What's a B-21? Will it make mortgages harder to get?

OSFI (Office for Superintendent of Financial Institutions) has finally came out with its new B-21 rules for mortgages. They are going to be implemented for the companies who insure mortgages that have less than 20% down payments. Companies like CMHC, Genworth & Canada Guaranty. 
In October of 2012 OSFI implemented the B-20 lending rules to federally legislated lenders to follow which definitely tightened up mortgage rules and slowed the market. 

Most lenders and insurers have already implemented the guidelines from B-20 & many from B-21 as well so the new rules won't affect the mortgage market that much or people applying for a new mortgage going forward.

Here’s what’s new:

  • Cash-back down payments will soon be extinct on insured mortgages.
    • Credit unions are the only ones left doing this form of 100% financing (ever since OSFI’s B-20 prohibited it at federally regulated lenders).
    • Borrowed down payments are still allowed, however.
  • B-21 puts heightened focus on the consistency of underwriting decisions.
    • This might lead to fewer underwriting exceptions with insured mortgages.
  • Lenders’ underwriting will be increasingly scrutinized
    • Sample audits of individual files could become more frequent.
    • OSFI says lenders with “proportionately higher levels of delinquencies and claims…” should be more scrutinized.
    • Repercussions may stiffen for lenders who cut corners when underwriting. B-21 explicitly requires insurers to give them less latitude (e.g., fewer exceptions, deal submission limits, etc.). Despite that already being standard practice, B-21 creates even greater incentive for lenders to cross every “t” and dot every “i” on insured mortgage applications (and when reviewing borrower documentation).
  • Data disclosure will increase
    • Thankfully, insurers will now be required to publicly disclose more risk-related statistics every quarter (e.g., the percentage of insured borrowers putting down only 5% at the time of origination.)

In short, B-21 provides incrementally more confidence in the stability of Canada’s housing finance system. From a pure lending standpoint, it could have been a lot more restrictive


Tony Marchigiano1-155 Water Street
Mortgage BrokerVancouver, BC


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