OSFI releases B-21 draft

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The Office of the Superintendent of Financial Institutions (OSFI) released its Guideline B-21 Residential Mortgage Insurance Underwriting Practices and Procedures Monday, which include “six fundamental principles for sound mortgage insurance underwriting.”

The industry has feared B-21 would bring with it further restrictions to those implemented by B-20.

The B-21 draft, which is based on OSFI’s internal review as well as the Financial Stability Board and the Joint Forum, will now enter a consultation period that is open until May 23.

“Once comments have been considered, a final guideline will be issued and an implementation date set,” an official release from OSFI states.

The six principles – which include implementing an underwriting plan, assessing mortgage lenders and their underwriting practices, and risk mitigation, among others -- can be found below.

Principle 1: Residential Mortgage Insurance Underwriting Plan
A (federally-regulated mortgage insurer) FRMI that is engaged in residential mortgage insurance underwriting should have a comprehensive Residential Mortgage Insurance Underwriting Plan (RMIUP). The FRMI’s insurance underwriting practices and procedures should comply with its established RMIUP.

Principle 2: Establishing Standards for the Initial Assessment and Qualification of Mortgage Lenders
A FRMI should establish sound standards for the purpose of initially assessing and qualifying mortgage lenders for mortgage insurance coverage.

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  • Paolo Di Petta | dipettamortgage.com on 2014-04-14 4:38:55 PM

    So basically, people need to start doing their jobs.

    Sounds a lot like common sense. The real question is why this wasn't happening any sooner.

  • Daniel McKay on 2014-04-14 5:47:26 PM

    So when will these tougher guidelines actually be applied to the big 5 banks? They are still getting deals done in complete ignorance of harsher guidelines and OSFI/Department of Finance and the insurers continue to turn a blind eye to it.

  • Walid Hammami on 2014-04-14 6:55:41 PM

    No real relevant info here, it sounds like they want to make common sense legal now. I thought it was!!!!!

    They are not talking about downpmt or debt ratios. As long as client have good credit with ne delinquencies they should be ok and it's better that way.

  • Dale on 2014-07-13 7:14:54 PM

    OSFI seems to be out to lunch. The guidelines contradict a recent speech by the Ministry of Finance Joe Oliver at a Bloomberg Conference in London that there is / never was a housing bubble in Canada

    I understand that OSFI has a dedicated group in the second layer of Supervision (called an support group) of 8 staff reviewing housing feeds from bank analyst. I have seen their analysis and it is out of scope and context

  • Paul Therien - CENTUM on 2014-07-14 4:58:11 PM

    These new rules are certainly less of a change than could have happened. The guidelines do not actually restrict mortgage lending, they set out guidelines for mortgage insurers to follow – all of it is based on common sense. Essentially… the insurer must understand the underwriting and risk assessment policies and procedures of the banks and establish minimum guidelines prior to signing that lender up with a Master Policy Agreement. I would have thought that this would have been the process followed before, and it likely was – it just was not legislated as being required.

    With the penchant for lenders to bulk insure their entire portfolio, this is prudent risk management and it does not really further restrict lending practices. It just give the insurers more authority to ensure that the lenders are effectively adjudicating the risk prior to granting the mortgage. This only applies to insured lending however, and should a lender choose not to bulk insure their entire portfolio, they would not be subject to these guidelines. Prior to 2008 the practice of bulk insurance on conventional lending was fairly limited, since the collapse of the US market, Canadian lenders have insured to protect their investments. Good for the banks, significantly larger risk for the insurer and the tax payer considering that ALL mortgage insurance companies receive a government guarantee (CMHC 100%, Genworth and Canada Guarantee 90%).

    With nearly a trillion dollars in outstanding mortgage debt and the vast majority of it insured in some way or another – That is a LOT of money that the tax payer has provided a guarantee on. If there was a major default and the lenders all made claims for even 20% of that… imagine what a 200 billion dollar hit would do to the financial stability of our government, and to the pockets of the tax payer… the money has to come from somewhere!

  • Harry L. on 2015-01-02 5:44:55 PM

    You're kidding.
    OSFI is a highly incompetent organization. The Property and Casualty group is often at odds with the housing group.
    It took them three years to come up with this nonsense.

    I have heard from OSFI employees that internally the organization is a mess. There are 700 staff. Most of the work that gets done is plagiarized from other regulators. There quarterly reports are a summary of basic data and analyst reports.
    The good people have left the organization and have been replaced by sub par staff. Others have been placed into position and lack the qualifications to do the job. Take a look at the ORSA guidance. They actually tell you to get consultants!!

  • Jane Richardson on 2015-03-23 7:18:09 PM

    OMG OSFI is a very incompentent organization.

    Guideline B-21 came with little change. As I understand it, OSFI did not have the technical resources internally and relied extensively on industry for assistance. Very sad considering they have over 700 employees now.

    Unfortunately, OSFI was unable to plagarize from their peers on this one.

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