TD mortgage clause change

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One broker said he is getting nowhere in trying to find out why TD has altered the fine print in its VRM contracts for conventional mortgages – specifically around when a spike in  LTV triggers demand for  a lump-sum payment or a new appraisal.

“I went to the BDM and I ran it past them and asked if I was reading it wrong or not understanding it properly and they said the intention is as it states,” Patrick Mulhern of Invis Mulhern Mortgages told “They didn’t explain why the change was made.”

He suspects that change is really a hedge against any future price correction for Canadian real estate.

Under the terms of the new clause, if, at any time and for any reason, the loan-to-value on a conventional mortgage exceeds 80 per cent, the bank has the right to direct the borrower to bring it under that 80 per cent threshold or to obtain an appraisal proving the fair market value is indeed higher. The new wording replaces a similar clause that sets that trigger at 75 per cent but limits the scenario to instances where interest rate fluctuations have driven LTV over that 75 per cent mark.

Mulhern believes that new, wider clause speaks to the lender’s concerns about a possible market correction and its power to drive down property values.

“In the new clause, it states that if at any time the principal balance exceeds the max LTV.” he said. “This protects the lender in case of property devaluation. “ 

But does the move from 75 per cent to 80 per cent cancel out any potential negative exposure for the client? Mulhern isn’t so sure.

“Something that is outside the borrower’s control, property values, can cause them to have to come up with a significant amount of money or the mortgage will be called,” he explained.

The amendment took place sometime last year, according to Mulhern, and he was only made aware of it because of an increase in variable rate mortgages he recently arranged.

“Unless I’m reading it incorrectly this type of clause has nothing to do with rate fluctuations and everything to do with loan-to-value,” Mulhern said. “Property value decreases would have a huge impact on all TD variable rate mortgages.”

The clauses are compared side-by-side below.


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news/TD_new.png" style="width: 620px; height: 207px;" />
  • Jimmy the broker on 2014-01-20 8:22:49 AM

    Of course TD is worried, why else would you change that clause? Its obvious all the banks are worried now and feeling the heat from OSFI and CMHC pulling back on funds.

    This is what happens when the pigs get too stuffed. Gotta laugh when TD puts out their ads telling borrowers to skip a payment too. Hilarious stuff. Hey , borrow money from us even though you can't really afford it in the first place and skip a payment or 2 when you're not feeling well. And the idiot Canadian borrowers do it regularly.

    Not just the banks at fault here, the borrowers are all guilty too. Canada is a debt ridden country full of real estate pumpers and newbie buyers who have no idea what they are getting into. They buy houses like they are leasing a Honda Civic lol. Whats the monthly payment?? Ok thats cool. No I dont care that I just took on a 98% LTV mortgage on a $700k garbage semi-detached in Leslieville. No problem here folks.

  • Northern Broker on 2014-01-20 8:32:02 AM

    I find it especially disturbing that TDCT has taken the option of switching a conventional mortgage to a fixed rate mortgage off the table. So the customer without access to a large lump some of cash, has no option but pay a lump some or be in default...

  • Northern Broker on 2014-01-20 8:32:03 AM

    I find it especially disturbing that TDCT has taken the option of switching a conventional mortgage to a fixed rate mortgage off the table. So the customer without access to a large lump some of cash, has no option but pay a lump some or be in default...

  • Bibi on 2014-01-20 8:39:31 AM

    @jimmy the broker. You a broker and you're saying this about newbies. Your role as a broker is to advise your clients on best options since they don't know any better not to just earn commission and laugh at their ignorance at what they are getting into.

  • Blair Anderson on 2014-01-20 8:57:57 AM

    So why doesn't it work the other way with default insuance? For example, if a property's value goes up, like it normally does, and the property's new LTV drops to 80% LTV, shouldn't the homeowner be able to cancel the default insurance? The loan in no longer high-ratio. Oh that's right, Canadians pay a one time default insurance premium, on the whole amount of the loan, and not just the amount above 80% LTV.

    A more equitable practice would be to base the cost of the insurance on the added risk (that portion of the mortgage above the 80% threshold). It would be paid on a monthly basis like mortgage-life and mortgage-disability insurance, and best of all, you could cancel it at any time if you could prove your mortgage was no longer greater than 80% of the property’s value. Something an appraisal could quickly determine.

    If you agree, put your signature on my petition -, and lets stop the madness once and for all.

  • Paolo Di Petta | on 2014-01-20 10:12:51 AM

    Is anyone still surprised? I mean the banks consistently preach about how great the market is doing, and then pull stuff like this.

    Don't listen to what they say, watch what they do. That will give you a better indicator of the true state of housing and our economy.

