I think it safe to say that virtually all of us were taken by surprise when Ontario was suddenly locked-down last March to stem the rising rate of hospitalization of extremely ill Ontarians who had contracted Covid-19; to ‘flatten the curve’ as we now understand it.
The lockdown affected everyone and everything. There really was no way for any of us to have been prepared for the declaration of a pandemic - caused by the SARS-CoV-2 virus and all that that entails. Sudden and unexpected passing of loved ones. Separation from friends and family. Business closures, layoffs and rampant unemployment – all at once. And grocery store shortages. Remember those empty rows of shelving where toilet paper was once displayed?
In the opening blog post The New Reality - Part I, I recalled that in my practice, before the lock down, two of the more common causes of mortgage default were mortgagors’ deaths and marital breakdown. Few families can financially survive either of these calamities. Although merely anecdotal, it is safe to say that most Canadians were paying their mortgage debts in full and on time, until the pandemic arrived in March of 2020. But that was then.
This is now. The new reality. Covid-19 has changed everything – literally turning each of our world’s upside-down, virtually overnight. By the end of March, 2020, more than one million Canadians had applied for EI. To date, more than three and one-half million Ontarians have applied for CERB - Canadian Emergency Response Benefits.
Fortunately, shortly after the lock-down, our federal government, working closely with OSFI – the Office of the Superintendent of Financial Institutions, Canada’s bank regulators, and with CMHC and other mortgage insurers, permitted financial institutions to grant to its homeowner/mortgagor customers (without financial penalty) a moratorium, for up to 6 months, on the payment of principal and interest owing under insured and uninsured mortgages not already in default. This was a welcome respite for the hundreds of thousands of Canadian households whose income or salary had suddenly stopped. By the 2nd week of July, payments under almost 750,000 mortgages had been deferred. In all, more than $170,000,000,000 (that’s one hundred and seventy billion dollars) in outstanding mortgage debt was deferred across the country.
Mortgagors who started their mortgage payment deferral in April will have to start making regular monthly payments again this month, in October. Similarly, May deferrals will have to restart payments next month, in November. Only time will tell how devastating the pandemic will be on Canada’s mortgage industry. Many insiders are predicting an avalanche of new defaults over the next few months, as a direct result of the pandemic payment deferrals now coming to an end.
The next blog post will continue this review of post lock-down mortgage remedies. And as always, this blog is intended for information purposes only. It is not legal advice and cannot be relied on as such. Nor is it a substitute for hiring your own legal counsel, who will be an essential member of your mortgage default and mortgage remedy team. And lastly, this blog is just my opinion. I reserve the right to change my mind. And I reserve the right to be wrong.
Be well and stay healthy.