House Standing Committee on Finance (February 13, 2024)
ISSUE: Mortgage Guideline consultations and feedback from industry

Key points

• Consultations are part of FCAC’s standard practice in developing Guidelines.
• FCAC consulted industry, stakeholders and members of the public in finalizing the Guideline to benefit from a wide range of perspectives.
• FCAC considered all comments and modified the proposed Guideline, where appropriate.
• FCAC published an anonymized summary of comments received during the consultations and how they were addressed.

Qs & As

1. Which stakeholders did FCAC consult?

• FCAC participated in 13 stakeholder engagements and received 36 written submissions from stakeholders, including members of the public, consumer advocacy groups, credit bureaus, academics, financial institutions, and industry associations.
• Industry-specific consultations took place via engagements with the Canadian Bankers Association (CBA) representing a wide range of Schedule I, Schedule II, and Schedule III banks, the Canadian Credit Union Association (CCUA) for Canada’s credit unions, and some caisses populaires.

2. Did FCAC modify its Guideline based on stakeholder feedback?

• FCAC considered all comments and made changes, where appropriate. This includes the following changes.

Input on the scope of the Guideline

• FCAC clarified that the Guideline applies only to consumers who are “natural persons.”
• This includes individuals who have an existing mortgage loan on their principal residence who are experiencing severe financial stress because of exceptional circumstances and are at risk of defaulting on their mortgage.
• This was done to clarify the scope of the Guideline, which does not apply to corporate entities or investment vehicles.

Input on the Guideline being too prescriptive

• FCAC’s Guideline does not recommend specific mortgage relief measures. The Guideline was amended to recognize that financial institutions are in the best position to determine appropriate relief measures for consumer based on their circumstances, including their financial needs.
• In addition, the Guideline was amended to include a proportionality statement. The proportionality statement recognizes that financial institutions may tailor their policies and procedures to align with the nature, size and complexity of their business, distribution channels, and products and services.

Input on the impact on credit scores

• The Guideline was amended to clarify expectations regarding credit scores.
• FCAC expects credit reporting to reflect any new arrangements agreed to by the financial institutions and the consumer.
• For example, if a consumer skips payments as part of a relief measure, this should not be reflected as being delinquent on their payments.

Input on the concept of “reasonable time frame”

• • FCAC received comments asking for clarity on what a “reasonable time frame” means, as part of expectations to return amortization to its original length.
• FCAC’s position is that financial institutions must develop a plan with the consumer to restore amortization to its original period. The plan must be developed within a reasonable timeframe. The plan must also ensure the total amortization period is reasonable.
• Financial institutions are in the best position to determine a reasonable time frame based on a consumer's circumstances, including their financial needs.

Was there input that FCAC did not accept?

• Some comments were out of scope for the consultation, or not within FCAC’s mandate to address. legislative or regulatory requirements.
• These comments may help inform future policy considerations, as well as FCAC’s National Financial Literacy Strategy.
• FCAC published an anonymized summary of consultation feedback following the Guideline publication, itemizing feedback that was incorporated through amendments and feedback that was not incorporated.

Specific examples of input not accepted:

Comment: Consider delaying implementation.

Response: No change was made. The Guideline came into effect on July 5, 2023, the day it was published.

FCAC is concerned that consumers who are at risk are currently experiencing periods of severe financial difficulty due to exceptional circumstances including the combined effects of high household debt, the rapid rise in interest rates and increased cost of living. The purpose of the Guideline is to set out how FCAC expects FRFIs to contribute to protecting at-risk consumers of financial products and services by providing them with tailored support.

Comment: Cap mortgage rate increases at 2 percent.

Response: This comment is out of scope for the consultation, but is duly noted for future reference.

Comment: Proactively monitoring consumers raises privacy concerns.

Response: This comment is out of scope for the consultation, but is duly noted for future reference. Proactive monitoring of mortgage loan obligations is a standard risk-management practice and allows for early engagement and a timely evaluation of options. All applicable legislation, regulations and guidance continue to apply in addition to the expectations set out in the Guideline. we started to see signs,