- The Office of the Superintendent of Financial Institutions (OSFI) released revised "B-20" guidelines for residential mortgage underwriting at federally regulated financial institutions. As was widely expected, the updated 'stress test' will be applied to all new mortgages beginning in . Currently the test applies only to mortgages requiring insurance (i.e. those with low down payments) and those whose term is less than five years.
- This change requires that borrowers qualify for mortgages at the greater of the Bank of Canada's five-year benchmark rate or the contracted rate plus 200 basis points. For reference, as of this morning, the Bank of Canada posted rate was 4.89%. It should be noted that OSFI will not apply the more stringent requirements in the case of mortgage renewal.
- While the extension of qualification guidelines will likely draw the most attention, OSFI introduced two other changes:
- Loan-to-value limits must be established and lenders will be required to ensure that they "are reflective of risk and are updated as housing markets and the economic environment evolve"
- Lending arrangements designed to get around loan-to-value limits are restricted with the updated guideline explicitly forbidding 'co-lending' or 'bundling' arrangements.
Real Estate Websites by Web4Realty