This is the final post in our four-part year-in-review series for the Canadian mortgage industry. Read Part 1, Part 2, and Part 3.
Canadian mortgage rules can greatly affect the housing market — both for consumers and for professionals. While 2019 did not see quite the same level of regulatory changes as 2018 (when updated B-20 guidelines came into effect) there were nonetheless some influential regulations that will shape the market of 2020.
We have compiled several of the most transformative regulatory changes of 2019. Read on for the review.
- FSCO and DICO to FSRA
Effective June 8, 2019, the Financial Services Regulatory Authority of Ontario (FSRA) took over regulatory duties from both the Financial Services Commission of Ontario (FSCO) and the Deposit Insurance Corporation of Ontario (DICO).
FSRA is a self-funded Crown corporation with a Board of Directors consisting of members appointed by the Lieutenant Governor in Council on the recommendation of the Minister of Finance.
In 2019, FSRA began several changes, including seeking consultation on its draft statement of priorities and budget.
2020 will be the first full year for the FSRA.
- MBLAA Review
While not an official regulatory change, the Ontario Ministry of Finance reviewed the Mortgage Brokerages, Lenders, and Administrators Act, 2006 (MBLAA), providing recommendations to protect and modernize Ontario’s mortgage industry.
Recommendations included a registration regime for private/unregulated lenders that meet certain monetary or activity thresholds, reducing red tape for commercial mortgage transactions, and establishing new classes of licensing.
Some of these recommendations could be coming into effect in 2020.
Read more about the recommendations: https://www.purview.ca/is-a-registry-for-private-mortgage-lenders-in-the-works/
- Mortgage Stress Test Review
While the updated B-20 regulations were introduced in January of 2018, the mortgage stress test has continued to remain a topic of interest. In 2019, rumours circulated about whether the stress test would expand to include private lenders.
Many in the mortgage community expressed a desire for changes to the stress test.
In December of 2019, Prime Minister Justin Trudeau directed Finance Minister Bill Morneau to “review and consider recommendations from financial agencies related to making the borrower stress test more dynamic.”
As of February 18, 2020, the stress test for insured mortgages had been altered, effective April 6, 2020, and the stress test for uninsured mortgages was under consideration.
- Syndicated Mortgage Rules
In 2018, FSCO made amendments to the regulation dealing with non-qualified syndicated mortgages.
In 2019, FSRA issued an update to this regulation, including a new Fee Rule, which requires that within five days after providing the prescribed disclosure to the first potential or actual investor in a non-qualified syndicated mortgage, Mortgage Brokerages have to:
- File with FSRA a completed and signed disclosure Form 3.2 – Disclosure Statement for Investor/Lender in a Non-qualified Syndicated Mortgage; and
- Pay a $200 fee.
FSRA also introduced an updated burden reduction for syndicated mortgage investments and an updated supervision approach for high-risk syndicated investments.
- First-Time Home Buyer Incentive
While not necessarily a regulatory change, the First Time Home Buyer Incentive was a development nonetheless, promising to make real estate more affordable for those entering the market.
The federal program launched on September 2, 2019. It offers eligible buyers up to 10% of a home’s purchase price to put toward their down payment, lowering mortgage carrying costs.
Read more about the program: https://www2.geowarehouse.ca/first-time-home-buyer-incentive-focus/
- Domestic Stability Buffer Changes
The Office of the Superintendent of Financial Institutions (OSFI) increased the domestic stability buffer twice in 2019, first setting it at 2.00% in June 2019 (effective October 31, 2019) and then increasing it to 2.25% in December 2019 (effective April 30, 2020).
According to OSFI, “this reflects OSFI’s view that key vulnerabilities to Canada’s Domestic Systemically Important Banks (D-SIBs) remain elevated, and in some cases show signs of increasing.”
OSFI said the key vulnerabilities include Canadian household indebtedness, asset imbalances, and institutional indebtedness. In addition, global vulnerabilities related to ongoing trade tensions and rising leverage are growing, which could increase the chance of a spillover of external risks into the Canadian financial system.
Read more about the increase: https://www.osfi-bsif.gc.ca/Eng/osfi-bsif/med/Pages/dsb20191210-nr.aspx
What mortgage regulation changes affected you the most? What do you think we will see in 2020? Share your opinion with us on social media. Purview is on Facebook, Twitter, and LinkedIn.
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