Housing inspectors have begun sending warnings that banks could face huge losses if there is any slight change in the current housing market and they call on banks to put rigid guarantees in place for such an event.
Recent inspections have been conducted on bank mortgage funds as authorities are putting measures in place so that any change in the housing market will not come as a surprise.
Inspectors are mostly concerned about the Vancouver and Toronto housing market as they were the markets with the highest hosuing prices, but with the Vancouver market already experiencing a drop in price, it is also anticipated that the Toronto housing market will also follow suit.
The Superintendent of Financial Institutions highlighted that the increasing level of debt of mortgage borrowers coupled with the rising housing pricing has led that Institution to broaden its inspection on mistakes made on mortgage lending by banks and also inspect the way banks carry out income verification, higher-risk loans, debt service ratios, loan-to-value rations and risk yearning.
Speaking on the subject, Jeremy Rudin, the superintendent of financial institutions cited that vibrant guarantee has always been essential for banks but its relevance is most needed in recent times.
He went on to explain in a conference for mortgage professionals in Vancouver on Monday that any prolonged economic depression can result to a significant housing price amendment and this will not be to the advantage of banks as it will lead to losses.
Rudin also discussed the transactions of banks that are not under the specifications of the Office of the Superintendent of Financial Institutions and requested all banks and those involved in mortgage formation to perform their rightful duties.