More Oversight for Mortgages in Canada?

Katherine Martin • July 7, 2016

Although no firm changes have been announced regarding mortgage regulations, it looks like this might be the beginning of something. The following is correspondence shared by Mortgage Professionals Canada by email to the mortgage industry, it has been shared here for your benefit. 

The Office of the Superintendent of Financial Institutions (OSFI) issued a letter this morning to all federally regulated financial institutions (FRFI). The letter expresses concern about the rising levels of household debt in Canada and serves to remind FRFIs of their obligations under Guidelines B-20 and B-21 to assess and underwrite mortgage loans and mortgage insurance in a prudent manner. 

The letter states: 

Given the current economic environment in Canada, with record levels of household indebtedness and growing risks and vulnerabilities in some housing markets, OSFI’s supervisory scrutiny in the area of mortgage underwriting will continue. Moving forward, OSFI will place an even greater emphasis on confirming that financial institutions conduct prudent mortgage underwriting, and that their internal controls and risk management practices are sound and take into account market developments.

Highlights

OSFI has identified the following five specific areas that it expects lenders to consider diligently during their underwriting process:

Income Verification
Due diligence processes for lenders must be in place.  Inadequate income verification can adversely affect the assessment of credit risk, anti-money laundering and counter terrorist financing (AML/CTF) compliance, capital requirements and mortgage insurability. More stringent due diligence for incomes outside of Canada should be applied, and there should not be any reliance on collateral values as a replacement for income validation.

Non-Conforming Loans
OSFI warns that the 65% loan-to-value threshold should not be considered a demarcation point below which, sound underwriting practices and borrower due diligence do not apply; a borrower’s character and capacity to service the loan should always take precedence over the value of collateral when underwriting mortgage loans or insurance.

Debt Service Ratios
Incomes should be conservatively calculated and appropriately questioned. In particular, rental incomes from the underlying property should be critically examined. OSFI also suggests that relying on current posted five-year interest rates to test a borrower’s ability to service its obligations does not represent an adequate stress test in a rising interest rate environment.

Appraisals and LTV Calculation
OSFI suggests that rapid house price increases create more uncertainty about the reliability of property appraisals. Institutions should use appraisal values and approaches that provide for a conservative LTV calculation, and not assume that housing prices will remain stable or continue to rise.

Risk Appetite and Portfolio Management
OSFI’s supervisory work indicates that the risk profile of newer mortgage loans is generally on the rise. OSFI reminds mortgage lenders and mortgage insurers to revisit their Residential Mortgage Underwriting Policy and Residential Mortgage Insurance Underwriting Plan regularly to ensure a stringent alignment between their stated risk appetite and their actual mortgage/mortgage insurance underwriting and risk management practices.

OSFI’s letter further states that they are working on various capital policy initiatives to strengthen the measurement of capital held by the major banks and mortgage insurers to ensure their ability to weather losses from residential mortgage defaults. New measures are targeted for implementation in November 2016 and January 2017 respectively.  Risk Sensitive Floors, Capital Requirements for Mortgage Insurers, and BCBS Revisions to the Standardized Approach for Credit Risk are each included in these reviews. 

We are pleased that OSFI is committed to consultations with our industry prior to the implementation of these new rules. Mortgage Professionals Canada will be involved in these discussions and we will keep you informed of any developments.

 

This article was originally published by Mortgage Professionals Canada and was included in an email correspondence. 

 

