14 April 2014

Here are some of the new regulations:

Cash-back down payments will become unavailable in case of insured mortgages.

After OSFI eliminated this service for all federally regulated lenders, credit unions were the only ones who still provided 100% financing. Meanwhile, borrowed down payments are still available.

B-21 focuses on the consistency of lender’s underwriting.

It means we may see fewer underwriting exceptions for insured mortgages.

Lenders’ underwriting will be even more thoroughly scrutinized.

In other words, sample audits of individual files will be made more often.

According to OSFI, lenders with proportionately higher levels of insurance claims and delinquencies will be more scrutinized.

In the end, those lenders who tend to violate the rules will be more affected by B-21, as the new set of regulations requires insurers to be stricter. And though it’s already a standard policy for most insurers, B-21 demands more scrutinized checks on insured mortgage applications.

Another important change is that data disclosure will also increase. Now insurers will have to disclose more risk-related information every quarter, for example, the percentage of insured borrowers with only 5% down payment.

In general, with B-21 new borrowers should expect stricter underwriting, more fraud prevention measures and more documents requirement from insurers and lenders respectfully.