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Risky Play? Or Well-Calculated?

TD’s new collateral charge mortgage policy finally hit the mainstream press (see this Globe article).

The response thus far seems more negative than positive.

It will be interesting to watch how TD’s share of broker business changes in the next 12 months.

TD-Canada-Trust-MortgagesOther things being equal, this policy has a real potential of reducing TD’s broker volumes. Brokers will now be less inclined to refer standard mortgages to TD given the obstacles to clients changing lenders at maturity.

Moreover, of the broker deals TD does get, a higher proportion could be deals that can’t easily get done elsewhere. That could lower the quality of TD’s broker-originated mortgage portfolio.

All of this raises two intriguing questions:

  1. Did TD not foresee the potential implications of this change?
  2. If TD did foresee a drop in broker volumes and quality of deals, why did it move ahead with this?

We have TD mortgage specialists in our loop that tell us TD is giving them all the training and rate discretion they need to compete with brokers. The collateral charge policy is bound to make some people question TD’s commitment to the broker channel.

On the other hand, perhaps TD will offer brokers something new to keep spirits up (like adding trailer fees, cutting rates, or letting brokers sell the HELOC product). If not, then as much as we hate to admit it, this could be a turning point in TD’s broker business.