ING: Collateral charges are all about 'simplicity & savings'

by |

ING’s decision to register all mortgages as collateral charge boils down to just two things, its VP of lending told savings and simplicity.

“We have done a fair bit of homework in terms of coming up with this decision,” Martin Beaudry said Monday, after announcing the system-wide switch effective Dec. 10. “We are on the verge of introducing our HELOC – something our valued broker partners have requested– and we looked at registering them conventionally, but that simply would not have worked.”

The development of that product, due early next year, ultimately encouraged the lender to adopt the readvanceable mortgage across all of its product line, a way of ensuring clarity and “simplicity” for the client as well as ING, from its “own administrative perspective,” he said.

Another driver of the decision was the savings in legal costs for borrowers looking to refinance.

Still, ING brokers have registered concerns about the challenge collateral charges present in trying to move clients to other lenders.

While readvanceable mortgages allow clients to re-borrow the principal they’ve paid off on their mortgage and to avoid upfront legal costs, the lender registers a collateral charge on the home for 100 per cent of the value. That effectively means the mortgage must be entirely discharged in order for a borrower to transfer it to a new lender at renewal or for refinancing. That step translates into additional legal costs.

Beaudry argues that the industry is, in fact, moving in the direction where that new lender is willing to absorb a portion of those legal costs in order to win the switch.  

“So this concern is being addressed more and more,” he told

At least one high-volume broker using ING agrees.

“I see lenders as increasingly willing to eat the legal costs for a client having to discharge their mortgage,” Dan Eisner, CEO for True North Mortgage, told

The added legal step may, in fact, facilitate switches, he said, suggesting lenders may show more willingness to respond to a lawyer-initiated request for payout statements.

But many brokers remain opposed to collateral charge mortgages, arguing they’re primarily used as a retention tool at the same time they do little to guarantee a borrower access to the equity in their homes when they really need it.

“With readvanceable mortgages, the lenders are doing it to offer the client something else down the road,” Larry Frondall, a broker and underwriter for several MICs, told “The problem is that the need for that something down the road doesn’t come about until the client hits some trouble and then the bank is unwilling to readvance the funds.”

Other opponents point to a lack of broker knowledge about collateral charges, concerned that translates into ill-informed clients.

ING has already moved to address any broker deficit, with its BDMs focused on bringing their clients up to speed on a product Beaudry argues will better connect brokers to Canada's $215 billion HELOC market.

  • George on 2011-12-07 4:54:43 AM

    I agree that the collateral makes sense in cases where the client takes ING's HELOC. However, this does not explain the need to register as collateral for clients who do not take the HELOC. It is plain and simply greed. ING wants to handcuff their clients at maturity. Also, this registration at 100% of the value of the home is nonsense. There is no value to the client in having this done. all that is accomplished is it prevents the client from going elsewhere down the road for a HELOC. Good job ING..... NOT!

  • Larry Frondall on 2011-12-07 5:12:55 AM

    Simplicity and Savings for the Lender, not the borrower. I just had another one this week where the lender has registered for the full market value of the home at $350,000.00, yet the client has a HELOC with a limit of $200,000.00. She needs to increase the Heloc to $250,000.00 to clear up some credit card debt and the lender has declined her. My MIC will not register the second behind that lender with their mortgage registered for the full value, so the borrower asked the lender to amend the registered amount and was told NO! So the only solution in this case is to payout the existing heloc with that lender and refinance with another institution. Maybe this works in an increasing market and in good times, but in a decreasing market and a fiscal recession, this simply does not work. I have not seen anyone that has benefited from this in the last 4 years. I understand that the lending institutions put a lot of THOUGHT into this, however, those THOUGHTS all appear to be in their best interests and not in the Clients.

  • Steve the broker from burlington on 2011-12-07 5:24:08 AM

    ING is not giving more choices, they are taking them away... Why not give the client the choice of having a regular mortgage or this collateral mortgage... ? Remember, if you take the new ING mortgage, and you want to borrow more money down the road, you still have to qualify for the new funds. Let's hope they haven't changed their lending policies and that you still qualify... And what if you don't qualify? I don't know any Bank, Credit Union, Trust Company or any of the institutional lender or private lender that will lend behind a collateral charge... If ING wants to offer a HELOC, that's great but there is no need to register all mortgages as a collateral charge... these are HANDCUFFS... I wouldn't put them on any of my clients...

  • David from Dundas on 2011-12-07 7:14:30 AM

    "We looked at registering them (HELOCs) conventionally.... Really Skippy? Interesting concept, but makes an LoC kind of hard to revolve.
    Cut the crap.... this has nothing to do with brokers or consumers. It's all about protecting market share & keeping those bonuses coming!

  • Ottawa Broker on 2011-12-07 7:50:34 AM

    All the same comments that were made to Scotia and TD, yet they still get a large piece of the broker business. ING will also continue to get their large piece of the broker business. Why? Because it seems that as brokers/agents, we lack the work ethic to learn about additional lenders and use different lenders. To many take the easy route and sell the big names, ING, TD, and Scotia. Until as a broker community we stop using these lenders that we do not agree with, more and more lenders will see there is no repurcussions to having collateral mortgages. Therefore, everyone will be registering collateral mortgages soon, whether there is a HELOC component or not.

  • Jeremy on 2011-12-08 2:02:33 AM

    I agree with David! It's all about retention. Once you educate the consumer on the pros and cons and then show them what it could cost either way, an educated consumer will never go the collateral route, unless a HELOC. Life happens!!

