Canadian Mortgage Chapter – How Banks Can Help With Mortgage Troubles

With Ontario’s delinquency rate rising 44% year-over-year, a surge of mortgage arrears is expected through 2026, mostly due to a wave of renewals at higher rates, combined with unemployment and inflation. 
However there are ways banks can help, and homeowners need to know their options when dealing with their financial institution.

Canadian Mortgage Charter is a list of “rules and expectations” banks are expected to follow. It’s not a law but rather guidelines how banks are expected to treat vulnerable borrowers. The Charter contains 6 guidelines regarding how banks are expected to treat borrowers under financial strain:

• 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.

• Waive interest on interest when mortgage relief measures result in mortgage payments that fail to cover interest payments on a loan.

When banks reach out to all borrowers four to six months before their mortgages are up, borrowers can explain their unique financial 
situations to lenders and the two parties can work through 
their options.

Borrowers who are not offered the affordability 
measures outlined in the mortgage charter can file a complaint 
on the FCAC website: https://www.canada.ca/
en/financial-consumer-agency.html