The purpose of the Code is to ensure that federally regulated financial institutions ("lenders") provide enhanced information in respect of credit agreements secured by mortgages where a prepayment charge could apply ("mortgages") to assist borrowers in making decisions about prepayment of their mortgage.
Lenders currently provide substantial amounts of information relevant to mortgage prepayments to consumers in accordance with the requirements in the applicable federal regulations, including but not limited to federal cost of borrowing disclosure regulations and credit business practices regulations. The information that will be provided under this Code is in addition to existing information provided by lenders to borrowers.
Lenders will implement the policy elements of the Code with respect to new mortgages no later than six (6) months from date of adoption of the Code for Element 3 and Element 4; and no later than twelve (12) months from adoption of the Code for Element 1, Element 2 and Element 5. Lenders will apply the Code to existing mortgages where it is feasible to do so. The Code does not apply to mortgages that are entered into for business purposes or to mortgages entered into by borrowers who are not natural persons.
The Financial Consumer Agency of Canada will monitor and report on compliance with the Code.
Lenders will provide the information in language, and present it in a manner, that is clear, simple and not misleading.
1. Information Provided Annually
Lenders will provide the following mortgage prepayment information to borrowers annually:
For mortgages where the prepayment charge may be based on the IRD:
2. Information Provided When the Borrower Is Paying a Prepayment Charge
If a prepayment charge applies and the borrower confirms to the lender that the borrower is prepaying the full or a specified partial amount owing on their mortgage, the lender will provide the following information in a written statement to the borrower:
3. Enhancing Borrower Awareness
To assist borrowers in better understanding the consequences of prepaying a mortgage, lenders will make available to consumers information on the following topics:
Lenders may make this information available on their publicly accessible Canadian website where products or services are offered and upon request by consumers at the lender’s places of business in Canada, including when consumers are pre-approved for a mortgage. In addition, each lender will provide on its publicly accessible Canadian website links to information on mortgages provided on the website of the Financial Consumer Agency of Canada.
4. Financial Calculators
Each lender will post calculators on its publicly accessible website for borrowers, and provide guidance to borrowers on how to use the calculators to obtain the mortgage prepayment information they want. Borrowers will be able to enter information about their mortgage into the calculator to get an estimate of the current prepayment charge. Borrowers will also be able to change the information they enter, such as the amount of the mortgage that has not yet been repaid or the remaining term, so that they can see how the payment choices they make affect the prepayment charge.
5. Borrower Access to Actual Prepayment Charge
Each lender will make available a toll-free telephone line through which borrowers can access staff members who are knowledgeable about mortgage prepayments. These staff members will be able to orally provide a borrower with the actual prepayment charge that would apply to the borrower’s mortgage at that point in time. These staff members will also be able to provide to a borrower, on request, a written statement of their prepayment charge, accurate as at the time the statement is produced. A lender will not proceed to take steps to pay out a mortgage until the borrower has confirmed that the borrower’s intention is to pay out the mortgage.