    I want to feel bad for those sending ALL their business to ING, but I don't.

    On with the Mortgage Revolution!

  • GordB on 2011-12-08 2:49:31 AM

    It is a way of taking our clients, pure and simple and keeping them forever without having to compensate us or giving the clients the benefit of an impartial recommendation. The sad thing is the experience of Scotia and TD show we are willing to let them. When are brokers going to smarten up and stop using lenders who trap our clients with collateral mortgages and 100% charges?

  • Kevin J Power, President Power Mortgages Inc. on 2011-12-08 3:05:53 AM

    The use of these documents to support products other than Helocs is a very good decision , for lenders. It is a very poor position for consumers. They cannot access any equity that they have in their homes as no one will register behind these documents. I don't believe even experienced real estate lawyers fully understand the issues that are present with lenders using these documents. I saw a case a few years ago that had a lawyer register a private second mortgage for $100,000 behind a Scotia STEP. The home owner went back to Scotia after the funds advanced and they use the re-advance clause and gave him another $100,000, virtually wiping out the second mortgage equity position. Even the lawyer who handled the transaction didn't see the issue with it.

    Retail lenders who offer credit cards, overdrafts etc are using these documents to support otherwise unsecured debts in a bankruptcy or Consumer Proposal situation. This will make it more difficult for borrowers to take advantage of debt resolution programs.

    The suggest option that lenders will develop programs to pay legal fees for someone to move their mortgage will of little to no use, when you can only refinance to 85% of today's value on High Ratio mortgages.

    Consumers and unfortunately, people in our industry are going to be in for a rude awakening when they come to realize the control that these documents give lenders.

    As a point of interest, I recently saw a document from TDCT for collateral charge that showed them being able to increase the rate of borrowing to Prime plus 10%, if the mortgage went in arrears. That would certainly wipe out someone's equity in a hurry. These documents also get registered as Demand Loans. Think about what that means.

    The brokerage community and the industry associations should really be sounding the alarm bell on this issue.

  • Broker Fiduciary Responsibility to Consumer or Len on 2011-12-10 4:40:53 AM

    As a Mortgage Broker also operating under the Code of Ethics of a Realtor I also have a Duty of Care and fiduciary responsibility to my Client who in this case would be the Borrower. Because of the inherent risk and detriment to a Borrower who is taking a collateral charge mortgage with a Lender we are preparing a Disclosure to Borrower Schedule that outlines the pitfalls of such a mortgage and require the Borrower to sign the document which acts as higher level of disclosure and holds the Brokerage and Brokers harmless (we hope)in the futuree. In discussions with an insurance company executive providing errors and omissions insurance for mortgage brokers it is highly likely that such additional signed disclosures and waivers will be required in the file to protect brokers and the insurance companies from a projected increase in claims when these issues start to explode 2-3 years down the road.

  • Omer Quenneville on 2011-12-10 4:41:11 AM

    I've been informing my clients for years about these HELOC, and transfering them out of TD and Scotia upon renewal. Once explained to the client what it means, and how well their hands will be tide, it is easy for them to switch. As an industry we need to educate people. We need a 10 minute, unbranded video, that explains clearly what this means to the client and then we need to circulate it to our business partners such as realtors and churchs to expose the devil. It about protecting the client and in turn, it will protect our industry.

  • Ron Price on 2011-12-10 5:27:13 AM

    Any broker who supports the collateral mortgage product is out to lunch. The negatives far outweigh the positives for the borrower who by and large is in the dark. Readvanceable, simplistic, savings, say the banks. What about having the ability to secure, unsecured credit cards and loans to the mortgage, and being able to increase inerest rates(to 10%). Someone loses their job and asks the bank for help (have good equity and credit rating) is the bank likely to say yes? If you sell your house, you want to go with another lender because they offered you a better deal, guess what you can't because it will cost you a fortune. The best you can get is a blended rate, which the bank makes big money on. Saving on legal fees? Questionnable. I have a question. Does anyone know if the banks can switch to a collateral product at renewing by having the client sign a 'simple' form, and without giving full disclosure?

  • Ted Evans on 2011-12-15 10:45:19 PM

    I agree that The collateral chaarge mortgage on title is great for Home Equity Line of Credits because of the readvanceable funcion of the line of credit and the terms and conditions are fully explained to the client so they can make the best decision for the financing. I agree that the collateral charge will reduce the clients lawyers fees when they want to refinance their mortgage. However, What concerns me as a mortgage professional for my clients are when the standard amortized mortgage is registered as a collateral charge and not disclosed in the commitment and explained so the client is aware of the implications if they decide to refinance with another lender for whatever reason. Lenders have to be more transparent in the terms and conditions of thir mortgages right on the commitment as opposed having separate documents to explain a collateral charge. The clients in most cases won't receive or be aware that there is a separate schedule explaining to them the difference between collateraal charge and standard charge. Respectfully, Ted

  • Blair Anderson on 2011-12-09 2:47:41 AM

    Is it really just a bad work ethic, or are some brokers/agents too comfortable with their status. Let’s not forget who the real loser is, your client. At least you thought they were your client until they figure out what a bad deal this was. As the only independent source of information, mortgage brokers have a duty to educate their clients. Our independence, is the keystone which defines us and raises our game above the competition. We shouldn’t reward banks who adopt this policy. It reminds me of Jerry Seinfeld’s line, “Sex to save the friendship”. Think about it.

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