Frequently Asked Questions

Overview

1. What happened?
2. What were the errors?
3. What did RBC do to fix the situation?
4. Who is affected by a change in interest rates after the pay out statement is issued?
5. Who is affected by the "similar term" situation?
6. What is a prepayment charge and how is it calculated?
7. What should I do if I haven't prepaid my mortgage, but may do so in the future?

Prepayment Adjustment Details

1. What exactly will you be paying clients?
2. How will you be making payments to clients?
3. What do I do if I believe I am entitled to a reimbursement but do not receive a cheque from RBC?

Overview

1. What happened?

We recently discovered that some clients with fixed rate residential mortgages were overcharged the prepayment charge when they prepaid their mortgage.

2. What were the errors?

There were two errors. The first occurred in situations in which interest rates increased after the pay out statement was sent to the client and we did not recalculate the prepayment charge based upon the new interest rate. The other relates to the "similar term" calculation with a higher prepayment charge being collected by our automated system than what was described in client documentation.

3. What did RBC do to fix the situation?

We changed our process for mortgage prepayments to take into account rate changes and ensure prepayment charges are checked again when we receive the payment.

For the similar term calculation we have ensured that the calculation on our systems matches the calculation outlined in our documentation relating to mortgage prepayments.

We also sent a letter to clients we identified as having been overcharged prepayment charges. We explained the situation, and included a cheque for the portion of the prepayment charges that were collected in error, plus interest on the reimbursement amount at the RBC prime rate up to February 15, 2006. We have a review process for affected clients who we have not been able to identify or contact.

4. Who is affected by a change in interest rates after the pay out statement is issued?

You may be affected if you are a current or past RBC Royal Bank mortgage client who between February 02, 1999 and November 12^th 2002 :

• Prepaid, early renewed or converted your fixed rate closed mortgage prior to the term maturing and paid a prepayment charge.

5. Who is affected by the "similar term" situation?

You may be affected if you are a current or past RBC Royal Bank mortgage client who, between August 28, 2001 and February 11, 2004:

• Early renewed your mortgage into a fixed rate closed mortgage, or
• Converted your mortgage into a fixed rate closed mortgage, or
• Renewed your mortgage into a fixed rate closed mortgage and signed a form titled "Replacement Mortgage Renewal Agreement"

and later paid a prepayment charge.

6. What is a prepayment charge and how is it calculated?

The mortgage prepayment charge applies to clients with a closed mortgage who break their mortgage before maturity including converting or early renewing their mortgage before maturity. The charge for fixed rate mortgages is based on the interest rate differential (IRD) - the difference between the interest rate on the mortgage and the interest rate offered for a mortgage with the same term as that remaining in the mortgage or 3 months interest, whichever is bigger.

7. What should I do if I haven't prepaid my mortgage, but may do so in the future?

If between the dates noted above you signed a form titled "Replacement Mortgage Renewal Agreement" for a fixed rate mortgage, please complete the Mortgage Prepayment Charge Adjustment Request Form and forward with a copy of the 1st page of the Replacement Renewal Agreement. We will make sure the correct prepayment calculation is associated with your mortgage. Affected mortgages that use other documents have already been identified on our systems.

Prepayment Adjustment Details

1. What exactly will you be paying clients?

Clients who were overcharged prepayment charges will receive a cheque for the amount of the overpayment. This amount will also include interest earned on the reimbursement amount, calculated at the RBC prime rate from the prepayment date up to February 15, 2006.

2. How will you be making payments to clients?

We are sending letters to clients we identified as being affected by this situation beginning January 26, 2006. A cheque for the reimbursement of prepayment overcharges plus interest earned on the adjustment amount at the RBC prime rate to February 15, 2006, is included in this letter.

3. What do I do if I believe I am entitled to a reimbursement but do not receive a cheque from RBC?

We have made every effort to notify all impacted clients but there is a chance that we may not have been able to reach you. To handle situations where clients no longer deal with RBC or where our records do not reflect a client's current address or other personal information or the client signed a Replacement Mortgage Renewal Agreement, we have set up a manual review process that can be initiated upon client request. If you believe you are entitled to a reimbursement of prepayment overcharges and do not receive one by February 10, 2006, please complete a Prepayment Charge Adjustment Request Form.