Last November, federal Deputy Prime Minister and Finance Minister Chrystia Freeland tabled the federal government’s Fall Economic Statement 2023 (the FES). The new Canadian Mortgage Charter (CMC) was part of that, and according to Freeland, it’s “one of the most important things” available to help vulnerable borrowers. Okay, but what is it?
Think not of the Canadian Mortgage Charter as a law, but rather “rules and expectations” built on existing expectations regarding how financial institutions are expected to treat borrowers. “I really recognize that with interest rates having gone up very quickly, there are many, many Canadians who are concerned about their mortgages going up. They are concerned about being able to afford to stay in their own homes,” Freeland said. “What we’re saying today is we understand this is a challenging situation and we are here to help.”
Most of the rules in the CMC are based on the Guideline on Existing Consumer Mortgage Loans in Exceptional Circumstances, published by the Financial Consumer Agency of Canada (FCAC) in July.
What does the Canadian Mortgage Charter actually 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.
Are any of these rules new?
Yes and no. Most of the rules already existed, but may have been difficult to find or understand. Combining them in one place makes it easier for vulnerable borrowers to learn what their options are.
One new rule is the requirement that banks proactively reach out to borrowers four to six months before their mortgages are up for renewal.
The other new addition is the requirement to give insured borrowers a pass on the stress test when changing lenders at the time of their mortgage renewal.
What does it all mean?
It means working with a lender who has your best interests at heart is important. That’s me! As a Mortgage Broker, I have access to hundreds of mortgage financing products, not just one (like each bank).
Let me help you find the best mortgage financing solution for you and your family.
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