The revised Residential Mortgage Underwriting Practices and Procedures will take effect from January 1, 2018 and 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 for uninsured mortgages to be the greater of the five-year benchmark rate published by the Bank of Canada or the contractual mortgage rate +2%.
- Enhanced LTV 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.
“These revisions to Guideline B-20 reinforce a strong and prudent regulatory regime for residential mortgage underwriting in Canada,” said Superintendent Jeremy Rudin.
The full guideline update is available from the OSFI website.
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OSFI has published its update for the tightening of mortgage lending regulations known as Guideline B-20 and set the date that it will apply.