A Vancouver mortgage broker says his clients were almost overcharged hundreds of dollars in interest after a standard decision to change their payment schedule led First National Financial Corporation to aggressively push them to renew early – the company ultimately backing down after facing pushback.
Sherlock Yam, a mortgage broker and partner with Win Lui Group, said his clients opened a five-year mortgage with First National on Nov. 25, 2019 with a monthly payment schedule. Shortly after, the couple decided to switch to bi-weekly payments, which Mr. Yam said is a fairly common request.
The change meant their last payment date was now Nov. 14, 2024 – 11 days earlier than their mortgage maturity date – a normal discrepancy that should have no impact on when a mortgage holder must renew.
But when the couple approached renewal time, they were informed that they’d have to renew by Nov. 14 – their last payment date – instead of their maturity date of Nov. 25, or they would be automatically placed in a high-interest open mortgage at a roughly 10 per cent rate.
In e-mails to Mr. Yam’s clients, a First National employee said that, while their mortgage agreement shows the registered maturity date as Nov. 25, they consider the last payment date to be the maturity date anyway.
E-mails between Mr. Yam’s clients and First National show the clients attempted to push back, while Mr. Yam tried to reason with his own contacts at the company. For days, First National denied their right to renew on Nov. 25, and Mr. Yam’s clients ended up rushing to re-sign a mortgage for Nov. 14 to avoid getting into a pricey open mortgage.
Even if they did renew before the Nov. 14 deadline, Mr. Yam said in an interview, the couple would have overpaid hundreds of dollars in interest, since they’d be renewing at a higher rate earlier than they had to.
“I’ve never heard of any bank doing that – you’re basically shortchanging the client by 11 days,” said Mr. Yam, who added that switching to a rate that is roughly 2 per cent higher 11 days earlier than needed would cost around $250 in extra interest for his clients, who have a mortgage balance near $500,000.
“All the mortgage documents, all the annual statements showed the maturity date was the 25th.”
If they went into an open mortgage for the 11 days between their last payment date and their maturity date, Mr. Yam noted, the couple would have paid just less than $900 in extra interest charges.
Mr. Yam said First National only allowed his clients to renew their mortgage at its original maturity date after days of pressure.
“Closer to the 14th, I was very adamant and said, ‘Hey this isn’t right, you’re shortchanging the client, how can you do that?’ It wasn’t until then that they escalated,” said Mr. Yam, who added that staff at the company eventually relented.
“It was a lot of fighting to essentially allow the client to keep their rate for the guaranteed five years.”
First National chief financial officer Rob Inglis admitted a mistake had been made after reviewing the case.
“It seems, unfortunately, our renewal specialists made an error and did not apply our policy correctly,” Mr. Inglis said in an e-mail to The Globe and Mail.
“We regret the borrower’s negative experience. Despite the passage of time, now that we have become aware of this situation, we will be reaching out to the affected borrower to ensure appropriate resolution.”
Mr. Yam said the strong language in their e-mails to his clients, with terms such as “urgent” in all capitals, as well as them brushing off his clients’ initial queries, makes him think it would be easy for other clients to give up and pay the interest.
“This is just so strange, and I find it to be a huge policy error on their part,” Mr. Yam said.
Ron Butler, founder of Butler Mortgage in Toronto, called the company’s attempt to make the couple renew “nonsense.” He said he has never heard of a lender using a change of payment frequency to make a client renew earlier and said it was likely a mistake made by retention staff.
On the other hand, Mr. Butler said he has seen retention departments at mortgage providers use heavy-handed tactics to cajole mortgage holders into renewing early, either by suggesting rates will go up or that processing times will take too long for the customer to shop around.
Meanwhile, Mr. Yam said anybody that has changed the payment frequency on their mortgage should ensure that their mortgage holder lets them wait until their maturity date to renew, especially in the current environment when many homeowners will be renewing at higher rates.
