Brokers call for tighter bank regulations

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One broker believes the banks are intentionally pulling the veil over customers’ eyes and is calling for a specific client signoff on collateral mortgages and not just at the time of signing.

“(Collateral mortgages) should be explained to clients and they should sign an acknowledgement (and) not just one of many acknowledgements they sign but one that is clearly understood and is explained to them,” Omer Quenneville of Centum Regal Financial Corp. told MortgageBrokerNews.ca.

Brokers tend to feel like the regulatory deck is stacked in favour of their banking counterparts and are calling for tighter restrictions, especially pertaining to collateral mortgages.

“Basically, they just go ahead and tie up the client’s house for far more than they really should,” John Van Driel of Mortgage Shopper explained. “They need to stop doing that and if they’re going to do that they should make it pretty darn clear to the client that they’re doing that because it’s unconscionable.”

Collateral mortgages allow the lender to secure more than the value of the home when a borrower takes out a mortgage and, according to a number of brokers, the client is often never told.

“I personally think collateral mortgages are a trap because you can’t transfer a mortgage out of a bank once you have a collateral mortgage; it has to be discharged and you have to pay the discharge penalties in order to be able to do that and then re-register with a new bank,” Quenneville said. “Once they have that imposed upon them, then of course the rates won’t be as flexible as they could be if you were able to go and shop around.”

Quenneville also argues the need for a take-home information sheet on the implications of collateral mortgages on renewals and the restrictions on moving a mortgage to a rival lender.

And although both brokers clamour for more balanced regulations, neither is holding his breath.

“We know that it’s the banks that run the industry, so therefore they can influence what the regulators do and there are definitely some obvious signs that (the regulators) are making it difficult for us (brokers) and trying to squeeze us out of the picture," Quenneville said. "The banks are influencing the regulators, no question in my mind, and making it tougher for brokers.”

 
 
  • Barbara Buote on 2014-01-15 8:41:50 AM

    A recent MacLean's magazine feature listed among other statistics, the largest lobby groups in Canada. #1 was the Canadian Banker's Association. That should tell us all alot about who is going to continue winning strategically in the world of finance. Will our call for "mortgage specialists" in our banks to be regulated or require accreditation ever happen? Don't count on it.

    Further discouraging is the flagrant disregard for Bill B20 that doesn't seem to apply to (or rather some institutions simply ignore) the big banks. While all of our monoline lenders are being audited to death who is watching over the biggest offenders - the banks?

    This is not heresay on my part as you have no idea how many times what I tell clients are the rules that apply in their case (i.e. qualifying at the posted 5 year rate for a variable) is totally
    disregarded by their bank and like majic, they are approved when clearly they didn't qualify.

    I seriously doubt in my time (30 years in this business as a banker and broker) that anything will change in this battle. My empathy is with all of those borrowers out there that are hoodwinked, either intentionally or not, by the implications of collateral mortgages, penalty calculations, etc.

    However, I am proud that as brokers, we have the opportunity to provide truth and guideance to our clients.

  • Barbara Buote on 2014-01-15 8:42:00 AM

    A recent MacLean's magazine feature listed among other statistics, the largest lobby groups in Canada. #1 was the Canadian Banker's Association. That should tell us all alot about who is going to continue winning strategically in the world of finance. Will our call for "mortgage specialists" in our banks to be regulated or require accreditation ever happen? Don't count on it.

    Further discouraging is the flagrant disregard for Bill B20 that doesn't seem to apply to (or rather some institutions simply ignore) the big banks. While all of our monoline lenders are being audited to death who is watching over the biggest offenders - the banks?

    This is not heresay on my part as you have no idea how many times what I tell clients are the rules that apply in their case (i.e. qualifying at the posted 5 year rate for a variable) is totally
    disregarded by their bank and like majic, they are approved when clearly they didn't qualify.

    I seriously doubt in my time (30 years in this business as a banker and broker) that anything will change in this battle. My empathy is with all of those borrowers out there that are hoodwinked, either intentionally or not, by the implications of collateral mortgages, penalty calculations, etc.

    However, I am proud that as brokers, we have the opportunity to provide truth and guideance to our clients.

  • Blair Anderson on 2014-01-15 9:38:58 AM

    This is a good idea, and leading the charge for more disclosure reflects well on the broker channel. Once again as brokers, we lack a national voice, and the influence needed to expedite the process. But don't lose faith Barbara. Consumers today are much more savvy. I know a lot of time has passed, but eventually we will be rewarded for the good stewardship we provide, and the consumer advocates that we are.

  • cc on 2014-01-15 9:49:55 AM

    I totally agree with your concerns and that changes have to happen with regards to collateral mortgages.

    Your view with the banks trying to push brokers out of the market, this should be a real concern for all brokers like as you said the signs are there .
    Lets see one big bank closes a large broker lender and another big bank buys a broker lender and than pulls it from the broker market.???
    This should also be a huge concern for the consumer as well, as the rules tighten on mortgage lending clients will not have the option of shopping for rates as they will need to qualfiy under the new rules .
    Example Clients that originally qualified with a 40 & 35 year amortization ect.......
    What I see the banks offering at time of renewal in the future are posted rates as they know clients will not be able to qualify any where else.

    The banks want to control the discounting and by pushing out the competitor (Brokers) than they will accomplish this.

  • Krishna Gupta on 2014-01-19 7:49:00 PM

    I have been advised by the lawyer who has been instructed by the lender for second mortgage behind collateral mortgage that bank has informed the lender in writing that "No subsequent charge can be registered", means client not only can not transfer mortgage to a different lender, now Bank is stopping them to get equity out by way of second mortgage.

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