April 6, 2016
41.4.81
Background
The grievor occupied an indeterminate position in City A. Following the disassembling of the grievor's work unit, the grievor accepted a position in City B.
When the employee bought the property in City A, the initial mortgage was transferred to this property. At that time, the grievor undertook major renovations for which a second type of financial instrument was obtained. It was explained to the grievor that the rate of the first mortgage could no longer be offered. In order to protect the low interest rate of the mortgage, the grievor accepted a collateral mortgage as a second form of credit; knowing that when the collateral mortgage would be up for renewal, the two would be merged. However, the two instruments were never merged as the grievor relocated to City B.
The following year, the grievor's financial institution wrote to the department on two separate occasions, to clarify the two financial instruments that were used to finance the grievor's home. The financial institution's representative stated that the 2nd financial instrument was not a line of credit and was considered to be a collateral mortgage. The sale agreement of the property at origin, also referred to the 2nd financial instrument as a ‘mortgage'.
The grievor's financial institution offered the following definition of a collateral mortgage: ‘A collateral mortgage is a mortgage that is registered on a property to secure one or more loans or lines of credit. Often a collateral mortgage can secure not only loans or lines of credit given by the borrower at the time the mortgage is registered, but also loans or lines of credit that may be given by the borrower to the lender in the future.'
However, the Contracted Relocation Service Provider (CRSP) did not recognize the 2nd financial instrument as a mortgage and did not take it into account when calculating equity. Therefore, the grievor was not entitled to use the equity of the sale of the property at origin to settle the collateral mortgage.
Grievance
The employee is grieving the Employer's denial to pay the Mortgage Default Insurance Premium (MDIP) in violation of Section 9.17 and other related sections of the NJC Relocation Directive.
Bargaining Agent Presentation
The Bargaining Agent representative indicated that the denial of the appropriate amount of the Mortgage Default Insurance Premium (MDIP) is in violation of Section 9.17 of the Directive.
The CRSP initially confirmed, the day prior to the grievor's house hunting trip, that the first and second mortgage would be used to calculate the MDIP. The representative referred to the Principle of Estoppel as the grievor made the decision to purchase a home based on the information that the grievor would be reimbursed the full Mortgage Default Insurance Premium.
The representative contended that the grievor relied on this information to determine the amount of the down payment of the residence at destination as well as the expected Mortgage Premium Default. The grievor was advised, one month following the purchase of the house, that the second mortgage would not be taken into account in the calculation of the Mortgage Premium Default by the CRSP. The Bargaining Agent representative indicated that the CRSP is acting as a representative for the Employer, and therefore, should be held accountable for the grievor's decision being based on erroneous advice.
The Bargaining Agent representative noted that the grievor has always been forthcoming with the Department, and the CRSP, in indicating that he had 2 mortgages and a secured line of credit. Furthermore, the grievor's financial institution confirmed, by way of letter, that the second credit facility was a mortgage and in the spirit of fairness and modern relocation practices, the Mortgage Premium Default should be amended to include this second financial instrument.
Departmental Presentation
The Departmental representative explained that the grievor's financial institution provided two distinct documents. The first identified the financial instrument as a mortgage and provided an associated mortgage number. The second document was entitled ‘Discharge/Payout for Lines of Credit or Loans Secured by a Collateral Mortgage' and contained a loan or line of credit number. As a result, the CRSP deemed the second instrument to be a line of credit and not a mortgage and therefore, was not used in the calculation of available equity.
The representative noted that the Department sought clarification with the grievor's financial institution, which confirmed that the financial instrument in question was a collateral mortgage. A collateral mortgage was defined as being a loan registered on a property to secure one or more loans or lines of credit. The representative's position is that the financial institution distinguishes one type of mortgage from the other and that therefore, collateral mortgages fall outside of the definition of mortgage provided in the Directive.
The Departmental representative further noted that there was no discretion for the Department to authorize a pro-rated reimbursement of the Mortgage Default Premium in accordance with subsection 1.2.3 of the Directive.
Executive Committee Decision
The Executive Committee reviewed the report of the Relocation Committee and noted the impasse. The Executive Committee concluded that, in this case, the financial instrument in question ought to be deemed a second mortgage in accordance with the financial institution's statements and as such, the grievor was not treated within the intent of the Directive. Therefore, he ought to be entitled to a pro-rated MDIP. Given this, the grievance is upheld.