Standing Senate Committee on National Finance (NFFN) (May 28, 2024)
ISSUE: FCAC’s Mortgage Guideline

Key points

• FCAC shares concerns that some consumers with mortgages are experiencing periods of severe financial difficulty due to exceptional circumstances.
• They include the combined effects of high household debt, higher interest rates, and the increased cost of living.
• Given the challenges of the current economic environment, FCAC published a Guideline on Existing Consumer Mortgage Loans in Exceptional Circumstances (“the Mortgage Guideline”) in July 2023. It sets out how it expects federally regulated financial institutions to provide tailored support to consumers with mortgages for their principal residence who are experiencing severe financial difficulty.
• FCAC’s Guideline is based on best practices in financial consumer protection. It helps ensure financial institutions adopt fair and consistent approaches when they offer relief measures to consumers who are at risk of defaulting on their mortgage for their principal residence.
• FCAC expects financial institutions to proactively monitor and contact consumers at risk and discuss the most appropriate mortgage relief measures with them, based on individual needs and circumstances.
• FCAC advises consumers to contact their financial institution if they are at risk of not keeping up with their mortgage payments. Consumers who communicate their situation quickly to their financial institution will have more options available to them.
• FCAC consulted industry, stakeholders and members of the public in finalizing the Guideline to benefit from a wide range of perspectives.

Qs & As

1. What is the Mortgage Guideline? What purpose does it serve?

• Guidelines provide clarity and additional detail regarding FCAC’s regulatory expectations.
• They are intended to help regulated entities comply with market conduct obligations set out in legislation, public commitments and codes of conduct that protect consumers of banking products and services in Canada.
• The Mortgage Guideline is designed to contribute to the protection of consumers of financial products by providing tailored support to consumers at risk.
• By consumers at risk we mean those facing “exceptional circumstances,” which includes both recent and current factors such as the combined effects of high household indebtedness, rapid increases in interest rates and the increased cost of living.
• FCAC expects financial institutions to design policies and procedures with consideration for all available mortgage relief measures that may be appropriate for consumers at risk, such as waiving prepayment penalties, waiving internal fees and costs, not charging interest on interest, and extending amortization.
• [IMPORTANT: does not recommend one]
• The Mortgage Guideline will help ensure financial institutions adopt fair and consistent relief measures to consumers who are at risk of defaulting on their mortgage for their principal residence.

2. How is the implementation and monitoring of the Mortgage Guideline going?

• Overall, FCAC is satisfied with industry’s implementation of the Guideline to date.
• To date, FCAC has collected 3 sets of data from banks for the quarters ending September and December 2023 and March 2024.
• Reporting indicates that banks are contacting consumers at risk and that relief measures are being implemented.
• Reporting shows that there are approximately 5 million mortgage accounts for first mortgages on principal residences, of those less than 1% have been identified as accounts at risk.
• Of those accounts identified as at risk, approximately 13% have been reported to have benefitted from relief measures. In other words, there are about 33,000 mortgage accounts that are considered at risk, and approximately 4,300 accounts are benefiting from the relief measures outlined in our mortgage guideline.
• FCAC intends to release a public report on the implementation of the Mortgage Guideline later this year.