Mortgage Changes - Post Signing

[notsure]

About 2 months ago we decided to move our mortgage to a new bank that offered us prime + .5% (HELOC). We signed on the dotted line and all seemed to be well with the world.

Today, I got a call from said bank saying "head office" is refusing the deal and will only allow us prime + .65%. Anyone know if we have any legal recourse against them? Our biggest problem right now is time, the mortgage matures in 2.5 weeks which doesn't leave much time to settle legally and / or move to a new bank.

Worst of all, we just finished moving all our banking to this financial institution - including all investments. It is sad that a signed contract only appears to protect the bank's interests!

[Jake]

Odd. You said you signed at +0.5. What grounds are they using to break that contract? They need to provide you with legal grounds not a nebulous statement about head office. This is not a Staples price match. Challenge them on it don't just roll over and accept it. I would tell them your legal council needs to consider your options before signing anything and see if they blink.

Oh and if you sign at +0.65, that means nothing it would seem.

[notsure]

The person we were dealing with said the bank changed the way they approve rates and everything has to be approved by head office now. They said we were the first HELOC they had using this new model and they weren't aware of the new procedure.

Oddly, the computer system at the bank branch let them enter everything as +.5 and that is what was printed on the 3 contract copies we signed.

I know the rate change isn't huge but, right now, I feel like we are getting taken advantage of and I don't like it. It's more about them pulling this dirty trick at the last minute and not really giving us much time to go elsewhere. If the shoe was on the other foot, I wonder how quickly they would roll over.

[Jake]

they weren't aware of the new procedure.

Ah so they dropped the ball! Since it is such a small amount they should have done the right thing and allowed your rate to go through. Still I would be very vocal and ask if they would like their mistake to become public (oops too late). At least you have held off identifying the bank.

PS: I went through something similar with my first mortgage. Since there was two of us and only one of them it was our word against theirs. But in the end they caved. Plus we had not signed anything and we were ready to walk if they did not change it back to what we agreed on verbally.

[dscott01]

The paperwork signed by both you and the bank that states prime +.5% is a legal document. The bank has to honour that rate just as you have to honour the rate. The bank knows this.

I suspect the agent made an error and is trying to cover it up.

[Nighthawk 1]

I agree with the dscott, what makes it worse is now they have all your money moved over and the first thing they do is try to weasel out of an agreement. Don't give up, keep fighting and they will likely roll over. If they don't, better off without them and go somewhere else.

[timlocke]

I agree with dscott and Jake.
You say you have a signed contract.. do you have, in your possession the actual final paperwork? The person(s) who signed it were, by definition, people who had that signing authority for that amount and for that product from the bank. It is the bank's problem if their staff and their computer systems were incorrect. You say a couple of months. How long did the signed contract exist before they called? If it was a month or more then I don't think they have a leg to stand on.

Call the bank and ask to speak with the branch manager, if that gets nowhere ask for the VP of retail banking or some similar title. Maybe your bank has an Ombudsman.

But spend an hour or two talking to another bank just in case

[notsure]

It took some time but I think I got to the bottom of the situation. Our bank file was opened in March when we initially approached them and the particulars of the offer were entered there with all supporting documentation.

Some time between March and now the bank procedure for approving the HELOC portion of any mortgage was changed. This new procedure now required the branch to submit the HELOC portion for a separate approval prior to them and us signing. But, in our case, this wasn't done and we signed everything once the legal docs were prepared.

Fast forward to a couple of days ago, the branch received notification that the HELOC portion of our mortgage wasn't valid and had been refused. Tricky situation for them since we already signed and they already signed the contracts (having not followed the new procedure). Since the bank manager was/is on vacation our representative thought they could resolve the issue by getting us to quietly sign an amendment for the new rate of +.65 on the HELOC and the problem would go away.

So, this morning I contacted them and asked for two things; i) an official document stating why the bank would not be honoring the previously signed contract and ii) the name and phone # for the VP of retail banking. Well, one or both of those things seems to have done the trick because they came completely clean about the situation (at least I think they did). If we escalate things to corporate, we are more than likely to get the original contract honoured but it would make the branch employee look very very bad (their words). They asked that we give them until noon tomorrow to fix the problem in-branch without involving corporate. The branch manager has been called back in from vacation to deal with the situation and we are to meet with them tomorrow.

The only negative with this solution is it would mean not getting a HELOC and getting the full amount of the mortgage fixed. Since our signed rate for that is already at 2.55% for 2 years so I am anxious to see what they offer.

If they can't sweeten the deal, our plan B is to make our call to corporate tomorrow afternoon and let the chips fall where they may.

Thanks to all who offered advice and hopefully this is the end of the story!!

[hugh]

My two cents. Now is not the time to use a Heloc for a mortgage since the rate can escalate. With rates so low, this is the time to go fixed.