Canada's Office of the Superintendent of Financial Institutions (OSFI), the nation's federal bank regulator, has released a new draft guideline on residential mortgage underwriting practices and procedures.
The OSFI's Draft Guideline B-20 sets out the regulatory agency's current expectations for what it defines as ‘prudent residential mortgage underwriting.’ The OSFI says that it is issuing the draft guideline to allow industry and other vested parties to provide input on best practices for mortgage lending. The guideline does not affect the rules for insured mortgages, which are set by the government.
‘Although financial institution mortgage portfolios in Canada continue to perform well, a number of vulnerabilities in the financial system exist, including high household indebtedness,’ says Mark Zelmer, assistant superintendent of the OSFI's regulation sector. ‘The OSFI is acting in an effort to prevent these vulnerabilities from evolving into problems for the financial system.’