House Standing Committee on Finance (February 13, 2024)
ISSUE: The Canada 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. Was FCAC consulted on the Mortgage Charter?

• FCAC works closely with the Department of Finance and its regulatory partners. It provides input into matters relating to the support of Canadians facing financial difficulties and on related initiatives, such as the Charter.
• The Department of Finance is best placed to answer questions on the development of the Charter and its measures.

2. 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’.

SEB’s information backgrounder has additional examples.

3. 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.
• The FCAC is responsible for monitoring implementation of the Guideline and fully expects that federally regulated financial institutions will adhere to it.

FOR BACKGROUND: Statements about the Charter from Minister Freeland at FINA – December 7, 2023

From Minister’s opening statement:

• This new charter details the relief that Canadians can expect from their banks if they are in financial difficulty.
• Our goal is to protect Canadians by making sure they have the support they need to afford their mortgages and keep their homes when renewing at a time of higher interest rates.

Selected answers in response to questions on the Charter:

• …for the first time in Canadian history, we published the Canadian mortgage charter… It tells Canadians what they have the right to expect from their financial institutions, the kinds of tailored relief and support they have the right to expect when they're renewing their mortgages. That is really about being sure people understand the tools that are available to them.
• A couple of the key measures are that people have the right to talk to their financial institution about perhaps extending the amortization period, which could lead to a smaller monthly payment at this time of really challenging circumstances.
• Another element is for insured mortgages: You do not need to requalify in order to go and look for renewing at a different financial institution. Again, that's just to give people a little bit more choice, a little more flexibility.

In response to a question on compliance by financial institutions:

• We developed the mortgage charter in collaboration with financial institutions. It's been, I would say, a co-operative approach. What we have found is that financial institutions actually share our government's view…
• We believe the mortgage charter is something that financial institutions are able to abide by and are supportive of, because we developed it together with them.

On making the link to a single ECB when asked if FIs face consequences for non-compliance:

• We are now setting up something that consumer finance NGOs have been calling for a long time: a fully independent ombudsman Canadians can go to when they have concerns about their financial institutions.
• That has never been the case. Financial institutions have been able to pick and choose. We're creating a fully independent ombudsman, which I think is going to help people.

When pressed on compliance:

• The charter is published by the finance minister. Canadians can see it and refer to it. They can use it when they refer to the ombudsman and to the Financial Consumer Agency of Canada.

Finance Deputy Minister, Chris Forbes – December 7, 2023 (appearing after the Minister)

When repeatedly pressed if the Charter provides rights:

• It does not provide rights. It explains what people are allowed to do…
• I think that Canadians have the right—a word I would have used in the common parlance—to ask certain things of their financial institutions…
• I'll have to go and check yes or no. It does not grant any new rights to Canadian citizens.