TD under pressure for collateral mortgage

TD under pressure for collateral mortgage

TD under pressure for collateral mortgage 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.

“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.
  • @kiltedbroker 2015-04-09 11:43:33 AM
    Awesome! Ellen Roseman means business.
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  • Tony Piattelli 2015-04-09 11:50:20 AM
    Sounds to me that this is more like what an elderly gentleman told me when I first started working at one of the majors. When the sun is shining the banks are handing out umbrellas, the minute it starts to rain the banks go back to ask for the umbrella back. The banks aren't here to help you, they are around to make profit and minimize their risk. Just look at what Genworth and CMHC are doing in Alberta, they are precipitating a market collapse versus doing their job which is to provide mortgages to people who qualify based on their parameters not on whether they may lose their jobs. Anybody can lose their job, even the underwriters at Genworth and CMHC if they continue to stymie growth through objective approvals.
    As for collateral mortgages they work for many people who understand the benefits of being able to tap into their home equity on a regular basis and often used by financial planners. Not necessarily an evil thing, but needs to be fully explained and understood.
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  • Ad Lakhanpal, Mort. Alliance 2015-04-09 12:04:00 PM
    I am glad someone is noticing the risks associated with collateral mortgages that many banks have started to use without advising the ramifications to the clients. Among other disadvantages, such mortgages also make it difficult and expensive for the clients to switch lenders at the time of renewal. Perhaps MBN should request someone as influential as Ellen Roseman to do research and publish a column to educate the public. Brokers could use such a column to lend support to our efforts to educate the clients.
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