Reinforcing residential mortgage risk management practices

Summary:

This Regulatory Notice aims to reinforce sound business and financial practices for residential mortgage account and portfolio management in the financial institutions regulated by the Office of the Superintendent of Financial Institutions (OSFI). The notice responds to the heightened risk environment for real estate secured lending and emphasizes the need for proactive identification and management of vulnerable accounts and portfolio segments.

The guidance emphasizes the importance of:

1. Proactive account and portfolio management, including effective loan servicing policies, robust monitoring systems, and risk data refreshment.
2. Proactive and sustainable management of vulnerable accounts, including early engagement with borrowers, identification of vulnerable accounts, and prudent forbearance assessments.
3. Sound credit loss provisioning, including timely recognition and disclosure of increased credit risk and forward-looking information capture through expected credit losses modelling adjustments.
4. Sound mortgage underwriting practices, including rigorous income verification, careful consideration of higher-risk mortgage products, and assessments of borrower capacity and willingness to manage interest-rate risk.

The notice applies to all federally regulated financial institutions and aims to promote a culture of risk governance and risk appetite integration, ensuring financial resilience and reputation.