“We asked TD to remove the $946,000 lien, but were told to hire a lawyer,” homeowner Shawn Aberle told the Toronto Star. “We found it unfair the problem was back on us and it wasn’t the bank’s problem to lower the lien amount.”
Aberle and his wife took out a $612,500 mortgage and line of credit with TD Bank, and allege that unbeknownst to them, the bank registered a collateral charge totalling $946,000.
And when health issues forced Aberle out of his job, the couple didn’t qualify to access an additional $50,000 in borrowing. Still, banks continue to tout the readvanceable nature of collateral charge mortgages as a major benefit for clients.
“Collateral mortgages provide our customers with flexibility when they need access to affordable credit,” TD spokeswoman Alicia Johnston told the Star. “And may allow customers to avoid additional registration costs when increasing or refinancing a mortgage or with future borrowing.”
However, the Aberles faced challenges when their income profile changed due to the illness.
As is too often the case, say brokers, Aberle had, in fact, been approved for financing from an alternative lender contingent upon the lien being lowered.
Aberle credits Toronto Star columnist Ellen Roseman for TD Bank agreeing to discharge the lien.
“Your name gets things popping,” he said after she had contacted TD Bank.
Collateral charges at TD have won the bank other negative media attention.
CBC’s Marketplace recently went undercover to TD Bank to see how transparent it was about collateral mortgages and the fine print associated with them.
In a follow-up to an original segment about collateral charge mortgages at the bank – which resulted in the major banks promising to be more up-front about the associated stipulations – CBC went undercover to two different TD branches to see how well its mortgage specialists explain the fine print and to “test” the bank’s promises.
At the first branch, the undercover journalist asked the specialist if there was any difference between a TD mortgage – which includes a collateral charge -- and one offered at other banks. The specialist failed to mention anything about collateral charges.
In what brokers hope is a precedent, media pressure appears to have saved a borrower from the hefty discharge costs associated with a collateral mortgage.