  • Omer Quenneville on 2014-01-20 10:16:13 AM

    I'm not surprised by TDCT actions at all. This is just one more reason to warn your clients about dealing with TDCT. Anyone that has a TD mortgage eventually has an awakening, unfortunately, it is usually to late and not for good.

    Does the mortgage act offer any protection to unsuspecting consumers...

  • Prairies Broker on 2014-01-21 8:35:40 AM

    We can sit here and demonize large F.I.’s all we want, but the bottom line is we need to work with all of them. Ultimately it is your job as an advisor to be the expert and understand the product you are selling, as well as providing the required info and best options for your clients to make a the “best decision” available to them. The lending landscape will always change from a policy perspective so everyone needs to adapt. As for the CMHC argument by Blair Anderson, you got me thinking……….interesting view point. I will have to research this.

  • Omer Quenneville on 2014-01-21 8:46:57 AM

    A mortgage is not a loan and shouldnt be treated as a loan. It is a shared interest and banks should go for the ride with the client. It shouldn't be. Banks are over stepping and no one is watching.

  • Paul Mangion on 2014-01-21 9:27:41 AM

    Just stick to confirming suitability for your clients and cover your a@#. Most clients can talk themselves into anything and won't listen anyway.

  • Laurie C on 2014-01-21 9:44:25 AM

    Brokers are not in the business of giving advice, they are in the business of shopping for the best rate and making $$. TD Bank if you do your research has won many awards over the past 8 years all geared on customer satisfaction. TD Bank gives advice to their clients. The payment vacation and skip a payment feature were introduced to ease the stress in an ecomony where jobs were being lost. No one wants to have to worry about losing their home. I have been in the industry for 33 years and have seen many changes, mortgage lending will contine to evolve based on the ecomony and all banks will follow suit.

  • Paolo Di Petta | on 2014-01-21 10:58:37 AM

    @Praries Broker - If no one points it out, it'll only get worse. And to say that brokers NEED the big 5 is very shortsighted. The fact is, all we need are a few really good monolines that are interested in large scale branding, and are willing to support broker channel awareness/marketing efforts. That would do more for our industry than partnering up with the big 5 ever could.

    It surprises me that some brokers never learn even though they're repeatedly left out to dry by the big 5. 3 have already walked away from the Broker channel, 4 if you include ING.

    @Laurie - As someone who came from the advertising/marketing industry, the inside scoop is that many awards are complete BS.

    Not to mention, my TD branch handed a pre-filled, highly-rated scorecard for my dad to send in when he went to the branch for daily banking. Pretty bogus if you ask me.

    re: your comment on payment vacations - if they're about "introducing ease" then why are they encouraging people to take trips to Europe or to open yoga schools? If someone is facing financial hardship, the last thing they should do is go on an extravagant vacation or take on a huge risk starting a business.

    So, is it about "easing stress", or is it about padding delinquency rates? Or about tracking potential delinquent clients, without affecting their credit so they're easier to offload at renewal time?

    Other recent policy changes at TD have been very customer hostile, so forgive me if I don't think they really have customers' interests at heart.

    Sounds like a TD shill is among us. Again, watch what they do, not what they say.

  • BC Broker on 2014-01-21 11:34:37 AM

    All these brokers that say we don't need banks just Monolines know nothing. Where do u think the Monolines get their money from Mr wise one. Maybe take a second and do some homework on what happened in Australia with Monolines !!

  • Jimmy the broker on 2014-01-21 1:41:13 PM

    Well said Paolo...

  • Kelowna Broker on 2014-01-21 3:21:15 PM

    Just curious...Under their new guidelines a high ratio VIRM can be converted to a fixed rate mortgage or simply increase the payment to satisfy guidelines. However, a conventional VIRM excludes these options and TDCT's only options are either reducing your mortgage to 80% LTV or provide an appraisal. What does TDCT state in their conventional fixed rate mortgage clause? Why is converting to a fixed rate mortgage not an option (yet allowed for high ratio)?

  • Paolo Di Petta | on 2014-01-22 6:09:17 AM

    @BC Broker

    a) Your name is your reputation. I stand behind my comments and you should do the same.

    b) The onlt reason they're using the banks for their funding is because they're not big enough to do it on their own. It's a two way street. If the brokers cut out the big 5 and supported the monolines, eventually, they would be able to break away from the big banks.

    Not to mention, that money doesn't really belong to the big 5 either - maybe YOU need a primer in how banking actually works. Again, with enough broker support, monolines might be able to have the volume to borrow in the same way the big 5 do.

