Summary of Emergency Measures For Homeowners

A. Introduction

With businesses shutting down (by order of law or voluntarily) to prevent the spread of COVID-19, it is clear that the economy is slowing dramatically.  People are working from home, or not working at all, and there is a general concern about the ability to provide the necessaries of life such as food and housing. 

This past week the Federal Government of Canada (the “FGC”) announced financial measures designed to provide relief to homeowners whose ability to make their regular mortgage payments has been compromised by COVID 19. 

B. Canada Mortgage Housing Corporation’s Emergency Tool Kit

On March 20, 2020, the FGC announced amendments to mortgage insurance eligibility criteria. These changes are to assist stable funding and liquidity to financial institutions and mortgage lenders and support continued lending to Canadians.[1] 

This follows the March 16, 2020 announcement of the launch of a $50 billion Insured Mortgage Payment Program (“IMPP”) which allows the FGC through the Canadian Mortgage Housing Corporation (“CMHC”) to purchase previously uninsurable mortgages through the IMPP.  These amendments will now allow mortgage lenders to pool these uninsurable mortgages into National Housing Act Mortgage-Backed Securities for CMHC to purchase these securities through the IMPP.  This will allow financial institutions the ability to continue to lend to business and individuals, while assisting customers who face hardship and need flexibility, on a case by case basis.[2] 

The FGC has also temporarily relaxed their eligibility guidelines to include previously uninsured mortgages that were funded before March 20, 2020, provided they meet the other eligibility guidelines as set by the Government.

Effective March 24, 2020, the FGC is allowing low loan to value mortgages (20% or more down payment) to have a maximum 30 year amortization period, up from the previous maximum of 25 years.  The FGC is allowing these types of low loan-to-value mortgages to be eligible for government-guaranteed insurance (such as CMHC) whose purpose was the purchase of a property, subsequent renewal of a mortgage or refinancing.[3]

What do these programs mean for the individual homeowner?  Below, is a summary of the options now available as a result of the emergency relief measures:

1. Deferring mortgage payments for a period of up to 6 months;
2. Extending the original repayment period (amortization) in order to lower the monthly mortgage payments;
3. Adding missed payments (arrears) to the mortgage balance and spreading them out of the remaining mortgage repayment term;
4. Offering a special payment arrangement unique to the particular situation;

Remember, the eligibility rules for portfolio insurance mean that even if your mortgage is not CMHC insured, you can still qualify for relief.  If your mortgage was funded after March 20, 2020, it will not qualify.

These programs will remain available until December 31, 2020.  Homeowners must apply through their lenders, and relief will be provided on a case by case basis, provided the client qualifies.  Please note that this is not a mortgage vacation, as any missed payments will still need to be caught up and will have interest continue to accrue.  It is always best to contact the lender to confirm whether you will qualify for the mortgage deferral. 

C. Relief Offered By Canada’s Big 6 Banks

On March 17, 2020, Canada’s six largest banks (Bank of Montreal, CIBC, National Bank of Canada, RBC Royal Bank, Scotiabank, and TD Bank) announced plans to provide financial relief to Canadian’s impacted by the economic consequences of COVID 19.  These programs are in addition to programs offered by the FGC.

A review of the various websites of these lenders reveals that certain members of the lending group are offering some of the following measures to clients on a case by case basis:

1. Payment deferrals of up to 6 months on mortgages;
2. Skip a payment options;
3. Scotiabank is offering to pay property taxes if your mortgage payment includes a property tax component.  Any property tax payments made will be added to the mortgage account balance at the end of the deferral period.  Other lenders may offer this program, but Scotiabank is specifically advertising this option;
4. Payment deferral of up to 6 months on car loans, credit cards, and lines of credit;
5. Longer amortization periods;
6. Special loans to cover living expenses; and
7. https://www.scotiabank.com/ca/en/personal/scotia-support/latest-updates/coronavirus-covid-19.htmlThe waiver of certain fees and expenses associated with a default or amendments to specific loans and mortgages.

For more information about the specific relief being offered, click on the following links:

1. Bank of Montreal
2. CIBC
3. National Bank of Canada
4. RBC Royal Bank
5. Scotiabank
6. TD Bank

Many banks are reporting an unprecedented volume of calls and longer than usual response times in the circumstances.
If you have any questions, or for more information, contact:

Jeff Norwig (jnorwig@mcdougallgauley.com) in Regina,
Clayton Barry (cbarry@mcdougallgauley.com) in Saskatoon, or
any member of the McDougall Gauley LLP Residential and Commercial Real Estate Practice Team.