Canada's bank regulator, the Office of the Superintendent of Financial Institutions (OSFI), has reversed its proposal to require borrowers to requalify for their mortgages at renewal.
Had the proposal been adopted, people who were keeping up to date with mortgage payments might have been denied a mortgage renewal if they had lost their job and were no longer deemed to be a good credit risk.
The intent of the proposal was to bolster the strength of Canadian home mortgages to prevent any downward spiral in home prices if global economic uncertainty becomes a full-blown global recession.
Bankers told Business in Vancouver they were pleased with the decision because they considered the proposal impractical.
"It's something that would be extremely difficult to operationalize," Inde Sumal, Royal Bank of Canada’s regional vice-president for residential mortgages, told BIV.
"There are potentially close to four or five million mortgages outstanding in the country. How would you actually facilitate the proposed system? It would be a hurculean effort. It's one of those recommendations that perhaps somebody threw out there even though it couldn't really come to life. It would be extremely difficult for financial institutions to do."
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