    Until brokers realize that, we're keeping ourselves (and broker-friendly lenders) at the mercy of our frenemies.

  • Laurie C on 2014-01-22 6:59:47 AM

    Paolo, you appear well spoken and opinionated. If the broker is versed in the products they are selling, then they are given the opportunity to give the best advice to their clients. Many people feel a form of safety sticking to the large banks as they are more out there. The smaller lenders I find have restrictions that the larger banks do not, ie pre payment, paying off prior to maturity and penalty options. At the end of the day, it is the clients decision.

  • BC broker on 2014-01-22 7:19:29 AM

    You can argue all u want but facts are facts. Please take 5 minutes and research on what happened in Australia. So please tell me where these monolines would get their funds from if the banks cut them off like they did in Australia.

  • Paolo Di Petta | on 2014-01-22 7:32:22 AM

    @Laurie - you're dodging the topic and inserting FUD - the fact is some monolines actually offer better terms than the banks. Other monolines specialize in serving clients the banks will not. To act like they banks is always the best solution and acts in the best interest of their client is disingenuous.

    In terms of comfort, the issue there is that some brokers don't do enough to inform their client of non-bank options. Going for the quick, easy sale could actually hurt the client in the long run because of the onerous terms discussed in this very article.

    @BC broker - I think you need to re-read what I wrote - Of course the monolines depend on the big 5 now, but with enough support, they shouldn't have to. The banks themselves borrow, with enough broker support, monolines might get big enough to go direct to the source instead of their competitors.

    This isn't a short term, flip the switch sort of situation, but it should be a long term goal for the sustainability of the broker channel, as well as to keep the industry fair and competitive for our clients.

  • John Van Driel on 2014-01-22 8:33:43 AM

    The Big 5 have always been our largest competion in the broker channel!! I very seldom send them ANY business, unless I absolutely have to!!

  • Jim on 2014-01-22 11:11:49 AM

    The Big 5 have great retention, and they are getting more aggressive every year, so if you don't need a client for life send them to the bank, especially TD for a VIRM, when they find out about this new policy they will be sure to slam you for sending them there, and never come back to you.
    I personally look for a lender that has good systems, renewal fee or trailer fee models, easy refinance options for our customers and good underwriters (this makes my life better by have a great relationship).
    Rates can be the same everywhere brokers who sell rates instead of their service are the ones that will fail in this industry.
    Still shocks me that Scotia is the largest lender in the broker community, c'mon people stay away from the big banks, they will survive without us (they already do 70-74% of all mortgages).

  • 0mer Quenneville on 2014-01-22 11:22:51 AM

    The banks dont have better retention, they built a better trap, and TD is the leader.

  • Jack C. on 2014-01-22 4:04:42 PM

    Laurie C - (on 21/01/2014 9:44:25 AM) Are you serious?? Brokers are not in the business of giving advice. Are they not specialists in their field. I can find my own best rate but information on these types of changes are what are important to clients shopping for not only the best rate but the best DEAL (including the fine print)

    I truly hope you are not a broker, truly I do

  • Laurie C on 2014-01-22 4:16:54 PM

    Jack, I am not a broker and I am speaking from the experince of the local brokers that I am accustom too. I apoligize if this is not the case everywhere. I have been lending money for 30 yrs and have seen many changes to the field and eventually all the banks end of doing the same thing. Kudos to those other lenders that have the flexibility to lend outside what the government regulates. This is not a sparring match simply an open forum to voice our personal opinions. no offense is intended.

  • gokou3 on 2014-01-22 11:33:19 PM

    words (ted clark): the housing market is fine, blah blah

    action: lets change the mortgage clause

    action > words

  • M. Robertson on 2014-01-23 10:31:12 AM

    @Paolo Di Petta

    Paolo do you totally understand how the monoline lenders work, because based on your comments it appears that you do not. Very few of the monoline lenders in Canada maintain a book of business, they securitize then sell the mortgages off to secure new funds to lend to new customers. They do this because the cost to actually maintain a book of business is very high and with margins sitting where they are, it is very difficult for them to turn enough of a profit to attract and keep investors. The largest purchasers of those securitized mortgages are the chartered Canadian banks.

    Back in the day it was much easier for these monolines to source funds because foreign investment was substantial. As an example, Duetsche Bank was a major player, but with the financial crises pulled out of North America almost completely because of the risk (they are an incredibly stable and large bank – much larger than any Canadian bank). When they, and others, pulled out many of the monoline lenders struggled to source new funds – and as we all saw several shut their doors or merged with larger wealthier players.

