The Appraisal Institute of Canada (AIC) says it supports the B-20 guidelines as well as a plan to reduce mortgage finance underwriting that over-relies on the equity of a property, without consideration to the borrower’s capacity to pay.
It says the Office of the Superintendent of Financial Institutions (OSFI) has indicated that so far the B-20 guidelines “have yielded positive results, including lower average loan-to-value ratios for mortgages, and fewer mortgages being approved for over-leveraged individuals.” The OFSI says there is still evidence that mortgage approvals are relying too heavily on the equity in the property (at the expense of assessing the borrower’s ability to repay the loan). It plans to take steps to “ensure this sort of equity lending ceases”.
AIC says the B-20 guidelines “require a balanced approach to mortgage underwriting and have served Canadians and the housing market very well by enhancing market stability and supporting efforts to mitigate consumer indebtedness.”
“Our members’ work helps support a stable and healthy market. The B-20 guidelines require lenders to utilize appropriate numbers of on-site inspections and third-party professional appraisals to verify the value of collateral,” says Peter McLean, president of AIC. “On site appraisals help to mitigate risk for both the lender and borrower in cases when there is a high loan-to-value ratio, when markets are in flux, or when the creditworthiness of the borrower may be lacking.”
AIC CEO Keith Lancastle says, “The regulatory oversight provided by OSFI has allowed Canadians to benefit from stable markets; we have not seen some of the fluctuations and volatility that have plagued other countries. Our organization strongly supports B-20 and has called on governments across the country to mandate their application to all residential mortgage lending.”