A Harvey, N.B., man is asking Royal Bank
– the same lender that refinanced his mortgage without a lawyer’s signoff – why his home burned to the ground without fire insurance.
Brad McCullough didn’t realize he wasn’t insured until his home was gutted by fire, and his bank informed him that it was putting the house into foreclosure. Months earlier he had refinanced his mortgage with RBC, assuming that the fire insurance was included in the mortgage payments.
"When we remortgaged then that (fire insurance) should have been brought up, and I thought it must be added into my payment, type of thing. I don't want to step on anybody's toes. It's my fault, plain and simple,” McCullough told the CBC.
“I was disgusted at the incompetence of the bank employee and the lack of due diligence in the process,” says Andrew Galea, a mortgage agent with Calum Ross
Mortgage in Toronto. “It also was not surprising, as there should be a need for internal mortgage specialists to be licensed and also governed by FSCO and the bank act. I was a top producing sales advisor at FirstLine and some of my fellow colleagues barely knew the basics of mortgage 101.”
Banks require third parties – like lawyers or brokers who handle mortgages – to have proof of fire insurance; they do not apply that same rules to themselves.
Although McCullough may not want to step on toes, Galea is ready to point the finger of blame squarely at RBC.
“Clients rely heavily on the advice of these representatives to later realize the information provided was inaccurate or from out in left field,” Galea told MortgageBrokerNews.ca. “What do you expect when basic training is three weeks and the philosophy is one of a call centre?”
For mortgage brokers, it is an excellent example why clients should always have an independent third party negotiator working on their behalf when dealing with a bank, says Cathy Gingras, a mortgage broker based out of Fredericton, N.B.
“Definitely, it was an oversight on RBC’s part,” says Gingras, with Mortgage Alliance
Front Gate Mortgages. “The standard for brokers is so much higher than for bank employees. I used to work at RBC – that was the biggest change when I came to work as a mortgage broker eight years ago. We as brokers are doubled checked and tripled checked.
By comparison, she says, “it is kind of lackadaisical at the banks.”
RBC has since put the foreclosure on hold and says it is “actively investigating details around this case and discussing options.”
Gingras told MortgageBrokerNews.ca that such an oversight wouldn’t have happened if a mortgage broker had been involved in the refinancing process – and if it somehow had slipped through, the broker would be held accountable.
“I’m not sure what the coverage is for a mortgage specialist who works at the bank,” she says. “But we have errors and omissions insurance. But that is a problem with how the bank specialists operate. If they were held accountable to the same standards we as brokers have, it wouldn’t have been missed.”
Friends of McCullough are donating money and volunteering to help rebuild his home.