5 Things to Know About: The Canadian Mortgage Charter

November 30, 2023

The Liberal Government initiative builds on “existing guidance and expectations” for how lenders are expected to treat “vulnerable borrowers” under financial strain.  Also known as a “consumer at risk” the FCAC define them as someone “with an existing residential mortgage loan on their principal residence who [is] experiencing severe financial stress, as a result of exceptional circumstances, and [is] at risk of mortgage default.”

Rapidly increasing interest rates have caught many Canadians off guard and struggling to make their payments, under the charter there are six key forms of aid:

  • 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.
  • Lenders must not charge interest “in the event that mortgage relief measures result in a temporary period of negative amortization”

Reaction and Advice

The consensus from the lending community is that most of these measures have already been in use for some time. I was even told by one mortgage broker that the key rule allowing insured borrowers a pass on the stress test when changing lenders was but in place back in 2013, over 10 years ago. 

In my opinion this Charter falls short of committing much to those Canadians struggling with their heavily increased variable mortgages. It seems that the government was happy to recycle old initiatives as new, however this Charter has brought awareness to some forms of aid that are rarely acknowledged. Anyone struggling to make their mortgage payments should certainly leverage this charter and also explore other options with a mortgage broker and Realtor. I believe there is a solution to any problem and there is no need to struggle through it alone so get in front of the problem with an expert before it gets being a “consumer at risk” gets too risky.