OSFI Assesses Impact of Revised Guideline on Mortgage Underwriting
OSFI published an information sheet that assesses the impact of the revised Guideline B-20, which sets out the expectations for prudent residential mortgage underwriting practices and procedures. The document provides information on the role of OSFI in maintaining a safe and sound Canadian financial system, includes a brief history of the guideline, reports on the impact the revised Guideline B-20 has had on the uninsured mortgage market in Canada, and identifies areas for review. OSFI had issued an update to the Guideline B-20 in 2017 and the revised guideline came into effect in January 2018. In a speech, Ben Gully of OSFI emphasized that Guideline B-20, which is a broader risk management guide, is "having the desired effect of improving sound mortgage underwriting at banks."
The application of B-20 to mortgage renewals has remained consistent since the introduction of the guideline in 2012. The information sheet reveals that revisions to B-20 are working, strengthening mortgage underwriting across Canada and improving the resilience of the Canadian financial system to future shocks. While improvements have been made, OSFI will continue to monitor lender practices, particularly in the area of income verification, and will be proactive with lenders when it identifies areas requiring attention. The data representing uninsured mortgages from the top 19 federally regulated mortgage lenders, who hold more than 95% of all mortgages subject to OSFI regulation and supervision, show that since the B-20 revisions were put in place, lenders are approving fewer mortgages for the most highly indebted or over-leveraged borrowers. However, OSFI has recently observed an uptick in mortgage approvals for highly indebted borrowers, seeing a rise from 14.0% to 17.5% in 2019. This increase has been partially supported by a decline in the mortgage rates. OSFI will monitor this area closely.
Additionally, concerns have been raised that the stress test could limit a borrower's ability to obtain competitive rates at renewal. OSFI indicated it would be monitoring this closely and data from OSFI regulated lenders show that, following the introduction of the revised guideline, the difference between renewal and new mortgage rates for uninsured five-year fixed and variable rate mortgages has remained largely unchanged.
Related Links
Keywords: Americas, Canada, Banking, Residential Mortgage Underwriting, Credit Risk, Guideline B-20, OSFI
Previous Article
MAS Amends Notice 610 on Reporting Templates for Banks in SingaporeRelated Articles
UK Government to Set Out Rules on Wind-down of Critical Benchmarks
HM Treasury notified that, after considering all responses, the government intends to bring forward further legislation, when the Parliamentary time allows, to address issues identified in the consultation on supporting the wind-down of critical benchmarks.
EIOPA Launches Stress Test for Insurance Sector in EU
EIOPA launched the 2021 stress test for the insurance sector in EU.
UK Authorities Publish Third Edition of Regulatory Initiatives Grid
UK authorities jointly published the third edition of Regulatory Initiatives Grid setting out the planned regulatory initiatives for the next 24 months.
EC Consults on Regulation on Non-Financial Sustainability Disclosures
EC is requesting feedback on the proposed Commission Delegated Regulation on the content, methodology, and presentation of information that large financial and non-financial undertakings should disclose about their environmentally sustainable economic activities under the Taxonomy Regulation.
OSFI Outlines Prudential Policy Priorities for Coming Months
OSFI has set out the near-term priorities for federally regulated financial institutions and federally regulated private pension plans for the coming months until March 31, 2022.
BIS Announces TechSprint on Innovative Green Finance Solutions
Under the Italian G20 Presidency, BIS Innovation Hub and the Italian central bank BDI launched the second edition of the G20 TechSprint on the lookout for innovative solutions to resolve operational problems in green and sustainable finance.
ACPR Publishes Version 1.0.0 of RUBA Taxonomy
ACPR published Version 1.0.0 of the RUBA taxonomy, which will come into force from the decree of January 31, 2022.
EBA Proposed Regulatory Standards for Central Database on AML/CFT
EBA proposed the regulatory technical standards on a central database on anti-money laundering and countering the financing of terrorism (AML/CFT) in EU.
ECB Responds to EC Consultation on Crisis Management Framework
ECB published its response to the targeted EC consultation on the review of the bank crisis management and deposit insurance framework in EU.
BCBS, CPMI, and IOSCO to Survey Market Participants on Margin Calls
BCBS, CPMI, and IOSCO (the Committees) are inviting entities that participate in market infrastructures and securities markets through an intermediary as well as non-bank intermediaries to complete voluntary surveys on the use of margin calls.
