‘BUYER BEWARE’ HAS NEVER BEEN SO IMPORTANT
Continuing from last week’s article where we pointed out that when you get a bank
collateral mortgage these days, you have no choice but to take it, and you do so
completely uninformed because you essentially agree to terms and conditions that YOU
ARE IN FACT NEVER MADE AWARE OF.
How can this be true you ask? Well, because the basic mortgage commitment you sign
excludes all the really important terms and conditions that are buried in a voluminous
document called STANDARD CHARGE TERMS that are sent to the lawyer days before
closing, and which you never get any reasonable chance of reading yourself.
How dangerous is this? Mortgage lending (from Big Banks) has evolved to the point
now where BUYER BEWARE NO LONGER APPLIES, that is in a practical sense
because you have little or no opportunity to understand what you are signing.
In law however the Buyer Beware doctrines still require you to be fully ‘aware’ of what
you sign and so you do not have a leg to stand on.
Let’s look at a few clauses taken from actual Bank Standard Charge Terms
documentation.
We’ll start with the CIBC. Clause 5.2 Entitled ‘Demand to repay the total debt’ states
“...we will apply any money we receive to reduce the debt anyway we see fit.” Clause
5.6 states “We may require you to pay the total debt immediately if one of the following
events occurs > you do not make any payment as required by this mortgage or any
agreement.” also > you do not meet your obligations under this mortgage or any
agreement.” By the way ‘any agreement’ refers to any other credit cards, loans, lines of
credit etc you have with your bank. Together these two clauses give the bank the right
to call your mortgage in default as soon as you miss payments on any other credit/debt
you have with them. Hypothetically, you could continue to make all your mortgage
payments on time, and the bank can apply part of your mortgage payment towards any
missed payments on other debt, and technically render the mortgage in arrears and/or
default.
Here is one (very scary) example of what can happen that was in the news last year. A
father cosigned for his daughter’s new credit card (with RBC) who went to university,
maxed out the card, never made a payment (never told her dad and failed out) and her
father received (without warning) a POWER OF SALE NOTICE on his house from the
bank because of his daughter’s irresponsibility, nothing more. He had banked with RBC
for over 30 years. It didn’t count. And it didn’t matter that he had done no wrong. This is
but one example of how callous the banks can be.
When a payment is missed the banks (all have similar terms) can begin to charge you
‘the highest interest’ at their discretion. Let’s look at SCOTIA’s clause 26. Guarantee.
>...”It is understood that we can without obtaining the consent of or giving notice to any
guarantor: Increase the rate of interest payable under the Agreements either during the
initial term or any subsequent renewal period.” No parameters are given as to what
interest rate can be charged in our view, nor does this clause mention default.
Looking at TD Banks clause 2.06 Costs. >”All costs incurred by the Bank will be
immediately payable by you, bear Interest at the highest interest rate and form part of
the debt” you owe.
In a nutshell, we believe that bank mortgages have become downright dangerous and
given the fact that you are not informed to any meaningful degree, so that you have a
reasonable comprehension of your new obligations, they should be avoided at all costs.
Folks our job is to inform, advise and protect you to the best of our professional ability.
We hope that for your next mortgage need you will call us first because we have many
lenders who do not even have such a mortgage product. We will keep you safe and put
you in a good ole fashion ‘friendly’ standard mortgage.