OSFI launches public consultation on guideline B-20: Residential Mortgage Underwriting Practices and Procedures

Today, the Office of the Superintendent of Financial Institutions (OSFI) launched a public consultation of Guideline B-20 on Residential Mortgage Underwriting Practices and Procedures. Since the introduction of Guideline B-20 in 2012, conditions in the Canadian residential mortgage market have shifted significantly. Mortgage lending risks, particularly related to debt serviceability, have increased considerably since the onset of the pandemic. These heightened near-term risks underscore the need to consider complementary measures to mitigate them.

In OSFI’s Annual Risk Outlook 2022-23, it committed to initiate consultations on Guideline B-20 in the first calendar quarter of 2023. In this initial consultation, OSFI is interested in stakeholder feedback on a set of proposed complementary debt serviceability measures designed to better control prudential risks arising from high consumer indebtedness. The proposed debt serviceability measures include loan-to-income (LTI) and debt-to-income (DTI) restrictions, debt service coverage restrictions, and interest rate affordability stress tests.

OSFI welcomes stakeholder views on these debt serviceability measures, how they might be implemented, and other measures that could address prudential risks arising from high household indebtedness. OSFI may choose to pursue one or more of these measures or others that meet OSFI’s prudential policy objectives. Stakeholders who wish to make a submission should do so before the consultation closing date of April 14, 2023. Feedback from this consultation will inform proposed revisions to Guideline B-20, which will be issued for public consultation in the form of a draft guideline at a future date.

Sound mortgage underwriting remains the cornerstone of a healthy residential mortgage lending industry. We look forward to stakeholder views on how different debt serviceability measures can support this important policy objective.

- Tolga Yalkin, Assistant Superintendent – Policy, Innovation and Stakeholder Affairs