From CAAMP’s mouth to OSFI’s ear. The federal regulator issued a letter Wednesday clarifying its position on re-qualifying borrowers at renewal -- effectively maintaining the status quo and confirming CAAMP's understanding.
“The following provides a brief description of OSFI’s decisions on key issues, which will be reflected in the final Guideline,” writes the regulator in a letter sent to federally regulated financial institutions Wednesday. “Re-qualification at Renewal – current practice regarding residential mortgage renewals has served FRFIs well. OSFI agrees, for example, that having a good payment record is one of the best indicators of credit worthiness. OSFI, therefore, expects that FRFIs themselves will remain responsible for deciding what level of review to place on borrowers’ qualifications at the time of renewal.”
The letter confirms the message coming from CAAMP CEO Jim Murphy, the association leader telling MortgageBrokerNews.ca last week that OSFI was prepared to hold its fire on the most contentious component of its draft guidelines for mortgage underwriting.
At the same time, the message confirms that the regulator will uphold its guideline reducing the maximum loan-to-value ratio for HELOCs to 65 per cent.
Still, brokers appeared most concerned about the possibility of lenders having to re-qualify clients at each and every renewal.
The OSFI decision may leave some room for lenders to do just that, however.
"FRFI renewal practices should be articulated in internal policies governing their underwriting of residential mortgage loans," writes OSFI. "FRFIs, however, will be expected to refresh the borrowers’ credit metrics periodically (not necessarily at renewal) so that FRFIs can effectively evaluate their credit risk.”
For the full OSFI letter, click HERE.