Canada’s largest banks are fielding a deluge of requests to defer payments on mortgages as businesses suffer from efforts to curb the spread of the new coronavirus and job losses multiply.
More than 213,000 requests for mortgage deferrals – skipping payments – have been completed or are still being processed by the country’s six largest banks. On March 17, the banks announced a program that allows customers facing financial hardship as a result of COVID-19 to defer payments for up to six months.
Since then, they have scrambled to keep up with demand. The program was created quickly, in consultation with the federal government, and all the major banks have accumulated backlogs of requests. Banks had to adjust systems and launch automated online application portals in a bid to approve deferrals more rapidly. But the delays in response times and confusion about how the deferrals work have caused frustration for some bank customers.
“There’s huge demand for it,” Mike French, head of real estate secured lending at Toronto-Dominion Bank, said in an interview. “We have a long queue of applicants and expect continued growth in demand for this relief.”
TD would ordinarily expect to field 40 to 50 calls a day from customers looking for relief on loan payments, usually for reasons such as losing a job or illness. The relief offered would be tailored to each applicant based on their situation. During more localized crises, such as the wildfires of 2016 in Fort McMurray, Alta., lenders might have asked for statements of the borrower’s assets, liabilities and available cash.
Since the new deferral program was launched, TD has fielded thousands of calls some days, and that has prompted a search for a less customized approvals process that can be applied to large numbers of people confronting hardship from the same health crisis. TD asks just a few questions about the reason for an applicant’s financial difficulties, starting with an automated form. So far, TD’s approval rate for deferrals is well above 90 per cent, Mr. French said.
“We’re trying to get a sense of how COVID-19 has impacted their lives, and then document it,“ he said.
Even so, TD had to update its systems to broaden the approval criteria in the filters it uses to sort applicants so that some can be approved using a self-serve online option, while others are put through to a staff member in a call centre.
Bank of Montreal is adding resources to process applications for relief as fast as possible, and has launched a self-serve online tool to help, a spokesperson said. And the Bank of Nova Scotia said in a statement that it is also launching an online form for customers to request a mortgage payment deferral without visiting a branch or calling the bank.
The Canadian Imperial Bank of Commerce has provided relief to “tens of thousands” of clients, and continues to receive high volumes of requests, although it has seen “some reduction in new requests in recent days,” Laura Dottori-Attanasio, group head of personal and business banking for Canada, said in a statement. The bank has introduced digital tools to process relief needs, increased outreach by advisers and added call centre staff. “We are doing everything we can to help our clients through this,” she said.
Some customers have been upset to learn that the deferrals are not a true payment holiday, and that the banks continue to add interest to the loan’s principal through the relief period. But bankers point out that the program is designed to help customers with their cash flow in a time of crisis, not to save them money. And banks must pay interest on deposits, bonds and other financial instruments used to raise the funds that are loaned out as mortgages, and have to match those liabilities with interest coming in.
“We also want to make sure that we have the opportunity to talk to customers to say, ‘You should understand how this works and if it makes sense for you financially,’” Mr. French said. “We’re trying to give them liquidity to make it through the heart of the crisis.”
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