Plain Language Mortgage Documents

The Canadian Bankers Association (CBA) today announced a commitment by Canada's banks to Canadians to alleviate the anxiety of buying a home by simplifying the language in residential mortgage documents. As part of this commitment, the CBA released a sample plain language Cost of Borrowing Disclosure Statement which is a model for statements that will be used by Canada's banks.

Each bank will develop and put into use its own plain language Disclosure Statement by the end of the year. The Disclosure Statement is provided to consumers when the mortgage is approved to explain the terms of the mortgage, any additional costs, and the conditions for paying the mortgage off early. The sample disclosure statement also includes a simple formula which customers can follow to estimate how much it will cost them to pay their mortgages off early. "For most people, buying a home is the biggest investment they ever make, and the mortgage documents the most complex," said Raymond Protti, CBA's president and CEO. "We are pleased to be able to assist our customers in making informed choices about shopping for a mortgage."

Many consumers may already have noticed an improvement in the documents they are receiving as banks have been incorporating clearer language into application forms and agreements on an ad hoc basis. However, CBA members have now made a commitment to systematically change all of their mortgage documents.

Each bank will conduct a plain language audit of its mortgage documents and develop a strategic plan for "translating" documents that do not reflect plain language principles. The process involves translating almost 100 documents at each bank covering many different mortgage products and differing provincial regulations. Customers will see examples of the banks' plain language commitment with the disclosure statement later this year. Over the next few years additional plain language documents will be rolled-out until, by the end of 2005 all mortgage documents will be written in plain language. "We are fundamentally changing documents that were shaped by decades of law making and legal decisions," said Mr. Protti. "This process is a lengthy one but will in the end provide real value to our customers." Each financial institution will develop its own mortgage documents to address the needs of its customers and to explain its mortgage products.

Plain language mortgage documents will reflect the following writing principles:

Write to be understood;

Help readers find the information they want by using reader aids;

Use words that are familiar to readers and when that is not possible, define legal and technical terms;

Give an example or illustration to explain a complex concept or calculation; and

Print the document in an easy-to-read format with an appropriate type size, print style and page design.

The commitment and the Sample Cost of Borrowing Disclosures Statement are available here.

John Kelly
VP Corporate Development
CM Canada Mortgage Corp.
9th Floor - 1095 West Pender St.
Vancouver, B.C.
Bus: 604.891.8600
Direct: 604.891.8606
Fax: 604.891.8601