explain the difference between collateral charge mortgages and their conventional counterparts.
“Our government is standing up for consumers and saving Canadians money,” Joe Oliver said of the voluntary policy.
The Department of Finance requires lenders to provide more disclosure for collateral charge mortgages than traditional mortgages. The website reads:
While many consumers continue to choose a traditional mortgage to secure their home loans, many are increasingly choosing collateral charge mortgages. The impacts of having a collateral charge mortgage may differ from traditional mortgages. For instance, switching between lenders may be more difficult. To make an informed choice, consumers need sufficient information to clearly understand the costs and consequences of collateral charge mortgages relative to traditional mortgages. The government will require enhanced disclosure, better equipping borrowers to understand these impacts.
However, many brokers have complained about client ignorance surrounding these particular mortgages.
“(Clients) are effectively entering into an ‘all indebtedness’ mortgage, which brings any other debts to that specific lender under the umbrella of the registered security against the real estate,” Dustan Woodhouse
, a B.C.-based broker with Dominion Lending Centres
wrote in the March issue of CMP Magazine. “In other words co-signing a credit card or car loan for somebody that stops making payments with the same lender holding the mortgage can ultimately result in a foreclosure notice against the original client’s property.
“This is often not clearly spelled out on a mortgage commitment.”
A major broker gripe about a big bank mortgage policy has finally been addressed by Finance Minister Joe Oliver and more transparency about the practice is forthcoming.