Regulators propose further changes to syndicated mortgage rules

Canada’s securities regulators are implementing changes to the framework governing syndicated mortgages and have proposed further changes to improve investor protection.

The Canadian Securities Administrators has published a second notice and invited comments on the further proposed changes, which build on those previously announced in March 2018.

"We are moving forward with changes outlined in our initial consultation that will substantially harmonize a regulatory framework for syndicated mortgages and increase investor protections," said Louis Morisset, CSA Chair and President and CEO of the Autorité des marchés financiers. "In light of the feedback received, we have also adjusted specific aspects of our proposals and are now seeking comment on these changes."

Those specific aspects include implementing all changes on December 31, 2019 rather than the staggered implementation that had been proposed.

Given the rapid change of the real estate market in some jurisdictions, the CSA is also proposing a revision that includes a requirement that a property appraisal take place within six months before an appraisal is delivered to a purchaser. Staff are also proposing additional guidance regarding the identity of the issuer of a syndicated mortgage.

Regional variations
For qualified syndicated mortgages, provincial regulators in Ontario, New Brunswick, Nova Scotia, and Newfoundland and Labrador, are proposing dealer registration and prospectus exemptions.

Alberta and Québec are proposing a prospectus exemption similar to that already available in British Columbia.

Qualified syndicated mortgages are subject to restrictions relating to property type, loan-to-value ratio and other characteristics similar to those of a conventional mortgage, and as such, do not present significant investor protection concerns. These exemptions are being proposed on a local basis, primarily due to differences in existing provincial legislation.

Further details can be found on provincial regulators’ websites.

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