Absolutely. Negative amortization is specific to variable rate mortgages with a fixed payment. Negative amortization will kick in when a particular interest rate triggers a situation in which your payment no longer covers your principal. If interest rates continue to change, that payment will not even cover all of the interest, thereby causing the accrued interest to be charged interest.
Our guideline specifically identifies that as a potential relief measure. I should open up parentheses here and note that FCAC does not prescribe relief measures to financial institutions, but the guideline does identify some that may be relevant. One of those is to not charge interest on interest.
This is a serious issue. It's something we're monitoring closely. Institutions do have the obligation to ensure that the products offered are appropriate for the circumstances that consumers find themselves in.
With respect to the data, again it's very high-level, and negative amortization is happening in the range of about 150,000 to 200,000 mortgage accounts. The sum total is $5.2 million. Relatively speaking, things seem to be in hand, but we need early engagement by way of financial institutions speaking about options available to mortgage holders. That's accompanied by an expectation that institutions provide sound advice and refer customers to other reputable sources of advice to allow consumers the time to make an informed decision on how to handle that.
The guideline does have options, which I'm happy to explain further, but in principle, I think that gives you a sense of scale relative to the issue and a sense of the risk relative to the product.