It may be an exercise in futility, but brokers are once again calling for consistency in the way banks calculate mortgage penalties.
“We need regulation for penalties – every lender calculates them in a different way,” Paul Sidhu, president of Safe Mortgages told MortgageBrokerNews.ca. “I had one client that was hit with a $28,000 penalty at (one big bank) and we called the ombudsman and they couldn’t explain how it was calculated. TD wouldn’t explain it either.”
Sidhu went so far as to file a FSCO complaint against the ombudsman and eventually, the bank reassessed the penalty and dropped it to a much lower figure.
Penalty calculations are a perennial concern for mortgage brokers, whose clients are often hit with hefty bills. And there isn’t enough consistency across the board, most say.
“There are so many different ways lenders calculate penalties – certain lenders will use the posted rate and not the discounted rate that was offered to the client,” Narish Maharaj of Dominion Lending Centres Mortgage Mentors recently told MortgageBrokerNews.ca. “Others will subtract the client rate from the T BILL rate and subtract the client’s rate to determine the penalty.”
But is reform in the future?
One broker isn’t so optimistic.
“I think it’s wishful thinking because there isn’t enough public outcry,” Kent Farnsworth of Mortgage Alliance Simply Mortgages told MortgageBrokerNews.ca. “Interest rate differential penalties are the most frustrating – I think (a penalty of) three months’ interest is sufficient, but not all lenders calculate it that way.”
Still, the growing outcry – and action like Sidhu’s against the ombudsman – may make a slight difference.
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