The Office of the Superintendent for Financial Institutions (OSFI) proposed tighter measures for Guideline B-20: Residential Mortgage Underwriting Practices and Procedures. The spike in the real estate industry during the pandemic led many buyers to use floating-rate debt purchases. The current economic conditions have made it challenging for borrowers to maintain loan payments. Below are the following solutions suggested by the OSFI to reduce the risks of increasing volumes of highly indebted borrowers.
Loan-to-income (LTI) and Debt-to-income (DTI) restrictions
Restrict the certain volume of loans with lenders that exceed LTI of 450%
Interest Affordability Stress Test
Additional measures to current the Minimum Qualifying Rate (‘MQR’ or ‘stress test’)
Taking non-mortgage debts into account
Debt Service Coverage Restrictions
Restrict the volume of loans with high debt service ratios
Graduated or tiered Gross Debt Service (GDS) / Total Debt Service (TDS) thresholds for uninsured mortgages
While these restrictions have not been set in place, the housing market and mortgage industry may be faced with further pressure in the upcoming months. During these uncertain times, it is helpful for current and potential buyers to speak with a knowledgeable broker for more advice.
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