OSFI issues stern warning against bundled loans

OSFI issues stern warning against bundled loans

OSFI issues stern warning against bundled loans As part of its mandate to stamp out unscrupulous industry practices, Canada’s financial regulatory body has announced that it will be cracking down on so-called “bundled” loans.

Office of the Superintendent of Financial Institutions assistant superintendent Carolyn Rogers warned mortgage providers under its jurisdiction against providing such products.

“They are rules. They are not guidelines, and they are not principles. We absolutely expect regulated entities to be adhering to them,” Rogers said last week, as quoted by Reuters.

“Anytime a regulated entity is or appears to be designing a product or an approach that is, by its design, circumventing the rules we would take issue with that.”

Bundled loans package a primary mortgage with a second offering from an unregulated group. In the wake of stricter lending standards, such a pairing has gained popularity as a way to sidestep existing bylaws that place a cap on the amount that mortgage providers can lend.

Earlier this month, Fitch Ratings predicted that mortgage rates will remain at record-low levels for the first six months of this year.

The credit rating agency’s 2017 Global Housing and Mortgage Outlook noted that any possible increases would be minimal at best, and that inflation will remain at a relatively manageable 2 per cent.

“We expect that it will result in fewer loans being made available to marginal borrowers, which could reduce loan growth. That said, we expect loan volumes to remain near historical highs as long as interest rates remain low, employment is stable, borrowers are able to qualify under the stricter mortgage rules, and the desire/demand for home ownership remains high,” Fitch stated in the report.

 

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1 Comments
  • Len Lane 2017-02-28 9:10:00 AM
    I'm afraid all that will do is push the client into a fully private mortgage.
    Post a reply