Penalties and transparency called into question

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Healthy debate ensued among brokers, following a story about one big bank’s IRD calculations and the penalties in charges, with several calling into question the transparency provided by some lenders.

“I think it is absolutely fair and necessary to charge an IRD penalty. It is the only way mortgage securitization could work and that is the basis of our existence as mortgage brokers,” Ron Butler of Verico Butler Mortgage wrote on “The question is the clarity and simplicity of the disclosure, it should be easy for a layman to understand and it should not require complex future rate inputs.”

Shane and Joy Trusz, an Edmonton couple, knew they would be dinged with a penalty and expected to pay the equivalent of three months interest -- $4,000 – but were surprised when TD Bank charged them a much bigger figure, according to CBC News.

“We came out with a figure, it was about $7,000,” Shane Trusz told the CBC. “So, how is TD coming up with $17,000? I have no idea.”

The contract with TD stipulates that the bank will charge an early exit penalty of either three months interest or the Interest Rate Differential.

The bank eventually settled with the couple but it has lead brokers to compare big bank practices to their monoline counterparts.

Our profession as brokers is to provide consumers with realistic figures in a transparent manner; case in point: we are currently working on two refinance deals that were pre-approved with a major bank but closed through a monoline lender,” Lior Hershkovitz of Mortgage Edge wrote on “The penalty cost to break these mortgages through the monolines is one fourth of what it would have cost at the major bank.”

One broker, however, knows one way to ensure clients don’t suffer the same fate.

“I’ve been in this business a long time and I don’t think I’ve ever placed a client in a fixed rate mortgage,” Harold Grant of Acadia Mortgage Solutions told

Grant prefers variable rate products because the penalties aren’t as stiff.

“I prefer variable rates because they are often below prime,” he said.
  • A Broker on 2014-10-09 2:25:33 PM

    It's a brokers duty to know the terms of discharge for the client in the event they should discharge their mortgage during the term. I find a lot of brokers putting the blame on others for their own lack of knowledge. Do your job and explain to the clients at inception what they may be up against in different situations.

  • Jon on 2014-10-09 3:57:15 PM

    funny how much brokers slam the "Big banks" about collateral mortgages & unfair pay out penalties & yet TD & Scotia are still both top 5 mortgage broker originators

  • Dave on 2014-10-09 5:11:47 PM

    Never understood why so many brokers send business to TD and Scotia so they can let the banks steal their clients on renewal. Must be getting good seats at the ACC I guess.

  • Dave on 2014-10-09 5:13:05 PM

    Never understood why so many brokers send business to TD and Scotia so they can let the banks steal their clients on renewal. Must be getting good seats at the ACC I guess.

  • Mike Jensen on 2014-10-10 12:45:59 PM

    I'm surprised to hear a broker quoted saying he hasn't ever place a client in a fixed mortgage. We have to match our clients to the right product, although an adjustable product might be attractive for some, it's not the right product for everyone. And how would he get around the benchmark rate for highly leveraged borrowers.

  • James Resourceful Capital Financial Corporation on 2014-11-19 3:12:00 PM

    Sadly one of the reasons why I am dealing less with TD nowadays. They have made changes in their contract and I in good conscience can not tell me clients that its a good deal.

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