The federal regulator threatening to overhaul the guidelines lenders and brokers work under is now in receipt of the channel’s most exhaustive response to those proposals -- in short, a list of what ain’t broke and don’t need to be fixed, say brokers.
“It is important to note the many positive features of the Canadian residential mortgage market,” writes CAAMP in its official response to OSFI's draft on Residential Mortgage Underwriting Practices and Procedures. “This is something that is noticeably absent from the OSFI Draft Guideline B 20 Discussion Paper on mortgage underwriting.”
While CAAMP supports a thorough underwriting structure for residential mortgages, it cautions the regulator from going too far in five areas: loan documentation; debt service charges; loan-to-value ratios; HELOCs; and down payments.
For example, while OSFI is effectively stumping for greater loan documentation and underwriting at renewal, CAAMP, like consumer advocacy groups, is concerned those plans would actually compromise Canadian homeownership, not bolster it.
“CAAMP strongly recommends that this concept be clarified so that mortgages continue to be renewed at maturity without requalification,” reads the response sent this week. "If not, homeowners who have been in compliance may no longer qualify.
“This would result in a number of properties hitting the market at the same time thereby driving down prices.”
Broker eyebrows have also been raised by the OSFI suggestion it wants lenders to consider a borrower’s age in relation to retirement during the underwriting process.
“Mortgages in Canada are underwritten at the time of application,” writes CAAMP. “Underwriters and lenders consider income, including past income, credit score and other important factors such as location of the property and its value.
“CAAMP recommends a system of ‘best practices’ and best efforts in this regard. Such requirements should not be set in stone and CAAMP would be pleased to assist in developing such a best practices check list.
The analysis reflects arguments being offered by brokers across the country, fearful a crackdown on all five fronts would simple disrupt a mortgage underwriting system that is very much the envy of the world.