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.”