OFSI, along with the federal finance department announced tighter lending conditions last week and speaking Monday Mr Rudin warned that mortgage insurance would be invalid in the event that lenders had not been diligent enough with their checking of applicants’ incomes. That, he said, would leave lenders at risk of being saddled with bad debts from such individuals.
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The Office of the Superintendent of Financial Institutions says that lenders which have inadvertently provided mortgages for individuals who have falsified their income is a risk to the wider financial system. Jeremy Rudin said that “One of things we’ve been doing is encouraging sound risk management. And as we set out in our guideline on mortgage underwriting, income verification – checking to make sure the borrower has the ability to carry the loan – is an important part of sound underwriting.”