The Liberal Government unveiled an initiative called the Canadian Mortgage Charter, aimed to help consumers understand how financial institutions are expected to treat borrowers, in the Fall Economic Statement (FES).
What does the charter say?
The charter contains six guidelines regarding how banks are expected to treat “vulnerable borrowers” under financial strain. Under the charter, banks are expected to:
- Allow temporary extensions on the amortization period for mortgage holders.
- Waive fees and costs that would have otherwise been charged for mortgage relief measures.
- Exempt insured mortgage holders from re-qualifying under the stress test when switching lenders at the time of a mortgage renewal.
- Require banks to reach out to homeowners four to six months in advance of their mortgage renewal to inform them of affordability options.
- Allow borrowers to make lump sum payments to avoid negative amortization or sell their principal residence without incurring prepayment penalties.
- Waive interest on interest when mortgage relief measures result in mortgage payments that fail to cover interest payments on a loan.
Who is a ‘vulnerable borrower’?
The mortgage charter does not define “vulnerable borrower.” The FCAC guidelines define a “consumer at risk” as someone “with an existing residential mortgage loan on their principal residence who is experiencing severe financial stress, as a result of exceptional circumstances, and is at risk of mortgage default.”
Is your mortgage coming up for renewal? We can help. Contact us today to plan your next steps and help ease the stress of an upcoming renewal or call us at 416-925-3140 or 613-366-8525.