Collateral Mortgages Beware ! - CBC Marketplace

[dougboswell]

Great Post TJ!

dougboswell - As far as it being the "only" negative feature. . . I think those are really BIG ones. . . mainly the refinance. If a collateral mortgage can be 125% of your home value *without you even being aware of it. . . that's a problem. I understand a collateral mortgage for the original maximum amount of an HELOC (or Home Equity Line of Credit) but other than that it's just a grab. Mainly because the home owner has to go through the application process and there's little guarantee they'll get approved. It's like holding a client's home hostage.

* as in customers are rarely advised of its meaning. . .and if they are at all, it's only the positive aspects. . .not the negative.

Have to disagree with you a little. The lender will instruct the lawyer as to what the property is to be registered at. The client however has the choice to have it registered at the loan amount or the home value amount. If they want the property only registered at the loan amount they can write a letter while they are at the lawyers and the lawyer will forward it to the lender. This was verified yesterday by a senior credit manager for a large lender. Not all lenders are doing a cash grab from the client.

[MortgageQueen]

Have to disagree with you a little. The lender will instruct the lawyer as to what the property is to be registered at. The client however has the choice to have it registered at the loan amount or the home value amount. If they want the property only registered at the loan amount they can write a letter while they are at the lawyers and the lawyer will forward it to the lender. This was verified yesterday by a senior credit manager for a large lender. Not all lenders are doing a cash grab from the client.

I realize that is true. Problem is, client's are not aware of what's actually "involved" in collateralizing the home value amount because they're only told the benefits, not the negatives.
A broker who obtains a collateral mortgage for a client will explain those options because they go through everything on the commitment with a client. In fact it's highly likely this would have been discussed in detail before the application was even submitted.
Again. . .my beef is most (collateral charge) Lender's do not disclose "enough" information to clients.

[dougboswell]

I realize that is true. Problem is, client's are not aware of what's actually "involved" in collateralizing the home value amount because they're only told the benefits, not the negatives.
A broker who obtains a collateral mortgage for a client will explain those options because they go through everything on the commitment with a client. In fact it's highly likely this would have been discussed in detail before the application was even submitted.
Again. . .my beef is most (collateral charge) Lender's do not disclose "enough" information to clients.

Is this really the duty of the lender? It is the fiduciary duty of the mortgage agent/broker to explain this during the application process -ie: by choosing this rate with this lender you will have a collateral mortgage. Here are the pros and cons.

Unfortunately this theory breaks down when a consumer walks into a big bank like RBC or CIBC where they have no broker working for their interests. I agree that these are the lenders that have to disclose more to the customer. Another problem is the bank employee taking the application may not have the necessary training or knowledge.

[bobbyreyes]

Thank you all for your advice. I think before making any deal or before going for a Collateral Mortgages we must consult an expert to get the best advice.

[dougboswell]

Thank you all for your advice. I think before making any deal or before going for a Collateral Mortgages we must consult an expert to get the best advice.

Both Mortgage Queen and I are licensed mortgage agents. Before relying on bank employees advice regarding mortgages ask about their qualifications.

[MortgageQueen]

Is this really the duty of the lender? It is the fiduciary duty of the mortgage agent/broker to explain this during the application process -ie: by choosing this rate with this lender you will have a collateral mortgage. Here are the pros and cons.

Unfortunately this theory breaks down when a consumer walks into a big bank like RBC or CIBC where they have no broker working for their interests. I agree that these are the lenders that have to disclose more to the customer. Another problem is the bank employee taking the application may not have the necessary training or knowledge.

Very True DB. Unfortunately the Public believe (for the large part) that somehow the Bank is the highest authority when in fact as you said, bank employees rarely have much training and they are largely "quota motivated" and in fact they are under considerable pressure to produce that quota or target. This practically rules out the chance of any objective advice to a client looking for a mortgage that is in their​ best interests.

[bobbyreyes]

Thanks for the advice.