Banks and Toronto mortgage brokers can all breathe a sigh of relief. Those super stringent guidelines that the Office of the Superintendent of Financial Institutions (OSFI) released in April have been eased considerably. These guidelines called for many things, and a few seemed like an overreaction to a housing market that hadn’t yet collapsed. Thankfully, the OSFI has seen this (or at least listened to the mortgage professionals in the country) and now have much easier guidelines for banks and lenders. The guidelines are still not official; but the OSFI presented lenders with a new list of proposed guidelines on Wednesday – and it left them all smiling.
The first change not to take place will be the re-qualification of homeowners when it’s time for them to renew their mortgage. This proposed change was one that mortgage brokers and lenders had the most problem with, as it was the one that would most likely cause people to lose their homes entirely. Currently, the only element that’s looked at upon renewal time is the payment history on the mortgage – not income or credit history. If the original version of the guidelines were to go through, people would essentially be back at square one, having to apply all over again.
Terry Campbell, president of the Canadian Bankers Association said when arguing this proposed change, “Less than half of 1 per cent of all mortgage holders with the country’s largest banks have gone more than three months without making a payment. This number has been stable for more than two decades, in times of high and low unemployment, high and low interest rates, and a strong or weak Canadian dollar.”
Another big change in OSFI’s new proposed rules is the one that focused on HELOCs. Originally, OSFI wanted to put an amortization period on these loans – something they don’t have now. This would turn HELOCs from revolving loans into regular loans that had to be paid back within a certain period of time. Now it looks like the OSFI may leave those alone as well, when it comes to their repayment periods and amortization lengths, anyway.
“If they had required an amortization rule with HELOCs, then it would have made things much more difficult from a tax perspective,” said Robert McLister. “We’re still waiting to see if people can get a mortgage portion in addition to that HELOC, which is possible now.”
In addition to these changes, the OSFI is also planning on changing the way lenders currently make their property assessments. While it’s largely done now with automated software, OSFI is planning on asking them to include many different ways – including a human approach, which could see less error.