Broker: CMHC should not insure collateral charges

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Government interference in the mortgage industry has a history of frustrating brokers, but one leading player believes CMHC changes could be the key to reining in collateral charge mortgages.

“Collateral charges are registered against a person’s credit rating, like a loan. So therefore it should not be covered under the CMHC; a mortgage is a mortgage and is a shared interest in a property – it should not be treated as a loan,” Omer Quenneville of Centum Regal Financial told“So if a bank chooses to do this to protect their interest then they should have to forego the CMHC protection, in my opinion; CMHC isn’t there to protect loans.”

The positives and negatives of collateral charges tied to mortgages have been debated ad nauseam by mortgage brokers and the latest was spawned by a CBC investigation about the lack of disclosure one big bank provides for these products.

And according to Quenneville, the government should not be insuring a product that, in his opinion, is meant to protect big bank interests.

“It has very little do with protecting the customers’ interest and by putting a collateral charge on a property it enables banks to do all kinds of things including collections on other debts by using that collateral charge,” Quenneville said. “And it even shows up on a person’s credit rating whereas a traditional mortgage will not show up because it’s not a loan, it’s a shared interest.”

But would collateral charge mortgage products become less common if CMHC refuses to insure them?

“Absolutely, I think they would be much less prevalent if CMHC refused to insure collateral charges,” Quenneville said.
  • Faye Drope on 2015-03-10 4:29:34 PM

    Totally agree. It used to be that all CMHC Hi ratio mortgages were written with the same language with standard mortgage terms and conditions. There is good in having these charges available but simply put the client should assist in weighing in on their future.

  • James Catterall - Mortgage Architects on 2015-03-10 6:08:25 PM

    It's a very appealing argument - “So if a bank chooses to do this to protect their interest then they should have to forego the CMHC protection, in my opinion; CMHC isn’t there to protect loans.”
    It would be nice if this gained some traction, but I feel like our lobby is just a tiny squeak of a voice compared to the lenders in question.

  • Kuldip S Panesar Homeland Mortgage Corp. on 2015-03-10 7:02:29 PM

    CMHC insure the high ratio mortgages to protect the interest of Bank in case of default but not other debt client is having . They also charge the premium on the mortgage amount not on the collateral charge .Therefore there should not be any collateral charge on the property to cover the other debt of the Bank . CMHC is taking the right step.

  • banker on 2015-03-11 11:42:23 AM

    idiots, quit worrying about the "collateral charge" and start worrying about educating your borrowers, "CG" are not bad for everyone, some make sense, some don't, I have one, set with a LOC, etc, if I cannot pay the $1000 to transfer at renewal, I shouldn't have a mortgage in the first place,,,

  • Omer Quenneville on 2015-03-11 11:50:16 AM

    The only idiots here are the ones that hide and don't use real names.

  • Ron Butler on 2015-03-11 3:08:52 PM

    Omer............... True That!! the guys who always recommend screwing the public or talk about the consumer being stupid to worry about extra costs and hidden fees NEVER but their real names on posts.

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