The FCAC guidelines say that lenders should work with at-risk customers to provide temporary mortgage relief. This could include waiving prepayment penalties when a borrower sells their principal residence or makes a payment to avoid negative amortization. The watchdog also says it expects lenders to implement short-term measures, such as waiving internal fees or costs for a limited time, and ensuring that no interest is charged on interest when a mortgage negatively amortizes.
In cases where a bank and customer agree that a negatively amortizing mortgage is the best way to help the borrower manage higher costs, the FCAC says, the extension should be for the “shortest period possible,” accounting for the borrower’s ability to restore the payment term to its original period.
Mr. Lofranco said the FCAC expects lenders to monitor risk among their customers, and to pro-actively reach out with options to help them absorb rising costs.
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