Broker criticism of OSFI’s proposed guidelines may carry little weight with the regulator, its policy head answering and, perhaps, dismissing concerns those changes go too far.
“Are the banks equipped to handle a 40 percent drop (in property values)?” writes Vlasios Melessanakis, the manager of policy development for the Office of the Superintendent of Financial Institutions, in an internal document responding to broker Rob McLister and an article posted to his website in March. "Canada is not immune. Just because nothing happened in Canada in 2008 (a U.S.-centered crisis), does not mean that Canada is not vulnerable to a housing correction now.”
The posture reveals the extent to which the regulator is committed to bringing forward a slew of tighter mortgage lending rules for federally regulated institutions. The broker channel has raised a red flag on several points – from re-qualification tests on renewals to consideration of a borrower’s age at the time of application.
CAAMP, among other industry players, has also questioned the need to ratchet down on HELOCs to the extent OSFI is proposing. The regulator passed those guideline changes by members of the broker channel earlier this spring in order, ostensibly,to win their input.
Several brokers have suggested that their criticism has largely fallen on deaf ears and the regulator is determined to move forward with most, if not all, of its proposals.
OSFI's internal documents, accessed by Bloomberg through the Freedom of Information, suggest Melessanakis views the guideline changes as key to protecting the mortgage and housing industries in the long-term.