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OSFI regulatory change to variable-rate mortgages

No New Rules Coming. Well, Maybe One

Finance Minister Bill Morneau is suggesting that no new mortgage rules are on the drawing board.

After meeting with economists on Friday, he told reporters:

“We, as you know, were quite careful in considering the…situation around the housing markets across the country as we considered measures to ensure that, you know, the people’s bigPhoto Source: Wikipediagest investment was protected. We put in place some measures that we thought would better protect people by ensuring that the mortgages that they took on were appropriate for their situation.”

“We will remain focused on this area to ensure that those measures are having the desired impact. I can tell you that…we continue to focus on this area. The measures are, as we’ve seen, having some impact and we’ll continue to assure that Canadians are protected in the investment, which for most of them, is their biggest investment…their housing.”

When asked specifically if he had plans to restrict mortgages further, Morneau said:

“We continue to, to monitor the housing market and to make sure that the risks are appropriate for the market. We don’t have any measures under consideration at this stage, but we will continue to monitor to ensure that the housing market is stable and that people are protected in their important investment.”

Of course, one measure that’s still fully under consideration is regulators’ lender loss sharing proposal. On that, Morneau added:

“We, as you know, have been doing consultations…thinking about how we…share the risk in the housing sector. Those discussions have proceeded. We’ve had a significant number of submissions and…we’re considering those submissions now.”

“We’ve not yet come to any conclusions but we’ll be looking forward to following through on our considerations in having some news in the not-so-distant future.”

The likely translation: we’ll see Finance’s reaction to industry feedback on loss sharing this spring or summer.

Certain industry executives I’ve spoken with feel this consultation is merely the Department of Finance going through the motions. Many believe the department already knows how it wants to push through loss sharing.

But it’s only fair to give policy-makers the benefit of the doubt. We’ll wait and see how they address concerns about how loss sharing would further jeopardize Canada’s mortgage competition.

Finance is accepting comments on loss sharing until the end of February. If interested, you can send opinions here:

“…Our goal will be to work to ensure that Canadians make the investments that make most sense for their families and protect them from risk,” Morneau went on to say. “That’s what we intend to continue to focus on, managing risk on behalf of Canadians.”

Indeed, the fundamental purpose of government is to protect its citizens. Of course, how higher rates and degraded refinance options “protect” qualified borrowers is a whole different question.