Katherine Martin


Origin Mortgages

Phone: 1-604-454-0843
Email: kmartin@planmymortgage.ca
Fax: 1-604-454-0842


RECENT POSTS

How to Finance a Spousal Buyout After Separation or Divorce

By Katherine Martin • September 30, 2026
Mortgage Options During Divorce or Separation: What You Should Know If you’re going through—or considering—a divorce or separation, you may not realize that there are mortgage solutions specifically designed to help one party keep the home . For many people, the family home is their largest asset and where most of their equity is tied up. In situations like this, a spousal buyout program can allow one person to refinance the property and buy out the other party’s share—often up to 95% of the home’s value . This option can work whether you want to keep the home or your former partner does. What Is the Spousal Buyout Program? The spousal buyout program is a refinancing option that allows one owner to purchase the other owner’s share of the property as part of a separation or divorce settlement. In some cases, it can also be used to pay off jointly held debts, as outlined in a legal agreement. Below are some of the most common questions about how the program works. Is a finalized separation agreement required? Yes. Lenders require a signed and finalized separation agreement that clearly outlines how assets and debts are to be divided. This document is essential for approval. Can the funds be used for renovations or personal debts? No. Funds from a spousal buyout can only be used to: Buy out the other owner’s share of equity Pay off joint debts specifically listed in the separation agreement They cannot be used for renovations, personal loans, or unrelated expenses. How much equity can be accessed? The maximum amount available is the amount required to: Buy out the other party’s agreed-upon share of equity Pay off any joint debts listed in the agreement This amount cannot exceed 95% loan-to-value . What is the maximum loan-to-value allowed? The maximum loan-to-value is the lesser of : 95%, or The remaining mortgage balance plus the required buyout and joint debt payout The property must be the primary owner-occupied residence . Do all parties need to be on title? Yes. All individuals involved in the buyout must currently be registered on title. Your solicitor will confirm this through a title search. Does this only apply to married or common-law couples? No. While commonly used for married or common-law couples, the program may also apply to siblings or friends who jointly own a property and need one party to exit the mortgage. These cases are typically reviewed on an exception basis and require insurer approval. If no separation agreement exists, the purchase contract must clearly outline the buyout terms. Is a full appraisal required? Yes. A physical, on-site appraisal is required to confirm the property’s value before the mortgage can be finalized. Final Thoughts This overview covers some of the most common questions about mortgage options during separation or divorce, but every situation is different. Working with an independent mortgage professional gives you access to multiple lenders, specialized programs, and unbiased advice—so you can clearly understand your options and choose what’s best for your future. If you’re navigating a separation and need guidance around keeping or selling the home, feel free to connect anytime. All conversations are handled with discretion and confidentiality, and I’d be happy to walk you through your options.

How to Legally Assign a Construction Mortgage

By Katherine Martin • September 23, 2026
Why More Mortgage Options Matter—Especially for Assignment Purchases One of the biggest advantages of working with an independent mortgage professional is access to choice. Instead of being limited to one lender and one set of products, mortgage brokers work with multiple lenders—each with different guidelines, risk tolerances, and mortgage solutions. That flexibility becomes especially valuable when your situation doesn’t fit neatly into a “standard” box. A great example of this is purchasing new construction through an assignment contract . Why Assignment Purchases Can Be Challenging Assignment purchases are often viewed as higher risk by traditional lenders. Rather than declining these deals outright, many lenders quietly make them difficult by adding layers of conditions, restrictions, or uncertainty. This can lead to delays, frustration, or financing falling apart late in the process. The Good News There are lenders—available exclusively through the broker channel —that have clear, favourable policies for assignment purchases. With the right lender and proper planning, these transactions are absolutely doable. Typical Financing Requirements for Assignment Purchases While every situation is unique, many lenders that allow assignment financing look for the following: Standard purchase qualification, including income verification, credit, and down payment Assignments accepted at either the original purchase price or current market value Minimum 620 credit score , with no prior bankruptcies or consumer proposals The full down payment must come from the purchaser —seller incentives cannot be used Required Documentation To secure financing, lenders typically require: The original purchase agreement signed by all parties The MLS listing (if applicable) The assignment agreement signed by the builder, original purchaser, and new buyer Any side agreements outlining changes to the purchase price A full appraisal to confirm value This list isn’t exhaustive, but it highlights that while assignment purchases require more coordination, they are very achievable with the right lender and guidance. Final Thoughts Assignment contracts can open doors to great opportunities—but only if your financing supports the transaction. This is where access to multiple lenders and specialized policies makes a real difference. If you’re considering purchasing new construction through an assignment, or if you’d like to explore more traditional purchase options, feel free to connect anytime. I’d be happy to walk you through the mortgage products available and help you choose an option that doesn’t limit your financing possibilities.
© 2026 

Katherine Martin. All Rights Reserved.