On October 16, 2023, the Office of the Superintendent of Financial Institutions (OSFI) published the results and next steps of its initial public consultation on Guideline B-20: Residential Mortgage Underwriting Practices and Procedures from earlier this year, which focused on debt serviceability measures. CCUA submitted a response on behalf of credit union, which aligns with broad stakeholder feedback received by OSFI.

A non-attributed summary of feedback was published along with OSFI’s responses. Credit unions joined the majority of stakeholders who agreed that risks to lenders arising from high household indebtedness are important but were generally not supportive of additional debt serviceability measures. Many – including credit unions – suggested alternative measures or revisions to our proposals, which were reviewed. A key concern raised was the disproportionate impact that new, industry-wide measures could have on smaller institutions with unique business models. CCUA encourages credit unions to review the feedback summary.

OSFI indicated that the Minimum Qualifying Rate (MQR) has helped manage risks related to debt serviceability, especially as mortgage interest rates have risen sharply. The next review of the MQR will be on December 12^th.

However, OSFI has stated that it believes additional measures are needed to mitigate the underlying vulnerability of a buildup in highly indebted borrowers. OSFI will therefore pursue targeted supervisory actions that will aim to limit FRFIs’ individual exposures to high household indebtedness over time. These actions will take into account the size, nature, complexity, and risk profile of each FRFI, balancing sound risk management against the need for FRFIs to compete effectively and take reasonable risks.