Watchdog tweaks mortgage rules for insurers & banks
Canada’s banking and insurance watchdog has made some changes to the rules that mortgage insurers and banks must follow to minimize their risks from homeowner loans.
The office of the Superintendent of Financial Institutions (OSFI) released a final set of rules that mortgage insurers must follow to minimize their risks. They've also made some minor changes to the rules that banks must follow when selling mortgages.
One of the more notable changes is that the regulator is now spelling out criteria banks must meet to verify income of potential borrowers, especially the self-employed.
OSFI released a set of rules in 2012, known as the "B-20" which pushed lenders to be more cautious in areas such as credit checks, document verification and appraisals. Because of these guidelines, observers say it has contributed to the decline of Canadian home sales that occurred in late 2012 and early 2013. These latest changes are not expected to have any noticeable effect on the housing market.
OSFI is currently working on its final draft for its newest set of guidelines ("B-21") which will focus on ensuring mortgage insurers take responsibility on double-checking the steps that banks take when they are assessing borrowers.