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OSFI proposes capital requirement changes for lenders and mortgage insurers to address mortgage risk in Canada

Author: 
Steve Huebl
Publication date:
July 11, 2023
Article Summary: 

The Office of the Superintendent of Financial Institutions (OSFI) in Canada has proposed changes to the capital requirements for lenders and mortgage insurers to address growing risks associated with mortgages in negative amortization. The changes aim to ensure that banks and mortgage insurers have adequate capital buffers to absorb risks when mortgages fall into negative amortization. Lenders will be required to hold more capital for mortgages with a loan-to-value ratio above 65%, while mortgage insurers will see an increase in the maximum loan-to-value ratio in their capital formula from 100% to 105%. The proposed amendments are part of OSFI's efforts to enhance resilience in Canada's mortgage finance system.

Keywords: 

OSFI, capital requirement changes, lenders, mortgage insurers, Canada, negative amortization, Capital Adequacy Requirements (CAR), Mortgage Insurer Capital Adequacy Test (MICAT), capital buffers, risk management, loan-to-value ratio.

Source Citation: 
Steve Huebl
OSFI proposes capital requirement changes for lenders and mortgage insurers to address mortgage risk in Canada
July 11, 2023
https://www.canadianmortgagetrends.com/2023/07/osfi-unveils-proposed-new-capital-requirements-for-mortgage-lenders-and-insurers-in-response-to-negative-amortizations/
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