OSFI (Office of the Superintendent for Financial Institutions) has published its update for the tightening of mortgage lending regulations known as Guideline B-20 and set the date for January 1, 2018 that it will apply.
The revised Residential Mortgage Underwriting Practices and Procedures will include several key changes that the regulator says is part of its expectation that federally-regulated mortgage lenders remain vigilant in their underwriting practices:
-Stress test - the minimum qualifying rate will now include uninsured mortgages and is to be the greater of the five-year benchmark rate published by the Bank of Canada or the contractual mortgage rate +2%.
-Enhanced LTV (Loan to Value) measurement - federally regulated financial institutions must establish and adhere to appropriate LTV ratio limits that are reflective of risk and are updated as housing markets and the economic environment evolve.
-Restriction of certain lending arrangements - federally regulated financial institutions prohibited from arranging with another lender a mortgage, or a combination of a mortgage and other lending products, in any form that circumvents the institution’s maximum LTV ratio or other limits in its residential mortgage underwriting policy, or any requirements established by law.
Mortgage industry experts expect that, following a brief run-up in activity fueled by buyers rushing to lock-in existing qualifying criteria, the change will have a dampening impact on the housing market shortly after it comes into effect in January. It has the potential initially to rock the market because non-insured mortgages represent a large share of the mortgage market.
Posted by Steven Porter. Steven is a licensed Mortgage Agent with Mortgage Architects, Certified Reverse Mortgage Specialist (CRMS); Seniors Real Estate Specialist (SRES) and Accredited Buyer Representative (ABR) and retired, real estate broker with 30 years experience in residential real estate. Steven can be reached at 1-905-875-2582; steven.porter@mtgarc.ca or online at 1800Mortgages.ca
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