Standing Senate Committee on Banking, Commerce and the Economy (BANC) (May 30, 2014)
ISSUE: The Canadian Mortgage Charter

Key points

• The new Canadian Mortgage Charter builds on FCAC’s existing Mortgage Guideline and expectations on how financial institutions should provide tailored support to consumers with mortgages who are experiencing severe financial stress.

Qs & As

1. What is the difference between the Mortgage Charter and the Mortgage Guideline?

• The Mortgage Charter builds on FCAC’s Guideline. Both establish clear expectations for how federally regulated financial institutions should assist Canadians facing financial difficulty on their principal residence mortgage.
• The Charter and Guideline also underscore the expectation that lenders proactively reach out to borrowers to assist them.
• The Department of Finance is best placed to answer questions on the development of the Charter and its measures.

If pressed…

• The Charter and Guideline are not identical and have some differences, including related to scope and the expectations on financial institutions.

For example, with respect to the scope of application:

• The Charter uses the term ‘mortgage holders in financial difficulty’— this reflects a broader scope of application than the Guideline, which speaks to ‘consumers at risk of mortgage default’.

2. What are the key measures in the Charter?

• The Mortgage Charter includes:
  • Temporary extensions of the amortization period for those at risk.
  • Waiving fees and costs associated with relief measures for a limited period.
  • Permitting insured mortgage holders to switch lenders at mortgage renewal without requalifying under the insured minimum qualifying rate.
  • Proactive communication from lenders about renewal options 4-6 months in advance.
  • Options for homeowners at risk to make lump sum payments or sell their residence without prepayment penalties.
  • Avoidance of charging interest on interest during periods of negative amortization.

Qs & As - FOR INFORMATION ONLY (Developed by Finance for Minister Freeland)

What is the purpose of the Canadian Mortgage Charter introduced in the 2023 Fall Economic Statement?

• The Canadian Mortgage Charter aims to increase consumer awareness and establish clear expectations for how federally regulated financial institutions should assist Canadians facing financial difficulty on their principal residence mortgage.
• The Charter emphasizes the government's commitment to ensuring mortgage payments are reasonable and tailored relief measures are provided fairly and promptly to borrowers experiencing hardship.

What role does the Financial Consumer Agency of Canada (FCAC) play in the implementation of the Mortgage Charter?

• The FCAC is responsible for supervising the compliance of federally regulated financial institutions, including banks, with their legal obligations, codes of conduct, and public commitments.
• This includes monitoring compliance with the Guideline on Existing Consumer Mortgage Loans in Exceptional Circumstances related to the Canadian Mortgage Charter and assisting financial institutions in interpreting and meeting expectations in providing mortgage relief.

Is the Canadian Mortgage Charter voluntary or mandatory for banks to follow?

• The Charter is not established in legislation. It is designed to be read in conjunction with existing regulations and the Guideline on Existing Consumer Mortgage Loans in Exceptional Circumstances, issued by the Financial Consumer Agency of Canada (FCAC) in July 2023.
• FCAC is responsible for monitoring implementation of the Guideline and fully expects that federally regulated financial institutions will adhere to it.