Tourloukis: Refi rule strands 'collateral' clients

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Moving clients with high-ratio collateral mortgages is now virtually impossible given Flaherty’s mortgage rules changes, says one of Canada’s highest volume brokers, pointing to lender interpretation of refinancing limits.

“It’s something brokers need to know – that lenders, except for one that I know of – are now refusing to accept the transfer of collateral charge mortgages even when fully discharged and even when the client isn’t looking for a refinance,” Jim Tourloukis, president of Advent Mortgages, told “They’re basing that on their interpretation of the LTV cap on refinances being dropped to 80 per cent and that any high-ratio collateral mortgage must be treated as a refinance, even if the borrower is looking to transfer the same principal amount.”

The lenders' reasoning is straightforward enough, although effectively keeps clients permanently tethererd. In order to move a collateral mortgage to another lender at maturity, that loan can only be treated as a refinance as collateral mortgages cannot be transferred, or switched.  

Further, says Tourloukis, the recent changes by the Finance Minister no longer allow high-ratio mortgages above 80 per cent LTV to be refinanced.

“The result of this is that a client with a high ratio collateral mortgage will not be able to move their mortgage to another lender upon maturity, he says, “to the extent that's to the extent the home’s value keeps the mortgage high ratio.  

It's bad news for clients left at the mercy of the lender in terms of rates and re-advances.  

Tourloukis and others are worried that hard truth could leave brokers open to increased levels of litigation specifically tied to the limitations on collaterals.

The Unionville broker – a perennial member of the Top 5 in CMP’s annual ranking of brokers by funded volume – is also mindful that the increased difficulty of moving collateral clients will encourage some brokers to be more deliberate in placing borrowers.

“We urge all brokers to consider this potential issue for their clients,” he told “Three lenders who offer collateral mortgages only to their clients, and because of these rule changes, we limit the number of high ratio mortgages we send to these lenders. 

"For the ones that we do send, we make this issue clear to the client so that there are no surprises to the client at maturity by adding this issue to our disclosure form, which the client signs.”


  • Michael Mitchell on 2013-05-02 9:26:27 AM

    Why do think TD Canada Trust did this to begin with,should be illegal

  • Ron Butler on 2013-05-02 9:36:33 AM

    Jim's right, lenders have increased their "stickiness" with their mortgagors, which is okay IF the borrower is fully informed. But as we learned from the hidden camera incident at TD Bank the clients are rarely fully informed of all the aspects of a collateral charge.

  • Max Cafissi on 2013-05-02 10:16:34 AM

    You say only 3 Lenders use Collateral Charges. I belive it's more than that. Which ones has Jim identified other than TD/Canada Trust ? My understanding is that RBC, BMO, National Bank, Manulife Bank and perhaps CIBC are all now using Collateral Mortgage Charges. These Lenders are all acting under the pretence that it is beneficial to the Borrower, whereas, in reality, they are just trying to prevent "slippage". When has a Bank ever done anything to benefit the client ??

  • Gunther Kaschuba on 2013-05-02 10:53:09 AM

    If brokers are so concerned about this issue, why do they continue to send those lenders business? I agree it is an issue that needs to be addressed, but don't complain and then continue to do business with them. I stopped sending deals to them once I found out. There are plenty of other lenders out there that would love to pick up the slack

  • Jim T Advent Mortgage on 2013-05-02 11:05:55 AM

    Hi Max. Thanks for your points. Just to clarify, the point I made was that there are 3 lenders who ONLY have collateral mortgages. That is, they do NOT offer non-collateral mortgages at all. We all know who these 3 lenders are. Of course there are other lenders who offer collateral mortgages AND non-collateral mortgages. To Gunther’s point, fortunately different clients have different needs and there are some cases where a collateral charge actually does make sense. Regardless, the point here is that as mortgage professionals, it our duty to provide full disclosure to our clients as to what issues they may face with different types of mortgages.

  • Joe the Broker on 2013-05-02 11:40:09 AM

    TD bank is now the slimiest , shadiest bank in Canada.

  • Paolo Di Petta | on 2013-05-02 12:35:45 PM

    Again, the problem isn't the rules, it's that those people should have never been placed in high-ratio collateral mortgages to begin with.

    Not to mention, they wouldn't need a "high-ratio" mortgage if the housing market wasn't artificially inflated by low rates and previously long amortizations - their down payment would have gone a lot longer had they paid a reasonable price for their home in a more normal market.

  • Mark on 2013-05-02 8:40:01 PM

    Not all of those banks you mentioned are registering all of their mortgages as a collateral charge. Yes, is the product is a home equity line of credit, then the charge is collateral, but if the product is a mortgage, then a mortgage charge is registered. Jin is correct, there are 3 banks/institutions that register everything as collateral, while the others register as per the product selected. This is an opportunity to not spread false information, and truely become informed.

  • risk manager on 2013-05-02 8:50:13 PM


    Nice disinformation, but BMO still offers the customer a choice between a conventional mortgage or collateral charge, depending on the product chosen. In fact, I would estimate that, right now, 70-75% of customers are choosing conventional!

    i hope that the advice you are giving your customers is based more on facts, and not just your "understanding" of what the competition is offering!

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