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Law Talk S02E04: Business Law - New Canadian Mortgage Charter

January 29, 2024 by Clay Williams, Tanvir Gill

kelowna law firm

Law Talk Season 2 Episode 04: The New Canadian Mortgage Charter

The latest episode of FH&P Lawyers' "Law Talk", hosted by Clay Williams and Tanvir Gill with guest speaker Nancy Ling, examine the charter's potential effectiveness and its symbolic versus practical value in addressing the current economic climate. For anyone currently holding a mortgage or applying for a new loan, this episode offers essential insights into these new government guidelines.

Background: The charter is a government initiative aimed at assisting borrowers amidst economic challenges.

Key Proposals:

    1. Allowing Temporary Extensions for Amortization Periods: Banks are requested to permit borrowers to extend their amortization periods temporarily as a form of relief.

    2. Waiving Fees and Costs: Banks are asked to waive various fees and costs for vulnerable borrowers.

    3. Not Requiring Insured Mortgage Holders to Re-qualify: Banks should allow insured mortgage holders to avoid re-qualifying or re-passing the stress test when refinancing or switching lenders.

    4. Reaching Out to Borrowers Four to Six Months Before Maturity Date: Banks are asked to contact borrowers about their renewal options four to six months prior to the maturity date of their mortgage.

    5. Allowing Homeowners to Make Larger Lump Sum Payments: Banks are encouraged to waive prepayment penalties, thus allowing homeowners to make larger lump sum payments towards their mortgage.

    6. Not Charging Interest on Interest for Borrowers Unable to Make Payments: In the event that borrowers are unable to make payments, banks are requested not to charge interest on the accrued interest.

The consensus around the mortgage charter discussion is one of skepticism. There's reasonable doubts about the practical implementation of these measures by banks, primarily due to the voluntary nature of the charter and the lack of legal enforcement. Special Guest Nancy Ling points out that these are more suggestions than actionable requirements and together they question the likelihood of banks voluntarily foregoing profits or changing their standard operational procedures without a legal mandate.

"It's not a law. It's entirely voluntary. There's no enforcement measures, meaning it's got no teeth" Clay Williams, Partner. 

Without legal backing, the charter's recommendations are unlikely to be effectively adopted by banks.