Collateral charges: They're not going away, and brokers will have to adapt, say industry professionals, but are the banks going to make it easier to deal with those onerous mortgages?
The Big Story spoke with Gord McCallum, owner of First Foundation Residential Mortgages, and David O'Gorman, president of MortgageLand Inc.
Video transcript below:
Jamie Farshchi, Mortgage Broker News
Jamie Farshchi: Collateral charges, they may be a better conversation ender than a conversation starter. Hi, I’m Jamie Farshchi and this is the Big Story on Mortgage Broker News.
From a broker’s perspective collateral charges win a variety of reactions, all of them strong, many of them negative. But brokers may be throwing out the baby with the bath water, if they don’t consider the client.
Gord Maccullum, First Foundation Residential Mortgages
Gord Maccullum: Oh, they can be very useful for a lot of clients. You know there are plenty of examples, people who need a line of credit for assets to capital, need a [date] if their home is appreciating in value, that kind of thing. Business owners will often use it to access capital to grow their business. And so there are some very important uses of a collateral charge. [Re-advanceable] mortgages are a good example of that. For the right client, that’s the important distinction that sometimes gets missed.
Jamie Farshchi: But brokers need to be aware of the potential downsides for both themselves and their clients. Also they hope the banks will foot the bill for clients looking to switch may be wishful thinking.
David O’Gorman, Mortgage Land Inc.
David O’Gorman: That’s delusional, I don’t think the banks will ever pay to let people out of mortgages. I think what you are going to run into is, it’s all about retention, it’s all about the banks retaining their portfolio and locking their clients in. In my opinion there needs to be some more oversight by OFSI, Ministry of Finance, the Financial Consumer Agency of Canada, all three have a role to play in this to protect the consumer.