There will be help from your bank!

Inevitably with our current economic recession there has been an increase in personal bankruptcies and an increase in the request for employment insurance. Statscan reported that in January 200 employment insurance benefits was up 22.8% in January from February 2008. They also stated personal bankruptcies was up 14.9 percent. Most of these numbers were felt in Ontario, British Columbia and Alberta. The unemployment rate is currently 7.2% which is the highest it has been since 2004.

The risk to banks and lending institutions in times like these are the increase in defaults on personal mortgages. In effort to ease the pressure on the banks, the government and the consumer, CMHC is working with the 5 major banks to modify its current loans. CMHC is set to release these measures later this week. Stay tuned to various media outlets and their website www.chmc.ca.

What we hear is that CMHC is trying to curb a potential fallout similar to the United States. I am sure over the few months you have heard the common phrase – we’re not as bad as the U.S. – but is that true or are we just a few months behind. CMHC and the banks are being very proactive in this situation and will attempt to work with lenders to manipulate mortgages to keep the customers solvent during these tough times.

·         converting a variable interest rate mortgage to a fixed rate to protect the borrower from a sudden interest rate increase

·         offering a temporary short-term deferral of payments

·         offering payment flexibilities

·         extending the term, or amortization, to lower the monthly required payment

·         negotiating a special, unique, payment arrangement, or adding already missed payments to the mortgage balance

The Globe and Mail reports that some banks are already seeing an uptick in the number of homeowners seeking more flexible mortgage arrangements. “There are more people talking to us about how we can help, and in some cases it may be because they are facing difficulties,” said Wendy Hannam, executive vice-president of personal banking and distribution at Bank of Nova Scotia.

The good news is that the industry is acting to prevent a fallout. They seem to understand the pressure that consumers are under and are willing to work to keep owners in their homes.

Speak to your Mortgage Agent about different options that may be available to you.