CMA winner: OSFI 25-year cap would benefit B lenders

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The Office of the Superintendent of Financial Institutions Canada (OSFI) is looking at limiting amortizations to 25 years on conventional mortgages – a move that would benefit non-conventional lenders, says one broker.

“Of course it’s going to benefit subprime lenders,” says Adam Hale, a Hamilton broker with The Mortgage Centre and winner of this year’s CMA for alternative brokering. “The B-lenders must be licking their chops at this.”

Currently, low-ratio mortgages (those with a minimum 20 per cent down) can have amortizations up to 35 years. But the regulator of federally-licensed lenders is reportedly looking at limiting that period to 25 years, a move that could ostensibly shut out many broker clients.

According to a source at OSFI, this latest industry review is nothing unusual.

“It is common practice for OSFI to review our guidance with industry to determine its effectiveness and to assess impacts,” Annik Faucher, a communications specialist with OSFI, told MortgageBrokerNews.ca. “We are not issuing a public letter next week, but we are looking at the issue and doing some preliminary consultation with financial institutions.”

Faucher says the review is predicated on the current trending of personal household debt.

“We are working to determine the desirability of some changes given current conditions in housing markets and recent trends in household indebtedness. A decision in that regard would be taken once we hear back from the industry.”

Faucher added that any changes would be subject to a public consultation process.

For Hale, it is just one more opportunity for mortgage brokers to show their expertise.

“Brokers once again are going to be valuable to the lender,” says Hale. “I have people phoning me saying ‘The bank told me my TDS is too high.’ They don’t understand what a TDS is, but they know that I will explain it to them and help them find a mortgage loan.”

  • Chris H on 2013-05-14 9:01:08 AM

    I have said it before and will say it again...Mortgages ARE NOT the problem!
    Find and implement ways to limit CONSUMER debt, credit cards, LOC's & vehicle leases and you will quickly reduce overall household debt. Any mortgage delinquency I see is simply a symptom of the real problem...uncontrolled consumer spending via high rate cards, buy now pay later plans, etc.

  • Brian Matthey on 2013-05-14 10:04:49 AM

    I agree with Chris H.When will OSFI relate consumer debt to "reasonability" guidelines guaged against income and limit consumer debt to more reasonable levels.Right now a consumer can literally be approved for credit to any limit with a multitude of debt sources creating the availability of high interest debt.
    With refinancing now limited to 80% LTV,OSFI has created the ideal storm for bankers to proliferate consumer debt without the fear of it being refinanced
    All of the problems I see in delinquency relate directly to consumer debt,not mortgages.
    How many bankers sit on an OSFI advisory board??Just saying!

  • Chris H on 2013-05-14 10:32:38 AM

    Good points Brian. I have recently placed some 5% down mortgages with some major banks for young clients with TDS figures getting close to 40% ...Only to find out later the bank has also provided them with an unsecured LOC & new credit card...
    Having been a bank lender in a past life (ha ha) I know bank employees get recognition for upselling multiple products to clients, but they are their own worst enemy, and sound lending practices should still apply. I am regulary seeing mid 20's clients with consumer debt of $30,000 or more, spread over multiple loans, leases & locs...

  • Bryan Jaskolka on 2013-05-16 2:53:04 AM

    I don't think this article does a very good job of explaining WHY these proposed changes would be so good for subprime lenders, not that there are even many more of them left in Canada.

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