Winnipeg Free Press - PRINT EDITION

How law can make us pay

  • Print

Canadians are more prudent borrowers than our American neighbours, a recent Canada Mortgage and Housing Corp. publication seems to suggest. The U.S.'s rate of residential mortgage arrears was more than eight times higher than Canada's in the second quarter of 2012, the last quarter for which stats are available, the federal agency's Canadian Housing Observer reports. During the quarter, the Canadian rate of mortgage arrears was 0.36 per cent. The U.S. arrears rate was 3.04 per cent.

But it's not national borrowing habits, or the respective states of the Canadian and American economies, or even the escalating-interest-rate loans once the vogue stateside that solely account for the stunning disparity in rates of mortgage default.

Chalk up at least some of the huge gap to contrasting Canadian and U.S. mortgage-lending laws. U.S. and Canadian lenders have different legal remedies against borrowers who miss residential mortgage payments. On balance, Canadians are governed by a much tougher mortgage-lending regime. And that's reflected in CMHC's comparative rates for our two countries.

Almost all Canadian residential mortgages are what's known as full-recourse loans. This means a defaulting borrower remains responsible for any unpaid balance of the mortgage debt, even where the lender takes over the home, boots out the homeowners and sells it to a new buyer on the open market. Though the house that secured the mortgage may be long gone, borrower liability for the debt remains if the lender doesn't recoup all it is owed on the mortgage sale.

Thus when a Canadian bank or credit union sells a house in mortgage default, and the sale proceeds don't pay off the balance of the mortgage debt, including arrears, interest and penalties, it often pursues the borrowers for the remaining debt. The financial institution can sue, get a judgment and collect the balance of money owed via garnishment of wages or bank accounts or seizure and sale of vehicles, boats, equipment or any chattels of significant value. In Canada, there's no incentive to become a delinquent borrower and simply let arrears accrue, because your other assets can be tapped by a lender.

Defaulting U.S. residential borrowers, on the other hand -- though there's some variation state to state -- face no such pursuit by mortgage lenders.

American mortgages are what lawyers and bankers call non-recourse loans. Unlike Canadians, American borrowers aren't personally liable for their mortgage debt, and can't be sued for any unpaid balance of the loan. And once an American lender forecloses, its claim against the borrowers for any remaining balance is legally extinguished. This sometimes enables homeowners to let a mortgage fall into arrears, allow the arrears to pile up, and then just walk away from the home. The lender's only legal remedy is to foreclose, assume ownership of the house, and thereafter try to sell it or rent it out.

Canadians aren't in mortgage arrears in far lesser numbers than Americans by dint of any yawning difference in national character. If we're more responsible borrowers, it's because, at least in part, our mortgage laws compel us to be.

Editorials are the consensus view of the Winnipeg Free Press’ editorial board, comprising Catherine Mitchell, David O’Brien, Shannon Sampert, and Paul Samyn.

Republished from the Winnipeg Free Press print edition December 21, 2012 A12

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes


  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.


Make text: Larger | Smaller


Janice Filmon humbled to be appointed lieutenant-governor

View more like this

Photo Store Gallery

  • MIKE.DEAL@FREEPRESS.MB.CA 100615 - Tuesday, June 15th, 2010 The Mane Attraction - Lions are back at the Assiniboine Park Zoo. Xerxes a 3-year-old male African Lion rests in the shade of a tree in his new enclosure at the old Giant Panda building.  MIKE DEAL / WINNIPEG FREE PRESS
  • Marc Gallant / Winnipeg Free Press.  Local/Standup- Morning Fog. Horse prances in field by McPhillips Road, north of Winnipeg. 060605.

View More Gallery Photos


Will the closure of Future Shop affect your shopping?

View Results

Ads by Google