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Wednesday, 20 June 2012

Officials expected to finalize lending guidelines by end of June, early July

The draft recommendations recently put forth by The Office of the Superintendent of Financial Institutions (OSFI) have been the subject of much recent discussion. The recommendations, released March 19th are to be finalized by late June or early July, and would significantly change the mortgage underwriting process.

Some of the proposed changes include:
  • Reducing the maximum loan-to-value ratio for Home Equity Lines of Credit from 80% to 65%
  • Lines of credit to be amortized, or amortized after a certain period of time, eliminating borrowers making interest-only payments indefinitely
  • Stricter income requirements from the self employed
  • The possibility to re-qualify upon renewal
  • Disallowing the funds from a cash-back mortgage to be used as a down payment
After announcing the proposed changes and discussing with industry professionals, OSFI has chosen to relent on certain changes, most notably withdrawing the requirement to re-qualify upon mortgage renewal.

It is reported that these changes are an attempt to moderate consumer debt growth without raising mortgage rates, however, implementing all of the proposed regulations simultaneously would likely have a negative impact on potential borrowers, making obtaining financing more difficult. The changes are also fuelling an increase in the number of borrowers seeking advice from professionals, such as Mortgage Brokers, who have access to multiple lenders and mortgage solutions for individual financial situations.

For more information, contact a qualified Mortgage Broker.

Click here for the full article from the Vancouver Sun.

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