Economist to OSFI: What were you doing before?

by |
In an exclusive to, one leading economist weighs in on the implications of OSFI’s recent announcement that it will more closely monitor lenders.

“It’s not about affordability in housing; it’s really about protecting the mortgage industry from itself. So the impact on mortgage brokers just seems to be that it will be more work,” Michael Campbell, Verico’s economist, told “More verification of the due diligence they should be doing anyways. It’s going to be more difficult on that front. I hope it won’t be more difficult to get mortgages because it’s already difficult to get a mortgage.”

The Office of the Superintendent of Financial Institutions released a letter last week, addressed to all federally regulated financial institutions, confirming its expectations for prudent underwriting, saying it will increase its supervision on mortgage lenders.

“With rapid price increases in some areas and current exceptionally low interest rates, the risks are getting larger,” said Superintendent Jeremy Rudin at the time. “OSFI wants to see sound mortgage underwriting procedures in place that adapt to the ever-changing circumstances in this area.”

The reason for increased scrutiny, according to the regulator, is due to vulnerabilities for financial institutions have increased, according to OSFI, due to record-high debt levels and rapid home price increases.

The timing of the announcement was somewhat surprising to Campbell.

“I’m wondering what they were doing before if they weren’t verifying income and keeping tabs on this,” he said. “Are you kidding? What were you doing before this?”

And Campbell, like many in the industry, is unsure what the increased scrutiny will entail.

“I’m surprised that they’re coming out pretty clearly, saying they want to ensure prudent underwriting. I’m just not sure what prudent business practices have been up to his point,” he said. “I thought this would be standard issue by now. Will they want more documentation, more audits?

“Or was it just a statement, reminder that they’re watching. It’s hard to know before it comes into fruition. It seems like a warning shot.”
  • Mortgage Guy on 2016-07-13 9:18:40 AM

    OFSI is a huge joke. Lenders working with brokers are subjected to huge scrutiny making our lives that much more difficult. Meanwhile the bank reps are breaking all the rules and closing deals that we can't close. BMO recently is closing on a $1,020,000 home with 65% and the applicant is on ODSP and working as a cleaning lady. She bought the house and went firm due to the Realtor and now she is closing on a house that she can't afford. BMO did the deal, where is OFSI in this case? One lender told me banks get away with it because they have bigger law firms representing them. This is a unfair practice.

  • LanceH on 2016-07-13 9:43:42 AM

    The reason ppl adopt kids from Russia, is because here in Canada, you simply can't, due to over regulation. One couple were at it 10yrs and finally got too old and gave up. My point is, this is what happens whenever Lefty's are running the hen house. This is socialist micro-managing for it's own sake. What are the default rates? To my knowledge, they haven't changed. About 1/2 of 1%? So it appears the lenders and brokers are doing a good job! The excuse they've given is just that, an excuse to justify their excessive meddling.

    What Rudin really needs is a psychiatrist to help him figure out why he's such a control freak and help him get past it!

    But it's up to us to push back. Anyone know how to set up a petition?

  • CW on 2016-07-13 11:23:33 AM

    It's OSFI. If you're going to use mortgage industry jargon then at least get it right.
    Where was scrutiny prior to 2008? And look at the mess that caused. Now, we all have to pay for it. Yes getting the extra documents is a pain but I'd rather do the right thing for the client AND the lender.

  • Dan on 2016-07-13 12:00:53 PM

    OSFI has trusted FI's to complete good due diligence. Obviously they feel something is rotten.

    Lets talk documentation, fraud is obviously a significant concern. I wonder who is providing FI's with the conditioned for documents? (points finger at self)

    Instead of digging heels in and saying 'not me, not me!', how about we, the broker industry, take some responsibility and HELP the FI's - they are our bread and butter.

  • RR on 2016-07-13 12:52:44 PM

    The government is still concerned about 'over heated' markets (read Toronto and Vancouver),
    so a statement is made, publicly, to try to force the lenders to tighten again on their own. This is simply a political ploy to influence the market. The sad result will be the tightening in the rest of the country where there IS NO problem.

  • JS on 2016-07-13 2:34:46 PM

    I've received multiple inquiries for people asking for income to be massaged. I don't participate because I won't be able to sleep at night.

    For those who are doing it these people are charging thousands in cash fees and then also getting paid on a fraud file from the lender. In some scenarios the people qualified on their own! GDS and TDS limits are there for a reason. It bothers me that these brokers put people into homes they can't afford and then wash their hands of them when they get into trouble.

    The law today has no teeth. You steal a chocolate bar and you can go to jail, you commit fraud in the millions of dollars and you are not reprimanded.

    I still know of someone who was actually stripped of their license and then had their son join a different brokerage and kept the party going.

    Due Diligence is not rocket science but these fraudsters are way too sophisticated to be caught.

    Rant over.

Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Name (required)
Comment (required)
By submitting, I agree to the Terms & Conditions