Brokers as much to blame as banks?

  • feed
  • Google+
by |

A MortgageBrokerNews.ca article detailing one man’s battle with TD over a $17,000 mortgage penalty generated a maelstrom of comments and criticism not only for lenders, but brokers.

“I blame the banks, but we as brokers are just as much to blame,” said broker Omer Quenneville, also a Realtor with Real Estate Homeward. “If we as brokers did our job, people would be lining up to use us. The client needs to be told that the lowest rate is not always the best option. We as brokers are not doing our clients a service by not explaining what a collateral mortgage is, and trapping them in long-term, fixed-rate mortgages.”

The analysis comes on the heels of a MortgageBrokerNews.ca report on the challenges of one TD mortgage borrower, Shaun Rickard, a Toronto-area man who took his dissatisfaction with having to pay a $17,000 penalty to Facebook, Twitter and LinkedIn.

His frustration stems directly from attempts to refinance his home three years before the five-year fixed matured. It means paying $17,000 in penalties, the extent of those consequences far more than he’d been led to believe.

It’s worth noting, Rickard did not use a broker for the transaction.

The article has nonetheless resonated with mortgage professionals, and apparently bank employees, with the Rickard case both dismissed as one of sour grapes but also a reminder to brokers and lenders alike of the importance of fully explaining all and any potential downsides to the mortgage before commitment.

Quenneville, for one, urges his clients to opt for variable mortgages, as a way of limiting penalty shock.

“A lot of my clients are in variable mortgages,” he said. “And most of my clients don’t get burned. If the client is determined to have a fixed-rate mortgage, I will only agree to a maximum 3-year fixed.”
The numbers reflect a large number of people are breaking their mortgage early.

“Statistically, we know people will break their mortgage in three to five years,” he said. “A staggering 95 per cent fall into that category. TD and Scotia are trapping clients with collateral and long-term fixed mortgages. I steer people to BMO all the time.”

Quenneville teaches a seminar called “Mortgage 101,” explaining the basics of mortgage loans and the various options that are available to homebuyers.

“It’s something we should talk about as mortgage agents,” says “The client doesn’t know about the penalties until they try to end the mortgage before the term. I get upset with these banks that are pushing people into collateral mortgages.”

  • Bill Jones on 23/02/2013 4:48:04 AM

    "I steer people to BMO all the time.”??? NOT doing that should be in his "Mortgage 101" course (for a multitude of reasins).

  • The Dude on 23/02/2013 4:49:48 AM

    'I steer clients to BMO all the time...' - yeah, great...that's exactly the solution.

  • Derek Rowley on 23/02/2013 4:59:09 AM

    Do you steer them to BMO as a broker or as a real estate agent and since when dod a broker dictate to a client

  • Al Zayat on 23/02/2013 5:00:06 AM

    What if his clients can't qualify for a shorter term or variable? While he's blaming everyone he can blame the new mortgage rules. Plus, it's a different interest rate environment at this time.

  • Anthony on 23/02/2013 5:01:15 AM

    Does any editor or publicist at MortgageBrokernews.ca read the story before publication...why on earth would you run a story with the perspective of a Realtor/Mortgage Agent who sends deals to BMO...and where is the relevance to our business...does anybody at your firm get the irony of this agent sending deals to BMO...wake up guys...your story's are getting really lame.

  • Paul Mangion on 23/02/2013 5:07:23 AM

    To be clear I don't think that customer used a mortgage broker so you can't really bash the brokers in this case. But I am very sure that had he used a broker he would have had I good 80% chance he would be in the same boat.

  • Paul Meredith, CityCan Financial on 23/02/2013 5:15:24 AM

    Totally agree with Bill Jones. Also, Quenneville doesn't really seem to know what he is talking about as collateral mortgages are FAR from the problem here, so that leads me to believe that he doesn't really understand them himself. The only real problem with a collateral mortgage is that the borrower needs to do a refinance at the end of the term instead of being able to do a simple switch. If the rate is low enough to cover that cost, then really the collateral mortgage becomes a non-issue pretty fast. '
    It is the IRD calculations that are the big problem and as brokers, that should be primary sales pitch when selling against banks. The fact that he is referring his clients to BMO really makes me scratch my head.

  • Ron Price on 23/02/2013 5:16:14 AM

    I disagree w you paul; we avoid all banks/collateral mortgages w a passion. Educate the client of the positive benefits of a mono line mortgage and we are service them well.

  • Daylin on 23/02/2013 5:34:19 AM

    I don't understand what this article is trying to say. If the point is that brokers and lenders have a responsibility to educate clients in all of the details of the mortgage product so the client can make an informed decision of the best product for their needs, I couldn't agree more. The qouted comments, however, certainly do not make that point. Advice to steer clients to a lender that has a Fully Closed discount mortgage product (not to mention, a lender that doesn't support our channel) AND "I will only agree to a maximum 3 year fixed"?! So rather than providing knowledge of the available products - dictate to the client which mortgage they are "allowed" to take? If that 3 year client comes up for renewal at a time when rates happen to have increased a couple points and they were denied the 3% 5 year fixed they would have preferred, they are going to have a complaint at least as valid as the client that gets hit with an unexpected penalty.

  • Terry on 23/02/2013 5:46:03 AM

    Well, I suppose stay away from these 2 lenders altogether. How can we suggest BMO mortgages guys when we don't channel mortgages there, as they have their own Brokers. I suppose the only way to cut these 2 banks out of the picture is one thing, but than who is going to do our cistruction deals, not the mono line group. They don't do these deals. First of all, it should have been against all rules for the banks to set up mortgages as collateral in the first place, not tying the hands of the the consumer. And, variable offer is not always suitable either, ratios, etc.

