Canada’s largest mortgage lenders are expected to follow a move by CIBC to tighten lending to foreign homebuyers.
CIBC has ended its Foreign Income Program, reports the Globe and Mail, and will be introducing tougher requirements for foreign clients. This is in reaction to tighter regulation of financial institutions’ due diligence procedures.
Key to the requirements that CIBC will be looking for from foreign mortgage applicants, is proof that foreign income is claimed in Canada and declared to the CRA. It will also be checking credit bureaus for verification of the applicant’s status.
Reza Sabour, mortgage broker and director of Canadian Mortgage Brokers Association of BC said that anything that cracks down on the imbalance between rules for residents and those for non-residents is a good thing.
He told the Globe and Mail that he and his clients are frustrated when they don’t qualify for a mortgage under the tighter underwriting rules but foreign investors are able to move into the market.
While CIBC says that it has always verified foreign income, and that the changes are only to reflect the more stringent requirements of the regulators, some are already talking about the impact that lenders’ tighter rules may have on the Vancouver housing market; especially amid government rules that are already in place or set to be introduced.
Real estate lawyer Wes McMillan told the Globe and Mail: “They could go to a private lender or put their money in another market.”