Fees between big banks and monoline lenders (the ones we use often)

I read this article in ‘mortgage broker news’ today and thought it to be very interesting as it happens often.

My thoughts first – The big banks use much more favourable to them calculations when it comes to paying out your mortgage. I’ve done a lot of research on this and have seen many issues with past clients. With the majority of the lenders we use, which we call monoline lenders, their penalties are much lower. I wont get in to the nuts and bolts of why, however, they are!

The monolines only deal with brokers which keeps their costs way down as they don’t have thousands of employees and branches.

I’ve condenesed this a bit:

…when a deal of his which was supposed to close June 14 “went sideways because of the excessive penalty charged by RBC.”

The client had been with MCAP, but …was lured away by a personal banker and put in contact with a personal banking representative at RBC. The client moved the mortgage to the bank; then, upon attempting to refinance – was told there would be over $12,000 in IRD penalties to pay – as compared to $3,500 if he had remained at the monoline MCAP.

“He was penalty free with MCAP,” he told MortgageBrokerNews.ca, “but this guy’s personal banker pulled him out of MCAP to put him with a banking rep from RBC. Now my client knows what the banks are all about.”

…the government should be focusing its concerns on the mortgage industry – not on rate or qualification, but on business practices.

“The finance minister is truly focusing on the wrong things in the mortgage world,” … the client had no idea how bad it was going to be. I have paid out RBC many times before but the penalties have never been this bad.”

“To top it off I am about to lose another deal for the exact same thing,” he says. “I’ve lost two deals due to excessive penalties; the client had no idea how bad they were going to be. Sad really.”

“Standardize pre-payment penalties throughout the industry, or at the very least make clients sign a document that outlines how it is calculated with an actual example situation,” he says. “Many people would bail at that point, as it is really horrible. People claim it was never mentioned or explained.”

Standardize legal fees when clients are in trouble and going power of sale, or threatened with legal action. “Thousands of dollars charged to write a letter is all too common,” says Strickland. “When we try to help these people from time to time, we often can’t get it done due to excessive legal costs.”

The banks benefited from B20, but it did not do anything to help or protect Canadian, says Strickland.

“It forces people to continue to pay unsecured rates and never pay off the credit cards, it could have been done better by credit management (i.e. closing consolidated debts) if TDS is a certain level after closing, various tiers could have been introduced to ‘protect consumers’.”

Credit cards and lines of credit have saddled consumers with sometimes brutal payments and interest charges. Prime is 3 per cent, yet credit cards rates often exceed 20 per cent, Strickland points out.

“How is this good for consumers? The focus on the mortgages was due to being an easy target to implement,” he says. “It doesn’t make it right.”

**Disclaimer! I don’t say big banks don’t have they’re place. We do use them from time to time as they are the more ‘perfect’ match for our specific client after all the strategizing and planning sessions.

Fees between big banks and monoline lenders (the ones we use often)

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