CBC’s undercover report last Friday cast a pall over TD’s collateral charge mortgages.
Interestingly, TD never responded to the CBC on camera. So we went to Farhaneh Haque, TD Canada Trust’s Director of Mortgage Advice, for her take on the report.
She told me, “The CBC Market Place piece omitted to include the benefits of a collateral charge…A collateral charge provides future flexibility” by letting customers refinance “without having to incur additional fees.”
Haque adds that prior to October 2010 (when TD switched to 100% collateral mortgages) less than 1% of TD mortgage customers transferred to another lender using an “assignment with a conventional charge, whereas all customers who refinance with TD stand to benefit by re-using their collateral charge in the future.”
She says the majority of customers choose to refinance when moving to a new lender (as opposed to having their mortgage assigned). And when processing a refinance on a conventional charge, Haque says, “a new registration (effectively a fee) is applied.” This makes the loss of the “free switch” option less of a factor for TD customers with collateral mortgages, she suggests.
Haque expects that we’ll see more lenders go the collateral route. “The industry is moving away from conventional charges in favour of the flexibility offered by a collateral charge,” she predicts. “These have always been used for lines of credit and now most financial institutions in Canada use collateral charges for their combined credit products.”
Haque clarified another point as well. While collateral charge mortgage agreements can sometimes be used to satisfy delinquent non-mortgage debts (by forcing a borrower with equity to extract that equity or sell his or her home), TD doesn’t do that.
“…The real estate asset would only be used to payout the mortgage/HELOC facility…Using a collateral charge to pursue the borrower’s home equity to collect a credit card debt (for example) is not part of TD’s collection strategy.”