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Quality of Uninsured Mortgages Improving Says OSFI

October 24, 2018

Eric de Roos, Policy Analyst, Financial Sector, Government Relations, Canadian

Earlier this month, OSFI (Office of Superintendent of Financial Institutions) published their quarterly newsletter, providing commentary on the Canadian mortgage market – particularly around the impact of the B-20 changes (implemented at the beginning of 2018). OSFI notes that overall, the quality of uninsured mortgages has improved in 2018, citing:

  • Higher average credit scores;
  • lower average loan-to-value ratios;
  • the percentage of amortization periods >25 years has decreased; and,
  • that originations of mortgages with loan-to-income ratios >450% have decreased significantly.
These data points inform the conclusion that “the B-20 revisions are having the desired effect of helping to keep Canada’s financial system strong and resilient.” Moreover, OSFI notes that the residential mortgage market share for federally-regulated financial institutions has remained stable as of June 2018. This corroborates what CCUA has heard from credit unions and has been telling policy makers – that B20 has not led to an upswing in uninsured mortgages moving to credit unions. OSFI also acknowledges that some provincial regulators are requiring the adoption of similar underwriting practices.

Finally, OSFI indicates that they will take steps to end “equity lending”, which they define as “mortgage approvals that over rely on the equity in the property (at the expense of assessing the borrower’s ability to repay the loan).” CCUA continues to monitor and engage with OSFI and will communicate to credit unions relevant changes. If you have any questions or concerns, please contact Eric de Roos.