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

What You Need to Know About Mortgages and Parental Leave

By Katherine Martin • August 19, 2026
If the title of this article caught your attention, chances are your family is growing. Congratulations. If you’re thinking now is the right time to move into a home that better fits your growing family—but you’re unsure how parental leave affects your ability to qualify for a mortgage—you’re in the right place. Here’s the good news. Qualifying for a mortgage while on parental leave is possible when it’s done correctly. When you work with an independent mortgage professional, lenders can often qualify you based on your return-to-work income , as long as you can provide documentation confirming you have guaranteed employment waiting for you. A word of caution If you walk into a bank branch and disclose that you’re currently on parental leave, there’s a chance the bank will only allow you to qualify using your parental leave income. That can significantly reduce your borrowing power. Parental leave income is typically limited to 55% of your previous earnings, up to a weekly maximum. Qualifying on that amount alone can restrict your options and impact the type of home you can purchase. Why lender choice matters One of the biggest advantages of working with an independent mortgage professional is choice . You’re not limited to one lender’s rules or products. Some lenders will allow you to qualify using 100% of your confirmed return-to-work income , which can make a meaningful difference in your approval amount and overall options. What you’ll need to qualify Most lenders will require an employment letter that includes: Employer name (preferably on company letterhead) Your job title Original start date (to confirm probation has been completed) Confirmed return-to-work date Guaranteed salary upon return Lenders want reassurance that your income will resume once parental leave ends. You may also be asked to provide income history from the past couple of years, which is standard for most mortgage applications. One important note Whether or not you actually return to work after parental leave is entirely your decision. From a mortgage perspective, qualification is based on having a confirmed position available to you at the time of approval. If you have questions about qualifying for a mortgage while on parental leave—or anything mortgage-related—please connect anytime. I’d be happy to walk you through your options and help you plan with confidence.

Need Funds Between Buying and Selling? Here’s How Deposit Loans & Bridge Financing Help

By Katherine Martin • August 12, 2026
You’ve outgrown your current home. It no longer fits your life, so moving makes sense. And you’re not interested in juggling two properties. Selling first and buying something new feels like the right move. Ideally, you want possession of the new home before leaving the old one. That overlap makes moving easier, reduces stress, and gives you time to paint, renovate, or settle in before the boxes arrive. But there’s a common challenge. What if the down payment for your next home is tied up in the equity of the one you’re selling? That’s where bridge financing comes in. How bridge financing works Bridge financing temporarily unlocks equity from your current home once it has a firm sale . It bridges the gap between selling your existing property and purchasing your next one, allowing you to use that equity toward your down payment. What about competitive markets? In a hot market, a strong offer often means a larger deposit . If you don’t have that cash sitting in your account, but you do have equity, a deposit loan can help you compete with confidence. The non-negotiable requirement To qualify for bridge financing or a deposit loan, your current home must have a firm, unconditional sale . No firm sale = no bridge or deposit loan. Lenders need certainty to calculate available equity and manage risk. Bottom line A firm sale is the key that unlocks bridge financing and deposit loans. If you’re planning a move and want to understand how these options could work for you, let’s talk. I’m always happy to walk you through your options and help you plan your next step with confidence.
© 2026 

Katherine Martin. All Rights Reserved.