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Mortgage Insurers under the Microscope

A speech was given last week by Julie Dickson from the Office of the Superintendent of Financial Institutions (OSFI). The role of OSFI is to regulate banks, trust companies and pension plans for the greater good of the Canadian public by controlling and managing risk. Julie Dickson, appointed as Superintendent in 2007, was the first speaker at the recent Canadian Association of Accredited Mortgage Professionals (CAAMP) conference in Toronto which also included guest Colonel Chris Hadfield and General Colin Powell. As this year has seen many changes in mortgage lending regulations, primarily as a result of the now well know Guideline B-20, Julie’s remarks provide greater insight in the organizations plans for the upcoming year.

“Canada is not unique in asking whether we have a housing market that is in balance or overheated. Many countries are asking similar questions, given the impact of low mortgage rates and the incentive to borrow.” As a result OSFI is now working on Guideline B-21 that looks closely at the activities of the insurers, such as the Canada Mortgage and Housing Corporation (CMHC) which enables a borrower to purchase a home with less than 20 per cent down of the purchase price. In short those with less down present a higher credit risk so a tightening of the rules would impact how a borrower qualifies and their eligibility to receive financing.

While a draft of the new guidelines is not expected for public consultation until March 2014, Superintendent Dickson closed with saying “This is a market that continues to bear very close watching. All of us have a responsibility and an interest in ensuring that prudent lending is occurring. Borrowers do not want to over-extend themselves, brokers want to act in the best interests of borrowers, and banks want to facilitate this relationship while not putting depositors at risk. We all have a role to play in maintaining Canada’s sound financial system.” The complete speech can be located online at www.osfi-bsif.gc.ca 

Source: Brandon Scott is a Sherwood Park / Edmonton Mortgage Broker and the author of a weekly column entitled Real Estate Solutions in the Sherwood Park News. This article was originally published on December 6, 2013

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