Agency says that the time is ripe for discussions on B-20
In response to multiple lending risks that have only intensified due to the pandemic, the Office of the Superintendent of Financial Institutions has announced that it will be launching public consultations on existing and newly proposed mortgage lending rules.
The agency said that the time is ripe for such discussions as Guideline B-20 has been in force since 2012, and conditions in the Canadian residential mortgage market have evolved significantly over the succeeding decade.
“Mortgage lending risks, particularly related to debt serviceability, have increased considerably since the onset of the pandemic,” OSFI said. “These heightened near-term risks underscore the need to consider complementary measures to mitigate them.”
The consultations on B-20, which are slated to begin in Q1 2023, are expected to focus on measures that will help borrowers manage debt and other related prudential risks.
“The proposed debt serviceability measures include loan-to-income (LTI) and debt-to-income (DTI) restrictions, debt service coverage restrictions, and interest rate affordability stress tests,” the agency said. “OSFI welcomes stakeholder views on these debt serviceability measures, how they might be implemented, and other measures that could address prudential risks arising from high household indebtedness.”
OSFI said that members of the public have until April 14 to comment on these proposals, with feedback from the consultation period to inform possible B-20 revisions. The agency added that it might utilize one or more of these measures, or other approaches that meet its policy objectives.
“Sound mortgage underwriting remains the cornerstone of a healthy residential mortgage lending industry,” said Tolga Yalkin, assistant superintendent for policy, innovation, and stakeholder affairs at OSFI. “We look forward to stakeholder views on how different debt serviceability measures can support this important policy objective.”
