IRD Clarity Has Cometh – Ask a Vancouver Mortgage Broker

In March 2012, the Financial Consumer Agency of Canada(FCAC) announced improvements to the disclosure of mortgage prepayment charges.

Those improvements were designed to make life easier for people needing to assess the cost of an early refinance or mortgage termination.

The first set of enhancements arrived by last September. Among other things, they required banks to develop online educational material about IRD charges and online prepayment charge calculators.

The final measures came into force just this month. As a result, banks will now be providing:

• Annual statements outlining eachmortgagor’s mortgage prepayment options, info to help the borrower calculate a prepayment charge, advice on where the borrower will find his or her IRD comparison rate, etc.
• Prepayment charge quotes upon the borrower’s request, showing his/her actual prepayment charge, the lender’s calculation method, the time period the quote is good for and other amounts the borrower must pay todischarge the mortgage (like reinvestment fees, discharge fees, etc.)
• Toll-free phone support from knowledgeable bank staff. These trained phone reps must quote the exact prepayment charges that apply to one’s mortgage. That’s a welcome improvement given that most customer service reps have traditionally been semi-useless for detailed questions about mortgagepenalty calculations.

All of the above improvements are documented in a new federal Code of Conduct. Banks that are members of the Canadian Bankers Association (CBA) have agreed to adopt this Code.

“This Code, which will be monitored by FCAC, will go a long way in helping consumers manage one of the biggest financial decisions of their lives,” said Ted Menzies, Minister of State (Finance) in a press release.

It certainly will, and hats off to the Department of Finance for pushing it through. This initiative—especially the written penalty quotes and online calculators—has significantly eased the frustration level of those evaluating a mortgage change before maturity. One can only wish it applied to credit unions and other non-federally-regulated lenders.

Rob McLister, CMT