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You Need to Secure Your Mortgage Before January 1 to Avoid the New Stress Test

CHBA has been following-up on how the major chartered banks are handling the improved transition rules that CHBA was successful in securing from the Office of the Superintendent of Financial Services (OSFI) after OSFI mandated new Stress Test requirements for conventional mortgages effective January 1, 2018.

CHBA requested from OSFI, and received, transition rules to the B-20 Guideline to allow buyers who had signed a purchase and sales contract prior to October 17, 2017, to qualify under the ‘old’ pre-stress test rules. This was essential for many new home buyers, given the typical length of time between signing a contract and closing the purchase. At the time, OSFI committed to informing all federally-regulated mortgage lenders of this additional flexibility.

CHBA understands that all of the chartered banks have now adopted procedures to handle these pre-October 17, 2017 sales contracts.

To ensure you and your buyers are protected, you need to take action immediately. If your buyers have not done so already, advise them that they should contact their preferred mortgage lender now, and apply for full mortgage approval prior to January 1, 2018. This will allow the mortgage to be approved under the pre-stress test OSFI rules.

It is our understanding that these lenders are actively working to process these mortgage applications and have approvals in place, with rate caps or discount guarantees, prior to the year end. This will allow the mortgage to process after January 1, 2018 under the pre-stress test requirements, regardless of the eventual closing date.

Given the upcoming holiday period, time is of the essence. All builders and developers with buyers who want to avoid the new conventional mortgage stress test should act today to ensure these buyers are aware that mortgage pre-approval must be obtained prior to January 1, 2018.

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