it is important for anyone in any capacity to advise clients on financial and credit matters that they disclose all information that affect the persons decision making. All banks should adhere to this matter. Now that TD has gone to collateral only, its even more important for the advisor to explain clearly what the details of it means. If not, they will definitely hear it from the lawyers at signing and trust me lawyers don't always explain collateral charges properly.
Just because TD was the first bank to change over, it does not mean that other banks are not pushing this product and in some cases, applying a collateral charge without notifying the client. So regardless of the bank, bad advisors do exist. My friend who is an advisor at another big top 5 banks is mandated to push collateral charges on his mortgages and if he uses a standard charge instead, must explain to his manager in writing the reasons for not applying a collateral charge. There are strong indications that all banks will switch over like TD.
Now lets look at the collateral charge. It is a product put in place to help the majority customer base who would like to remain with their financial institution and not jump around from bank to bank. Mortgage switches from TD represented a much smaller number than those clients refinancing with TD. I cannot speak on behalf of the other banks but i'm sure they are similar.
Let's not under estimate the decisions being made by the big banks when a new product is released or changed. They have hundreds of analysts looking at market data and assessing the risks and impacts before it goes to the public.
Let me clear any confusions on those who believe that collateral charges lock customers to their bank. When a collateral charge is placed on a property and the mortgage comes for renewal. If the customer would like to transfer the mortgage to another F.I , the actual mortgage can be transferred but the charge has to be discharged. This is because bank will not or refuse to accept a registered charge from another bank. This is the same if someone has a Step mortgage with Scotia and the client wants to move to RBC, the collateral has to be removed causing a legal fee to be involved. Let's not kid anyone, similar to brokers buying down rates in order to win customers, banks are offering incentives to switch over. They have and will continue to cover legal fees if it means they will gain a mortgage customer and potentially more of the persons business down the road.
If anyone has any specific questions about collateral mortgages the benefits/impacts, please do not hesitate to contact me directly.
Nick Choukour
Manager, Mobile Mortgage Specialist
TD Canada Trust
647.201.8171
nick.choukour@td.com