OSFI addresses broker's criticism

OSFI addresses broker's criticism

OSFI addresses broker

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.

  • Kevin J. Power, President Power Mortgages Inc 2012-05-17 1:13:16 AM
    OSFI is becoming a very strong force in watching the financial services industry. Some of their changes make sense, some of the proposals do not. In particular the need for re-qualification testing on renewals. Also giving the right to over rule discriminatory laws based on age is a step backwards. This whole process is very disconcerting.
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  • Chad 2012-05-17 1:19:43 AM
    You have to love Government. We are scared of a house prices dropping so lets make it allot harder for people to get financing and take buyers out of the market.. Lets also make it harder to refinance so people must sell under duress. Wait, lets force the CAP on CMHC take out competition in effect raising rates...
    That should protect our banks.
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  • Paul Mangion 2012-05-17 1:41:56 AM
    Sounds like a self-fulfilling prophecy to me. They never seem to consider what effects these nee jerk reactions will have immediately and how much they can increase the severity of the crisses. All goverments seem to do this because nobody wants top make an un popular decision until it is too late. We can see many examples of this. Greece and Ontario are two great examples. In 2008 Ontario was still handing out raises and couldnt see what everyone else was seeing and now they go to the other extreme. But I guess we have no one to blame but ourselves since we will throw them out of office when a good fiscal decision is made early. (eg. Brian Mulroney). I can't wait for the next politically unforseen crises. The unfunded pension obligations. LOL!
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