OSFI is consulting on Guideline B-20 that sets out residential mortgage underwriting practices and procedures. Comments are due by August 17, 2017. OSFI will finalize the guideline after reviewing the comments received and will set an effective date for later in 2017.
The guideline sets out OSFI’s expectations for prudent residential mortgage underwriting and is applicable to all federally-regulated financial institutions that are engaged in residential mortgage underwriting and/or the acquisition of residential mortgage loan assets in Canada. OSFI issued a public letter, in July 2016, that reinforced its expectations for residential mortgage underwriting in federally regulated financial institutions and advised the industry that it would be increasing its supervisory intensity in this area. The draft changes to the guideline align language throughout the guideline with OSFI’s July 2016 letter and clarify and strengthen expectations in a number of specific areas, including the following:
Requiring a qualifying stress test for all uninsured mortgages
Requiring that loan-to-value (LTV) measurements remain dynamic and adjust for local market conditions where they are used as a risk control, such as for qualifying borrowers
Expressly prohibiting co-lending arrangements that are designed, or appear to be designed, to circumvent regulatory requirements
Comment Due Date: August 17, 2017
Keywords: OSFI, Americas, Canada, Banking, Stress Testing, Guideline, Residential Mortgage Underwriting, LTV
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