Banks Required To Hold More Capital For Negative Amortizing Mortgage

The OSFI has revised its capital requirements for lenders and mortgage insurers – see here - requiring institutions "to hold more capital for mortgages where payments don’t cover the interest portion of the loan (i.e., negatively amortizing mortgages)."

• “The revised capital guidelines are effective fiscal Q1 2024, which is January 1, 2024 for most institutions. For banks with a fiscal year end of October 31, the revised CAR guideline is effective November 1, 2023."
• By negative amortization, the regulation will target “variable-rate fixed-payment mortgages with loan-to-value (LTV) ratios above 65%, where payments are insufficient to cover the interest portion of the mortgage for three or more consecutive months, due to increases in interest rates.”