If your mortgage payment is beyond the trigger rate, Don't put cash into the mortgage, put it in GIC

[贾和平]

Today the Financial Consumer Agency of Canada (FCAC) issued guidelines for banks to reduce a borrower’s monthly payment and give the borrowers a longer timeline to pay the entire loan back, eg negative amortization. That is not new for us. But the guideline doesn't stop there. The government’s new guidelines are pressuring Canadian banks to offer more relief to customers on mortgages. FCAC's recommendations include not charging interest on the unpaid portion of the interest that’s being added to the loan’s principal each month and waiving internal fees.

The government’s guidelines also recommend the same mortgage relief measures apply to fixed-rate borrowers nearing the end of their term who will need to refinance at the new, higher rates.

For borrowers whose mortgages are near the end of 5 years term and need to refinance, banks should “not offer a less advantageous rate” because those customers may be unable to qualify with a different lender. So that means, as I understand, the banks can not take advantage of your low household income, which won't qualify for the new mortgage at the current higher rate, to force you into the higher mortgage rate.


According to the government, at least one-quarter of the Canadian mortgage portfolio at TD, BMO and CIBC are now in that category. And nearly a third of Royal Bank of Canada’s domestic borrowers are covering their interest only, so their amortizations are extending too. FCAC said that in cases where a consumer has concerns about how they were treated, they can pursue recourse through a complaint-handling procedure that banks are obligated to follow.

Don't you love this country!

 

[贾和平]

It seems that nobody got excited in this thread about FCAC's guidelines. That is good news. Just emphasize that FCAC is a watchdog of financial institutions/banks for consumers, but it is not a financial regulator. The Office of Superintendent of Financial Institutions (OSFI) is a regulator and all financial institutions must act in accordance with OSFI's guidelines.

FCAC is just doing their bureaucrats' job and remind of banks and consumers that we are here to watch and that there will be problems in the residential mortgage industry.

So, do you think FCAC will help you out if you find a bank that did not follow the FCAC's guidelines? FCAC did say that you can pursue the recourse via the complaint procedure and banks are obligated to follow FCAC's guidelines. It is a nice guideline. If anybody wants to try it, FCAC may be at your back, but be ready to get into a legal jungle or length of complaint procedures.