  • Ron Miller on 23/02/2013 5:53:13 AM

    Did this story seriously get published? Somebody made a serious boo boo. Quenneville I strongly suggest you stop teaching Mortgage 101. BMO is one of the worst. Refuse to give a client a 5 year fixed term. What?!? Please delete this post. Please!!! It is total nonsense.

  • Ross Taylor on 23/02/2013 5:53:24 AM

    This thread is pretty pathetic

  • BC Broker on 23/02/2013 5:55:03 AM

    I am pretty sure Bill Jones's comment was sarcasim if it is the Bill I know. This client is complaining after taking a cash back and wants to pay early. Yes the penalty seems a bit large but all the majors are doing it the same way. Now in TD's defence he can always take that mortgage to another property but mr client wants the best of everything it seems...cash back and best rates with no penalties!

  • B. Mighton on 23/02/2013 6:00:11 AM

    Interesting comments ,on a very serious & potentially costly subject.
    A recent TV program pointed out the fact that some staff members of "the Bank" were NOT AWARE of the difference of collateral mtg vs regular mtg.
    It would be prudent to ask any lender or broker the following : Is the Mortgage ..assumable,portable & how is the interest calculated (daily,monthly,semi annually)
    The answer to these points should be 1st & foremost concern for ourselves & clients .
    The best answer to these points can & should mitigate costs to ourselves & clients alike.

  • Brian on 23/02/2013 6:04:39 AM

    how is being a realtor and a mortgage broker allowed? That is a huge conflict of interest.
    Also is this an advertorial?

  • Paul Therien - CENTUM on 23/02/2013 6:18:48 AM

    I don't understand something that perhaps someone can explain to me… banks and consumers both read the articles and comments posted here. This article and the previous are eliciting huge negativity directed at banks and consumers from most of the people posting comments, several of whom are mortgage brokers. Yet we at the same time expect the big five banks to continue to fund the monoline lenders, and we still expect the consumer to use a brokers services and trust that they are getting expert advice?

    We as an industry are fighting to capture market share in what is looking to be a difficult year, all of the major brands are spending large amounts of money to support and grow our respective networks. I am shocked by the venom of some of the postings on this and the other article. What I also find staggering is that so many people seem to missing the point… that it is about the power of social media.

  • Bill Jones on 23/02/2013 6:40:14 AM

    A high-ratio collateral charge is serious problem (can't refiance due to over 80% LTV, limited options to switch, although Firstnational is now accepting them). Total agree with Paul Meredith - IRD Calcuations are the main issue (and BMO is certainly no better than any of them - try calculating their penalty on a 10 year 3 years into it). With this article, the saying "Jack of all trades, master of none" comes to mind.

  • Ontario Broker on 23/02/2013 6:51:35 AM

    Brian, when was the last time you head above water? 45% of the Principal Mortgage Brokers in Ontario (i.e. the chief compliance officer under the MBLA Act)are also, at the same time Brokers of Record under REBB Act,i.e. the chief compliance officer under REBBA. So if you are in Ontario there is close to a 50/50 chance your mortgage brokerage is run by a real estate broker.
    As to conflicts of interest, don't you have one everytime you get a finder's fee from a lender? Thats why you disclose the fee upfront, in writing, to the borrower. Life is a series of conflicts of interest, just disclose them to all parties involved, upfront and in big bold print, you won't get into trouble.

  • MP on 23/02/2013 6:54:57 AM

    Obviously this Quenneville guy needs an upgrade course for himself. lol. He should know that BMO also uses "discount off posted" to calculate penalties. He should know their low rate mortgage is restrictive and he should know that BMO doesn't support our channel. We as brokers need to be educating our clients on the ins and outs of IRD calculations so huge penalties don't happen. And making sure people are aware of the claw back with cash backs.

  • Robert Stanfield, Invis Agent on 23/02/2013 11:17:27 AM

    I agree with Paul Therien, show some professionalism fellow brokers. Also, I don't think comments should be posted unless accompanied by the writers real name and identity. It seems that the more negative comments on all articles are of brokers that hide behind a false name and identity. Being identified will make brokers think twice about writing negative comments that are not necessary.

  • Stan-DLC on 23/02/2013 1:29:04 PM

    The article blaming us mortgage Brokers and Agents, who are constantly train and upgrade to new mortgage law who do lots of work to educate clients who lot of time after running of to big Banks who is telling nothing,zip, nada, about Mortgage options unless you ask, most of the time they(Bank) chose for You best option for them. People know that dealing with mortgage Agents they will see and choose best option in they situation, but guess what 70% running to the Bank to get ripoff in most cases. People don't get it that Quarterly billion of $ pure profit is from pockets of hard working people.I just have same situation 1 1/2 year early before Client call me for refinancing I got him what he was looking for, no penalty mortgage with blended interest rate(in witch was in benefit to the client) we as mortgage Agents are not Genius but we have good lenders who care for Us and our clients "WE HAVE GOOD OPTIONS IN IT". No mater how strong You are if horse doesn't want to drink water You will not force him to drink. So we can yell and scream we have option we will teach You we will help You to save lots of money 7 of 10 is going where? to place where they in most cases loose money by doing unknown here sign and here and see You sucker. People known that if they are in trouble Bank will not even want to talk to them than they remember about Mortgage Brokers and Agents.I just hope more people will speak up who get badly hurt financially by Big 5 and the rest of people will start to recognize our hard and responsible work. Amen to It

  • Monty on 23/02/2013 3:29:54 PM

    Sure Stan. Until the client wants an open mortgage

  • Stan-DLC on 24/02/2013 3:25:44 AM

    Hey Monty,
    Mortgage was Fixed close for 5 Years I help him to refinancing 1 1/2 before term ends. Client got blended rate till end of his original term.

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