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
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