MLN NewsStream

At last, the fog has lifted. We now know our bank regulator's stance regarding whether federally regulated mortgage investors, also known as bank dealers or "aggregators," can purchase non-stress-tested uninsured switches from non-federally regulated lenders.

This revelation is significant given its implications for spicing up competition in this small segment of the mortgage market.

As we approach the biggest mortgage renewal cycle ever, brokers are starting to question OSFI's recent stress test exemption on uninsured switches. It's looking suspiciously like a gift-wrapped competitive advantage for banks, some believe.

Thousands of long-time mortgage brokers and unwitting customers have experienced Scotiabank's frustrating mortgage renewal policy.

If you don't renew or pay out the mortgage by the deadline, the bank shackles you to a new closed term. Borrowers must then often pay hefty penalties to get out of the mortgage.

Scotiabank's renewal policy is like a surprise party—without the party. And at least one customer has had enough. Lawyers representing this borrower initiated a proposed class action lawsuit earlier this year. MLN spoke with one of the lawyers on the case, and here's how things might shake out.

The bank regulator's axing of the mortgage stress test on uninsured switches was a win for consumers—but so far, only a partial win.

OSFI has definitively confirmed that the stress test exemption "does not apply to straight [uninsured] mortgage switches from a provincially regulated lender."

What every mortgage originator wants to know, however, is whether borrowers can switch uninsured mortgages to non-federally regulated bank-funded lenders (i.e., MFCs) without a stress test.

OSFI just provided some degree of clarification on that.