OSFI releases B-21 draft

OSFI releases B-21 draft

OSFI releases B-21 draft

Principle 3: Mortgage Insurance Criteria and Insurance Coverage Requirements for Lenders
A FRMI should establish prudent underwriting criteria, which specify the characteristics and parameters of insurable mortgage loans for lenders. In addition, a FRMI should promote sound mortgage underwriting and loan management practices by mortgage lenders by establishing prudent requirements in its insurance policies (e.g., Master Policy Agreements) for the purpose of controlling risk.

Principle 4: FRMI’s Periodic Assessments of Lenders’ Underwriting Practices
A FRMI should exercise reasonable due diligence regarding lenders’ underwriting practices, on a periodic basis, in order to assess consistency with the FRMI’s criteria for insuring mortgage loans and compliance with the requirements contained in the FRMI’s policy coverage documents. A FRMI should establish clear policies for identifying, escalating, and as needed, addressing weak or non-compliant lender practices.

Principle 5: Assessment and Validation of Underwriting Systems, Models, and Underwriters’ Processes
A FRMI that is engaged in residential mortgage insurance underwriting should periodically assess and validate its insurance underwriting systems, models, and underwriters’ processes, to ensure sound insurance underwriting outcomes and consistency with the FRMI’s RMIUP.

Principle 6: Effective Portfolio Risk Management and other Risk Mitigation
FRMIs should have effective portfolio risk management practices, including the use of stress testing and, as appropriate, the use of reinsurance. Given the objectives and risk appetite established in the RMIUP, a FRMI should consider the outcome of stress-testing and risk mitigation in appropriately setting or adjusting its mortgage insurance underwriting criteria.

Click here to access the draft in its entirety.

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Brokers apprehensive about potential B-21

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7 Comments
  • Paolo Di Petta | dipettamortgage.com 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.
    Post a reply
  • Daniel McKay 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.
    Post a reply
  • Walid Hammami 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.
    Post a reply