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Friday, 18 July 2014

B-21 is about self employed mortgages harder to insure

In short, mortgage insurance protects lenders against losses caused by a borrower’s default on a mortgage loan. Therefore, a mortgage insurer’s security is dependent on their underwriting policies and risk management.
OSFI’s release of the draft guidelines for B-21 outlines their expectations for prudent residential mortgage insurance underwriting. It targets all federally regulated mortgage insurers (FRMI) and sets criteria for insurers’ oversight of approved lenders.
B-20 outlined expectations for all federally regulated lenders; and B-21 (once finalized) will do the same for mortgage insurers. "The industry's adherence to these principles will contribute to the continued stability of the market," said Superintendent Julie Dickson in OSFI's press release.
The guidelines outline 6 principles for sound mortgage insurance underwriting including: implementing an underwriting plan, assessing mortgage lenders and their underwriting policies, and risk mitigation.

What (we think) you can expect:
•             With lenders’ underwriting becoming increasingly scrutinized, expect to see more rigorous underwriting practices for insured mortgage applications.
•             Potentially fewer underwriting exceptions. Particularly for borrowers who may not qualify based on insurer’s risk parameters.
For example, self-employed borrowers who may not be able to provide documentation proving their income consistency. Previously, that may have been overlooked given the borrower had a really high credit score or made a larger down payment. That may not be the case any longer. It will all depend how vigorously the insurers implement their policy. 

MortgagePRO is dedicated to provide mortgages for self employed and new to Canada with it's unique ability to provide a combination of institutional and private funds. Register for a FREE consultation today, to discuss your needs and create a plan to provide solution, where others fail.