Is the mortgage approval process different now than it was ‘back in the day’? Yes, definitely yes. Here is a list of some of the key regulatory changes that have occurred in the Canadian mortgage industry since 2006.
Introduction of the first set of guidelines for federally regulated financial institutions, known as the “Guideline B-20,” by the Office of the Superintendent of Financial Institutions (OSFI). These guidelines focused on sound mortgage underwriting practices and risk management.
Implementation of the “New Housing Rules” by the Canadian government in response to the global financial crisis. These rules included stricter lending criteria for mortgages, such as reducing the maximum amortization period from 40 years to 35 years and requiring a minimum down payment of 5% for insured mortgages.
Further tightening of the mortgage rules by the Canadian government, including reducing the maximum amortization period for insured mortgages from 35 years to 30 years and reducing the maximum amount Canadians could borrow against their homes from 90% to 85% of the home’s value.
Introduction of “Guideline B-21” by OSFI, which provided additional guidance to financial institutions on residential mortgage insurance underwriting practices, risk management, and disclosure.
Implementation of the “Qualified Mortgage” (QM) rule, known as the “B-20 Rule,” by OSFI. This rule required federally regulated financial institutions to use a minimum qualifying rate (the Bank of Canada’s five-year fixed mortgage rate or the contractual mortgage rate plus 2%) for all insured and uninsured mortgages with a term of less than five years.
Introduction of new mortgage rules by the Canadian government, including the implementation of a “stress test” for all insured and uninsured mortgages with terms of five years or less. Borrowers were required to qualify at the Bank of Canada’s five-year fixed mortgage rate or the contractual mortgage rate plus 2%, whichever is higher.
Expansion of the “stress test” to include all uninsured mortgages, regardless of term, by OSFI. Borrowers were required to qualify at the greater of the contractual mortgage rate plus 2% or the Bank of Canada’s five-year fixed mortgage rate.
Introduction of additional mortgage rules by the Canadian government, including a new benchmark rate called the “benchmark rate plus 200 basis points,” which borrowers had to qualify for in order to obtain an uninsured mortgage.
Relaxation of the “stress test” by the Canadian government, as the benchmark rate used to qualify uninsured mortgages was changed from the “benchmark rate plus 200 basis points” to the higher of the contractual mortgage rate plus 2% or the Bank of Canada’s five-year fixed mortgage rate.
Introduction of temporary regulatory changes by OSFI in response to the COVID-19 pandemic, including allowing financial institutions to offer payment deferrals on mortgages without deeming them in arrears, and easing some of the capital requirements for mortgage insurers.
Please note that this list is not exhaustive and may not include all the mortgage regulatory changes that have occurred in Canada over the period.
As always, we recommend consulting with a qualified professional or referring to official sources for up-to-date and accurate information on Canadian mortgage regulations.