19 November 2012
Those regulations made lenders more cautious when checking borrowers’ credit history, their document verification and of coursedealing with the appraisals. The most significant issue from the changes’ list is considered to be a reduction of the maximum loan amount on HELOCs – it was cut to 65% from the total house value.
“I don’t think these changes will have the same effect”, said Julie Dickson, OSFI superintendent while commenting on proposed insurers guidelines.
Mr. Flaherty is focused on the potential threats to the whole national economy. Meanwhile, Ms. Dickson is responsible for providing the stability of the country’s banks, insurers and mortgage insurers. And the guidelines that she prepares will focus more on what mortgage insurers must do in order to make sure they don’t get too much risk when insuring mortgages.
“Today we can see a serious household debt growth, so it’s time to act and try to remind people why sound practices are vital,” – Ms. Dickson noted.
OSFI started acting in this direction after the international Financial Stability Board suggested all countries should review their regulation for banks and mortgage insurers.
By the way, the board is chaired by the Bank of Canada governor Mark Carney, who has advised to put CMHC under OSFI’s authority.
We will keep you posted on any news, updates and leaks on potential mortgage rules tightening, since new insurance rules will be immediately implemented by lenders and will affect the vast majority of borrowers.