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The Mortgage Amendment Act

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S.M. 2001, c. 11

THE MORTGAGE AMENDMENT ACT


 

(Assented to July 6, 2001)

HER MAJESTY, by and with the advice and consent of the Legislative Assembly of Manitoba, enacts as follows:

C.C.S.M. c. M200 amended

1           The Mortgage Act is amended by this Act.

2           Section 2 is replaced with the following:

Application of Parts II and III

2           Parts II and III apply to mortgages of real property only.

3           The following is added after section 28:

PART III

REVERSE MORTGAGE LOANS

Definitions

29          In this Part,

"borrower" means an individual who borrows money under a reverse mortgage loan and signs a reverse mortgage as a mortgagor, and includes

(a) an individual who applies for a reverse mortgage loan, and

(b) after the reverse mortgage is signed, a person from time to time deriving title under the original borrower; (« emprunteur »)

"Consumers' Bureau" means the Consumers' Bureau under The Consumer Protection Act; (« Office de la protection du consommateur »)

"lender" means a lender under a reverse mortgage loan, and includes

(a) a person from time to time deriving title under the original lender, and

(b) a prospective lender; (« prêteur »)

"minister" means the minister appointed by the Lieutenant Governor in Council to administer this Part; (« ministre »)

"person entitled to disclosure" means

(a) a borrower, and

(b) an individual whose consent is required under The Homesteads Act; (« personne devant recevoir des renseignements »)

"prescribed" means prescribed by a regulation made under this Part;

"reverse mortgage" means a document under which an individual grants a mortgage, whether statutory or equitable, of real property as security for a reverse mortgage loan; (« hypothèque inversée »)

"reverse mortgage loan" means a loan that is secured by a charge on real property owned by an individual, and under which

(a) no payment of principal or interest is due before the entire balance of principal and interest is due; or

(b) the borrower is not required to make periodic payments designed to reduce, from one payment to the next, the balance owing under the loan,

but does not include

(c) a loan under which no interest is payable,

(d) a loan where the borrower is required to make periodic payments, at least once every two years, to repay all accrued interest on the loan;

(e) a loan that is repayable only on demand, if there is no restriction on when the lender may demand payment; or

(f) a loan between persons who, in making the loan, are not dealing with each other at arm's length. (« prêt hypothécaire inversé »)

Application of this Part

30          This Part and the regulations under this Part apply to every reverse mortgage loan entered into after this Part comes into force, despite any agreement made or waiver given to the contrary before or after this Part comes into force.

Lender's limited recourse

31(1)       A lender may enforce payment of the debt due under a reverse mortgage loan only against the borrower and only through a foreclosure of the mortgaged property or under an order for sale of the mortgaged property made under The Real Property Act or by a court of competent jurisdiction.

Borrower's limited liability

31(2)       When a property encumbered by a reverse mortgage is sold or otherwise disposed of, the total liability of the borrower under the reverse mortgage loan at the time of the disposition is the lesser of the balance otherwise owing under the loan and

(a) the sale proceeds, if the property is sold

(i) by the lender, or

(ii) by the borrower to a purchaser in good faith for value; or

(b) the fair market value of the property at the time of the disposition, in any other case.

Application and other fees

32(1)       A borrower is not liable for any fee, cost or penalty charged in connection with a reverse mortgage loan, including an application or processing fee, cost or penalty unless

(a) the lender has complied with subsection 33(2); and

(b) the borrower signs the reverse mortgage.

Refund to borrower

32(2)       If a borrower has paid an amount for which he or she is not liable because of subsection (1), the lender must refund it to the borrower on written demand.

Exception for independent legal and appraisal fees

32(3)       This section does not apply to a fee charged directly to a borrower

(a) by a lawyer for independent legal advice; or

(b) by an independent appraiser for an appraisal of the property to be mortgaged.

"Cooling-off period" defined

33(1)       In this section, "cooling-off period" means the seven-day period starting on the day after the day every person entitled to disclosure in relation to a reverse mortgage loan has signed, before a person authorized to take affidavits under The Manitoba Evidence Act, a statement in prescribed form acknowledging receipt of the prescribed form to be provided to him or her under subsection (2).

Disclosure required

33(2)       A lender must provide, in the prescribed manner, to each person entitled to disclosure, a prescribed form that provides full and accurate disclosure of prescribed information regarding the loan. The prescribed form must be provided at least seven clear days before any borrower signs the reverse mortgage or any other document that obligates a borrower to sign the reverse mortgage.

Mortgage signed before end of cooling-off period

33(3)       If a reverse mortgage is signed by a borrower before the end of the cooling-off period,

(a) the borrower is not obligated to accept an advance of funds under the reverse mortgage loan or to sign a new reverse mortgage after the end of the cooling-off period; and

(b) unless funds have been advanced under the reverse mortgage loan, the lender must

(i) return the signed mortgage to the borrower, and

(ii) if the mortgage or any other document has been registered in a land titles or registry office, take all steps necessary to have the registration discharged at the lender's own cost.