    Brokers on this site continue to bash the banks and make bold claims that we do not need them. They criticize insurers, they lament the supposedly “new” lending guidelines (which for the record… it is still easier to get a mortgage today than it was 15 years ago). Are the banks perfect? No they are not, but they are also not going anywhere. Credit unions and trust companies have been trying to oust the banks for over 100 years, and their market share has pretty much remained stable over the past 40 years. I have been dealing with my bank for most of my life, and although I am not always happy with them – the service I receive is consistent. Besides… I deal with a live person at a bank LESS than I do with a cashier at a grocery store. I do it all online or at an ATM. The only time I need to speak to a rep is if I want to borrow money, or do an investment, and so far – I honestly can’t complain about the service I receive. It is not perfect, but then neither is a brokers service.

  • Paolo Di Petta | on 2014-01-23 1:53:17 PM

    @M. Robertson

    I'm well aware of how monolines work - you're missing the point - the reason why they work that way is because they simply don't have the gargantuan volume to move up to the next rung of the ladder. The only way they'll ever get there is if we support them instead of the big 5.

    I'm sure many people said "Facebook will never work, Myspace is here to stay" - times change - when someone offers a superior product, eventually quality wins out.

    And in terms of complaints about the banks, is it so wrong to expect more? The banking oligopoly does do some sly, hostile things to their customers that no one understands until it's too late.

    It's our duty to our customers, as brokers to point that out. We're experts who are mandated to offer our clients the best advice, and to fight on their behalf.

  • Paul on 2014-01-24 3:40:01 PM

    @Paolo - M.Robertson is correct - the fact is that the cost to service a portfolio of mortgages is so prohibitive that if the monoline lenders were to do this they would never be able to compete on rate.

    Think of it this way... The banks are required to produce mortgage statements. Even if they only did it once per year, here are some numbers to consider.

    CIBC has over 5 million mortgages on the books. That is at least 5 million statements, not including to guarantors or co-borrowers.

    5 million x 0.63 per in postage, plus cost of envelope at say 0.10 per, plus paper 0.03 per, plus staff etc and you are at a MINIMUM of $1.00 to send out one statement in a year - so $5 million dollars.

    That is only 1% of the associated costs with servicing a mortgage.

    If they did not package and sell their book they would NEVER be able to compete with the banks on rate. Higher rates means brokers and consumers don't get mortgages from them.

    It is all in the math.

  • Ron Butler on 2014-01-25 8:41:18 AM

    @Paul Sorry Paul, the biggest monolines actually are servicers. They sell their servicing to the smaller monolines and others. All of your numbers are off on the mortgages under admin as well.

  • Jimmy the broker on 2014-01-25 10:46:51 AM

    Ok enough about monolines and debating how they work, fund mortgages, etc. Why isn't this TD mortgage clause news in the Globe and Mail, Toronto Star, etc. Why is the only news about a bidding war where some idiot buyers overpaid by $200k on a semi-detached in Toronto?

    What's more important? I think existing TD clients need to know what their bank is doing to them rather than seeing these articles that keep pumping the already inflated GTA market.

  • Heywood Chabuzov on 2014-02-03 4:04:39 PM

    The moral of the story? Don't put high ratio borrowers into variable rate products.

  • Jim T Advent Mortgage on 2014-02-12 4:03:33 PM

    The bigger question is why would you send your client to TD? Let me see:
    -could it be that they put your client into a collateral charge
    -could it be that they register to 125% of the value of the home which increases your client's title insurance costs dramatically
    -cold it be because of the ridiculous appraisal reimbursement policy whereby they reimburse the appraiser directly even though the client paid the appraisal and now as a broker you are chasing the appraiser to get the money back
    -could it be their horrible rates
    -could it be their horrible service

    I could go on and on but I think you get the point!

  • Ry on 2014-02-12 8:54:03 PM

    Wow, margin calls on mortgages now? That's crazy

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  • David Neville on 2014-12-29 11:42:19 AM

    I worked for TD in Toronto in the mid-90s and they had the same clause then. And for any of you who remember that time, we were coming out of a huge market correction in the residential market at the time. They would register the higher mortgage at that time on a collateral charge at that time too, but had the same clause as discussed to cover their backsides in case there was another market correction.

  • Angela Wong-Liao - Invis on 2014-12-29 6:13:34 PM

    I believe all lenders are worried about the real estate market value adjustment.

    It happened in the early 1990s when Ontario had the last recession. As a banker at that time, we were instructed to review all secured lines of credit on an annual basis and ordered appraisals to ensure the market value were able to cover the lines of credit balances outstanding. If the real estate market value dropped below the secured lines of credit balances, the bank had the right to call the loan if the borrower could not pay the lump sum to cover the differences.

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