This article is stating that many consumers out there are coming to mortgage brokers and demanding that their mortgage be placed with one of the big six banks. One mortgage broker even says that his client took a higher rate, just to have their mortgage with TD, as opposed to a mono-line lender.
Mono-line lenders are lenders that just do mortgages. They don’t cross-sell you on chequing accounts, saving accounts, RRSPs, etc. They are also only accessible through the mortgage broker channel. They are very reputable, and many have been around for decades. In fact, a lot of these mono-line lenders’ sources of funding come from big banks, themselves!
So why the apparent uproar from the market requesting their mortgage be held with a big bank? I placed the word “apparent” in there for a reason: I don’t think there is an uproar. I have never once had a client request that their mortgage be placed with a big chartered bank, strictly for the warmth and security of knowing their mortgage will be safe.
Let’s say, for arguments sake, that your mortgage was held with one of these ‘unknown’ mono-line lenders, and worst case scenarios take place all at once and this lender goes belly-up… Now all of a sudden you have no one to repay this money too… Oh darn! Remember… they don’t have a dime of YOUR money; you have THEIRS.
Of course, this scenario would never actually take place as another bank/lender would surely come in and purchase all of the mortgages off their books and you would simply receive a letter in the mail saying that your payments are now being directed to a new party, but your contract remains the same because, well after all, it is a contract and a binding agreement! In essence, nothing would change!
Keep in mind that these are, in fact, worse case scenarios, and the odds of a reputable mono-line lender going belly up are just as good as a reputable bank going belly up. Most have been around for a long time and have very stable financial backing.
So… where is the risk to the client, exactly?