Statutory terms

33(4)       Unless a judge orders otherwise under section 34, when a lender advances funds under a reverse mortgage loan where

(a) the reverse mortgage was signed before the end of the cooling-off period;

(b) no disclosure has been given by a lender as required under subsection (2); or

(c) there is a material error or omission in the information provided under subsection (2) by a lender;

the terms of the loan are deemed to be amended as necessary from the time that the funds are advanced, so that

(d) the total liability of all borrowers under the loan is limited to the unpaid balance of the funds advanced under the loan, less any portion of those funds that was used to pay a fee, penalty or cost for which no borrower is liable because of section 32;

(e) the amount calculated under clause (d) is due only

(i) when the term of the loan expires, if it is for a fixed term,

(ii) on the 120th day after the death of the borrower or, if there is more than one borrower, of the last of them to die, or

(iii) when any of the mortgaged property is sold or otherwise disposed of,

whichever occurs first; and

(f) the borrower may at any time prepay all or any part of the amount calculated under clause (d) without notice, fee or penalty.

Set-off and refund

33(5)       A borrower who has paid an amount under a reverse mortgage loan for which he or she is not liable because of subsection (4), may set it off against the balance owing under the loan.  If that amount exceeds the balance owing, the lender must refund the excess to the borrower or to his or her legal representative on written demand.

Order for discharge and costs

33(6)       If a lender fails to have the registration of a reverse mortgage or any other document discharged as required by clause (3)(b) or, if subsection (4) applies, when the borrower's liability under the reverse mortgage loan has been fully discharged in accordance with that subsection, a judge of the Court of Queen's Bench may, on summary application by a registered owner of the land affected by the registration,

(a) order the registration to be discharged; and

(b) award costs, on a solicitor and client basis, to the owner.

Application to court

34(1)       On summary application by a lender or a borrower under a reverse mortgage loan, or by a borrower's legal representative, to a judge of the Court of Queen's Bench,

(a) the judge shall determine whether the lender provided disclosure as required under subsection 33(2);

(b) if the judge determines that the lender did not provide disclosure as required under subsection 33(2), the judge may make an order varying the application of subsection 33(4) or substituting any other terms or conditions for the loan that in his or her opinion would be just and reasonable if he or she concludes that it would not be just and reasonable in the circumstances for subsection 33(4) to apply;

(c) even if the judge determines that the lender did provide disclosure as required under subsection 33(2), if the judge is satisfied, having regard to all the circumstances, including whether or not the borrower received independent legal advice, that the terms of the loan are not just and reasonable, he or she may make an order varying the terms of the loan in any manner that in his or her opinion would be just and reasonable in the circumstances;

(d) the judge may order the lender to set off against the balance owing under the loan, or to refund to the borrower, any amount paid by the borrower for which he or she was not liable because of section 32, subsection 33(4) or the judge's order under clause (b) or (c); and

(e) the judge may make any order respecting costs or any other order he or she thinks fit.

Onus re disclosure

34(2)       In an application under subsection (1), the burden of proof to prove that the borrower was provided with disclosure as required under subsection 33(2) is on the lender.

Limitation period

34(3)       An application under subsection (1) may be brought not later than six years after the registration of a reverse mortgage or other document has been discharged.

Consumers' Bureau

35          The director of the Consumers' Bureau or any person acting under the authority of the director is responsible for

(a) receiving and investigating complaints involving reverse mortgage loans; and

(b) mediating disputes involving reverse mortgage loans;

and in performing these duties has the powers, duties and protection given under sections 73 and 92 of The Consumer Protection Act, with such changes as the circumstances require.

Offence

36(1)        A person is guilty of an offence who

(a) fails to provide a borrower with the form required by subsection 33(2);

(b) provides a form required by subsection 33(2) which contains material errors or fails to disclose information required under that subsection;

(c) advances funds under a reverse mortgage loan where the reverse mortgage was signed by a borrower before the end of the cooling-off period;

(d) fails to refund an amount to a borrower as required by subsection 32(2) or 33(5); or

(e) fails to comply with clause 33(3)(b).

Liability of directors and officers

36(2)       If a corporation commits an offence, any officer, director or agent of the corporation who directed, authorized, assented to, acquiesced in, participated in or permitted the commission of the offence is also guilty of an offence and is liable on summary conviction to the penalties set out in clause (3)(a), whether or not the corporation has been prosecuted or convicted.

Penalty

36(3)       A person who is guilty of an offence under subsection (1) is liable on summary conviction,

(a) in the case of an individual, to a fine of not more than $20,000. or imprisonment for a term of not more than three months, or both;

(b) in the case of a corporation, to a fine of not more than $50,000.

Limitation period

37          A prosecution for an offence under this Part may be commenced not later than one year after the day on which evidence sufficient to justify a prosecution for an offence came to the knowledge of the director of the Consumers' Bureau.

Regulations

38          The minister may make regulations

(a) enlarging or restricting the meaning of "reverse mortgage loan";

(b) prescribing for the purpose of subsection 33(1) the form and content of a statement acknowledging receipt of the prescribed form required by subsection 33(2);

(c) prescribing information to be provided under subsection 33(2), and the form and manner in which it is to be provided;

(d) respecting any other matter the minister considers necessary or advisable to carry out the purposes of this Part.

Coming into force

4            This Act comes into force on a day fixed by proclamation.