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Mortgage Broker News | 12 Oct 2011, 08:00 AM Agree 0
Twin class action lawsuits were filed in B.C. and Ontario late last week alleging some CIBC mortgage borrowers have been unfairly penalized by “vague” prepayment terms, the lawyer behind the action told
  • BC Broker | 13 Oct 2011, 03:07 AM Agree 0
    I loved hearing this story. Kudo's to the lawfirm that ultimately decided to proceed with this case. I have talked to a few lawyers over the past few years about penalties and not one lawyer was interested in tangling with big banks and their powerfull lawyers.

    p.s Is the govt ever going to get around to standardizing penalties as they mentioned in the 2010 federal budget ?
  • Dan | 13 Oct 2011, 05:20 AM Agree 0
    That change will most likely never occur as it would harm the Big 5's ability to profiteer off of Canadians. When was the last time any federal government passed legislation that was detrimental to the banks' bottom line. The same is true for the fact that there is virtually no regulation within the areas of credit cards and in-store financing.
  • Ron Butler | 13 Oct 2011, 06:25 AM Agree 0
    Thank you BC Broker, standardization is the right approach. This would be an easy law for the Feds to enact. I don't even care what the IRD rule would end up being as long as there was only one way of calculating IRD.

    The only ones who do well in any class action lawsuit are the lawyers.
  • alberta | 13 Oct 2011, 06:54 AM Agree 0
    lets see, royal bank lost an action class lawsuit about 5 years ago and they are back to their old tricks. the banks do not give a damn. they will do what they please, CIBC will lose this lawsuit and thee will pay. than they will wait a year and they will do the same thing. what needs to be done is an action lawsuit against all the banks that are following CIBC lead, royal bank, bns, Laurentian bank, now even BMO changed their pre-penalty to follow royal bank because they realized how much money they can make.
    come on it is easy 6 months pre-penalty no matter when you mortgage was done. this will solve all problems
  • David O'Gorman | 13 Oct 2011, 07:54 AM Agree 0
    I did some fairly deep research into different types of CMHC MBS pools, & there is a type where the investors, the buyers of the MBS units, don't get a cent of the prepayment penalties. It all goes the originator, the FI.
    The arguments & judgements in favour of the banks being entitled to a PPP , has been that they had to continue to pay a GIC holder interest & therefore were losing money & the PPP offset the loss.
    My point is if the FI does not have a loss with these specific, MBS funded mortgages, why are they entitled to any penalty at all?
  • Lior | 14 Oct 2011, 05:15 AM Agree 0
    I have a feeling that this would be settled out of court. The key issue here is lack of standardization when it comes to computing the IRD. The federal government must pass regulations that make it easier and more transparent for borrowers to understand how the differential is calculated from the onset (BEFORE funding) and not after the fact when the homeowner is already locked in. Moreover, it is up to brokers to guide clients through various scenarios that could influence how the differential is calculated and the role the bond markets play in the equation. This would give the client a better understanding of what they're getting into and save a lot of headaches later on. I found from personal experiences that most clients almost never bother reading the numbingly boring disclosure (not an excuse in itself) in full at their lawyer's office. Of course, in a perfect world we could just convince everyone that a variable mortgage is the way to go since the consumer has various exit options and worst comes to worst the assessed penalty is 3 months interest which is more modest than the IRD. How can banks justify charging a $30,000 penalty? That's just absurd! I'm glad that subject is getting more attention. CBC did a story about a homeowner in Vancouver who got royally screwed with the IRD. The more attention is generated about the practice, the better.
  • M Mian | 14 Oct 2011, 07:06 AM Agree 0
    The banks charge penalty based on the morgage rate and the posted rate which is usually 1% above the rate actually charges on mortgages therefore its a fictitious rate invented to increase the penalty charge. No one can dare take on the brokers its the customers who suffer as they can avail mortgage at a lower rate but bear the penalty charged by Banks on the existing mortgages.
  • Ad Lakhanpal,Mortgage Alliance | 14 Oct 2011, 08:13 AM Agree 0
    I support the need for standardization of penalties,however,achieving it may become a very ambitious project for the Govt. There may also be perfectly good business reasons why lenders may wish to use different strategies. My suggestion, as a first step toward improvement, would be to somehow put a requirement in place, through industry associations or a Govt. body, for clear disclosure of penalties, in a standard format and using standard terminology. Also,in addition to the banks, the monolines should also be included. The stories coming from non bank lenders are even more horrifying.One B lender offering high ratio, with very high rates, used to calculate penalties based on the lowest rate being offered by MCAP. They did not reveal that method until my client, faced with a $22k penalty, threatened legal action.

    CAAMP could take a lead in this project to standardize the format of disclosure of penalties.
  • J. Town | 20 Oct 2011, 03:57 AM Agree 0
    This could be applied with the "Sale Only Clause" at the same time, talk about ear-marking legislation.
  • Mike | 21 May 2015, 08:50 AM Agree 0
    how and who do i have to contact to sue CIBC for this matter? i live in Toronto and need help . or any lawyer to take care of this. thanks
  • Elle | 28 Feb 2016, 08:34 PM Agree 0
    Locked in a mortgage with buy back. Wanted to sell and buy and being told I have to pay over $53,000 in penalties. When I was told my mortgage was convertible. I've excalated the issue with CNBC to no avail. Can I get in contact with this lawyer?!
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